Game-changer for critical South African industry

Trade Minister Parks Tau said the African Continental Free Trade Area (AfCFTA) is a “game-changer” for South Africa’s struggling automotive industry.

Tau explained that the duty-free trade this agreement enables will support regional value chains and encourage infrastructure investment.

He added that it also opens doors for collaboration in battery manufacturing and mineral beneficiation across Africa.

The minister’s comments come as the local automotive industry faces significant headwinds in light of increased United States tariffs on South African vehicle exports to the US.

In his keynote address to the 2025 South African Auto Week, Tau said the global auto industry is undergoing its most significant transformation in a century, and South Africa must adapt urgently. 

“Global markets are rapidly transitioning away from internal combustion engines,” he said. 

“The United Kingdom and the European Union, which together account for almost half of South Africa’s vehicle exports, have committed to ending the sale of new fossil-fuel vehicles by 2035.” 

The minister warned that if South Africa does not adapt, it risks losing these key export markets.

This would be a significant blow to South Africa’s automotive industry, which currently faces a near-perfect storm in the form of US tariffs, declining export demand, and increased local competition.

A blow to the automotive industry means a blow to the economy as a whole, as this sector contributes around 5.2% to GDP, accounts for 22.6% of total manufacturing output, and exports vehicles and components worth R268.8 billion to 155 markets worldwide.

The sector sustains nearly 500,000 direct jobs and supports around 1 million across the value chain.

“Beyond the numbers, this is a sector that anchors our manufacturing capacity, attracts consistent investment, and integrates South Africa into global supply chains,” Tau said. 

“It is one of our most competitive industries and gives us a unique advantage in Africa.”

South Africa’s automotive industry is uniquely positioned. The country also boasts some of the world’s largest deposits of platinum, manganese, nickel, cobalt, and rare earth minerals – resources considered critical in the production of electric vehicle batteries. 

Because of this, Tau said South Africa has a “once-in-a-generation opportunity” to move from merely exporting raw materials to beneficiating locally, producing battery-grade inputs and building a competitive battery manufacturing value chain here in Africa.

In this regard, the AfCFTA will play a critical role in strengthening South Africa’s automotive industry and allowing the country to grab this opportunity.

Building a continental giant

With increased pressure from the United States and Europe, Africa is becoming an increasingly important export destination for South Africa’s automotive industry.

In 2024, South Africa’s vehicle exports to the continent were worth R48.1 billion, an increase of 12.4% year-on-year.

This is why Tau described the AfCFTA as a “game-changer”. South Africa began trading under the new AfCFTA on 31 January 2024. 

This enables local companies to export certain products duty-free or with reduced import charges to 12 African states.

Research from the IMF indicates that the AfCTFA can result in an intra-African trade surge, possibly leading to a real per capita income rise of over 10% for most nations.

As the continent’s largest exporter, the agreement is set to boost exports from South Africa and translate into improved economic growth.

“It enables duty-free access beyond the Southern African Development Community (SADC), supports regional value chains, and encourages infrastructure investment,” Tau said. 

“It also opens doors for collaboration in battery manufacturing and mineral beneficiation across Africa.”

With AfCFTA, Tau said South Africa can build a continental battery industry, leveraging resources from across Africa and combining them with South Africa’s manufacturing and research strengths. 

“Our vision is an auto sector that creates value from Cape to Cairo,” the minister said.