Industry professionals from Deloitte in partnership with African Association of Automotive Manufacturers (AAAM) have called for an effective enabling auto industry policy that will to support the significant medium-term economic and good job creation benefits of an effective auto industry across Africa.
They observe that Africa has the potential to become the world’s next automotive industry powerhouse, noting that the opportunities are there with a young, growing population and rapid urbanisation across the continent.
Expert stakeholders from across the world while providing their insights at panel discussions at a virtual Africa Automotive Forum hosted by Nigeria the and presented by Deloitte pushed for processes that would allow Africa jumpstart its automotive industry.
Dave Coffey, chief executive officer of AAAM observes that 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,
Coffey noted that to create a cross-continental industry, getting governments on board to support legislation that elicits investor confidence is paramount.
He further opines that one of the solutions to the challenge facing the continent 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 to neighbouring economies based on their resources or comparative industrial advantages.
According to Coffey, “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.
Martyn Davies, managing director of emerging markets and Africa at Deloitte opines that opportunities for growth are there, but there are still challenges across Africa.
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.
“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
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.
Davies further said “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,”
“In Africa, you generally have interest rates above 20 percent 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 percent or less? That is fundamental to driving affordability,” said Coffey.
The three day virtual conference series, will see Alan Kyerematen, minister of Trade and Industry, Ghana deliver the keynote address, 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 Organisation (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 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.
