By Hilary Mare
THE motor vehicle industry faces a bleak future as government cut its vehicle expenditure from N$139 113 000 to N$45 104 000 in the 2017/18 financial year.
Essentially, goods and services expenditure is expected to decline by 21percent whilst capital expenditure expected to decrease by 15 percent (34 percent compared to 2015/16).
This follows Government’s fiscal consolidation drive that has also seen construction expenditure expected to decrease from N$4,672 billion to N$3,991 billion.
Explaining the agenda to cut on public expenditure last week, Finance Minister Calle Schlettwein said the mobilisation of domestic resources and the strengthening of management systems will be the overriding themes for Public Finance Management reforms Government seeks to align management frameworks to a changing economic environment and funding national development priorities, the Sustainable Development Goals and the developmental aspirations enshrined in Agenda 2063.
“The Government has proposed a number of measures to prevent the further growth of the costs and related personnel expenditure, but also to reduce current levels.
“Through budgetary adjustments, we have established the basis for the containment of non-productive expenditure. This policy will continue in the medium to long-term. The adjustment process presents us with an opportunity to align future expenditure growth to key national priorities as and when resources become available.
“We will continue to use the mid-year budget review as a measure to enhance allocative efficiency and retain greater latitude of transparency in the budget process. Initiatives are on-going to strengthen macro-fiscal modelling capacity as a means of developing inter-institutional capacity and to continuously anchor the budget on a credible integrated macroeconomic framework,” he said.
Although Ronel Claassen, marketing communications manager at Pupkewitz Holdings which is a huge beneficiary of the Government vehicle budget told Confidente that the cut on spending will not affect their business to a great extent.
Aylin Lützow who is the customer relations & marketing manager at M and Z motors said: “All vehicle dealers who receive regular tender grants will feel the 50 percent cut.”
According to the National Association of Automobile Manufacturers of South Africa (NAAMSA) for the year 2016, vehicle sales declined by 21.8 percent to 16 598 units.
“This sharp decline in vehicle sales in 2016 was led by a combination of factors ranging from a slowdown in PSCE, rising vehicle costs, the introduction of the carbon emission tax and an overall slowdown in the economy,” the association said.
Passenger vehicles declined by 17.8 percent m-o-m to 440 units in December 2016 compared to a 16.3 percent increase recorded in the prior month. In addition, light commercial, medium commercial, heavy commercial and extra heavy commercial vehicles also dropped by 15.8 percent m-o-m, 40 percent m-o-m, 71.4 percent m-o-m and 65.1 percent m-o-m, respectively.
On an annual basis, light commercial, passenger, and heavy commercial vehicles continued to contract by 32.2 percent, 28.3 percent and 85.7 percent, respectively. Furthermore, medium commercial and extra heavy commercial vehicles also fell victim to a negative annual growth by 28.0 percent and 25.0 percent in December 2016 after recording positive increases of 25.0 percent and 34.5 percent, respectively in November.
Confidente. Lifting the Lid. Copyright © 2015