Japan’s auto recovery signals hope for EC’s sector

Leading economist says that there is promising link for EC's catalytic converter manufacturers.

Japan may be in another hemisphere, but its first signs of economic growth since being ravaged by the world-wide recession may impact positively on the Eastern Cape, especially on the province's vital motor components industry.

Economists and industry insiders say the news is a flicker of hope to a sector badly hit by job losses in recent months.

Last week Japan came out of its worst recession since the Second World War with a gross domestic product (GDP) growth of 0,9% during the second quarter of this year.

Japan is the largest developed country to emerge from the recession, while France and Germany have also managed to pull through.

Economists say this will have a positive effect on the local economy, especially the Eastern Cape's motor parts industry and specifically the catalytic converter sector.

Econometrix director Tony Twine was encouraged by flickers of life in the Japanese growth rate after the ravages of the previous five quarters, saying: "The direct impact on the Eastern Cape motor industry is difficult to pin down, but the most promising link is probably via the catalytic converter portion of the component manufacturing industry, which has a share of total world production of 18%, and is the only mass producer of auto components in South Africa."

Jaco Kleynhans, spokesman for trade union Solidarity, agreed Japan's growth was "a very positive prospect for South Africa".

"It will lead to an increase in exports of raw materials like steel and iron ore as well as vehicle components." He added the Eastern Cape - as the automotive hub of the country - would definitely benefit from this growth, especially in the vehicle component sector.

"In recent times, there have been a lot of layoffs in this sector. This may just be the positive injection the sector needs."

Port Elizabeth Regional Chamber of Commerce and Industry chief executive Kevin Hustler was more cautious.

"Although Japan's growth figure echoes some analysts' position that the first green shoots are starting to show in the world economy, it may not yet be cause for celebration," Hustler said. - Weekend Post