Africa has the potential to become the world’s next automotive industry powerhouse. The opportunities are there – with a young, growing population and rapid urbanisation across the continent. But how can this potential be unlocked? What obstacles does the continent face in growing vehicle demand and becoming a true industry competitor? And how can regions unite to write the legislation that could see hundreds of thousands of jobs created?
These are just some of the questions that will be the focus of the upcoming virtual conference series, the AAAM Africa Automotive Forum, hosted by the African Association of Automotive Manufacturers (AAAM) and presented by Deloitte. Expert stakeholders from across the world will be providing their insight at panel discussions, that seek to unpack how Africa can jumpstart its automotive industry.
His Excellency Alan Kyerematen , Minister of Trade and Industry, Ghana will give a keynote address and Mike Whitfield, AAAM President, Chairman of Nissan Group of Africa and Managing Director of Nissan Egypt will lead a discussion on enabling government policy with automotive industry practitioners including, Masa Sugano, Deputy Executive Director, Africa Region of Japan External Trade Organization (JETRO), Mike Mabasa , Chief Executive Officer of National Association of Automobile Manufacturers of South Africa (NAAMSA), and Anthony Black, Professor in the School of Economics at the University of Cape Town.
Among other speakers, AAAM members including Renai Moothilal, Executive Director of National Association of Automotive Component and Allied Manufacturers (NAACAM) and Dr. Markus Thill, President Region Africa of BOSCH Group, together with Thomas Schaefer, former AAAM President and Chief Executive Officer of ŠKODA Auto a.s, will discuss unlocking the economic benefits of regional value chains. Further, AAAM members including, Simphiwe Nghona, Group Head for Vehicle and Asset Finance (VAF) of Standard Bank, Yves Nono, Vice President – Mobility Solutions Sales of BOSCH, Gerhard Botha, General Manager of Toyota South Africa Motors, together with Ridwan Olalere, Country Director for Uber, Nigeria will discuss driving affordability and mobility solutions in Africa. Serge Kamuhinda, Director at Volkswagen Rwanda will share a case study on the Volkswagen Business Case in Rwanda.
“The opportunities for growth are there, but there are still challenges across Africa. This conference is about unpacking those issues, finding solutions, and lighting the way to ensure our shared vision for the continent is achieved,” said Dr Martyn Davies, Managing Director of Emerging Markets and Africa at Deloitte and who will be facilitating the sessions.
Dialogue throughout the conference will be split between three major themes.
Regional Value Chains
The plethora of fragmented, small automotive production facilities rather than a singular force across the continent appears to be the result of ineffective automotive policies, with only Morocco and South Africa standing out as having fully fledged industries.
“However, even these two countries are heavily reliant on the export of high-volume models to non-African markets, though the long-term sustainability of this is questionable,” said Dave Coffey, CEO of AAAM. One of the solutions to this is the development of a pan-African automotive sector with the establishment of assembly nodes/hubs in the South, West, East and North of Africa and a spread of value adding activity (e.g. component manufacture) to neighbouring economies based on their resources or comparative industrial advantages.
Partnerships between countries have been key to the development of auto industries across the world; this facilitates scale which is necessary in this globally competitive industry.
“Not every African country is able to grow and industrialise a fully-fledged automotive industry sector. So, beyond these hubs, we need to build a hub and spoke model, where a hub such as Kenya, for example, can be supported by a supply spoke in a neighbouring country,” said Davies.
Enabling policy through government
A lack of political will can be the death knell for any industry, which is why Coffey believes that it’s time for automotive sector across the continent to push for legislative change, much like what has recently been seen in Ghana. The Ghana Automotive Development Policy, through its Ministry of Trade and Industry has already laid the way for the country to become a fully integrated and competitive industrial hub in West Africa. However, other countries are failing to realise the potential benefits, and are focusing more on the imported, used vehicle industry.
“The political will to support the significant medium-term economic and good job creation benefits of an effective auto industry is often overshadowed by the short term gains of customs revenue for imported used vehicles – when duty is actually paid,” said Coffey. To create a cross-continental industry, getting governments on board to support legislation that elicits investor confidence is paramount.
“The pending African Continental Free Trade Agreement could hold much promise for deeper value chain creation for the automotive value chain creation going forward,” said Davies.
Creating vehicle demand is about affordability, because for many Africans consumers, the high cost of new vehicles is the main obstacle to ownership. Poor infrastructure and high logistics costs do not support a competitive value chain, but this can be changed with enough political will. “This could include effective polices for financial institutions that supports affordable asset-based vehicle financing and alternate mobility solutions that stimulate demand,” said Coffey.
“Prices are also inflated by bad infrastructure and taxation, so the first step is to reduce this dramatically – as we’ve seen in Ghana. –The importation of pre-owned, dumped and unroadworthy vehicles, needs to be controlled through legislation that protects the consumer and the local economy,” said Davies.
Interest rates on new vehicles also remain an obstacle for prospective buyers.
“In Africa, you generally have interest rates above 20%, and that’s not affordable. It is important that we explore solutions with governments. The question is, how can we work with financial institutions and the value chain to offer interest rates of 10% or less? That is fundamental to driving affordability,” said Coffey.
“We hope that the African Automotive Forum can be a platform that allows us to find solutions to these burning questions, by bringing together some of the industry’s greatest minds and using their lessons and applying it to the African context,” said Davies.
“This conference, in partnership with AAAM, is yet another strategic initiative to promote the automotive industry and automotive industrialisation in Africa” he concluded.