The challenge to building a strong automotive industry within the African free trade area lies in removing politics from the equation and allowing frank and free discussion from the various stakeholders – and Afreximbank, major sponsors of the Intra-Africa Trade Show in Durban, has already committed US 1-billion in financial assistance.
On average there are less than 40 vehicles per 1 000 people in Africa with South Africa, Egypt, Algeria and Morocco which have established automotive manufacturing infrastructures, responsible for more than 80% of all new vehicle sales on an annual basis.
Professor Faizel Ismail, former South African ambassador to the World Trade Organisation, said the free trade agreement is a “game changer for Africa” and that a united Africa has been a dream that started long before many of its countries even became independent.
“About five years ago African leaders started to take the idea of a united continent seriously and in 2015 these leaders agreed on the free trade market,” he says. “In 2018 the African Free Trade Agreement was launched in Kigali and it is now time to start building industrial capital and creating regional added value chains. “We also need to build regional corridors made up of ports, road and rail to facilitate quick and easy cross-border trade infrastructure.”
In examining the way to building the automotive industry, the word regional comes up often and is used in the sense of Africa being a single entity with different regions.
Mbongeni Ndlovu from the Toyota Wessels Institute for Manufacturing Studies (TWIMS) pointed out there is a misconception around vehicle affordability in Africa, saying: “Around 66-million people in Africa earn R150 000 or more a year, so already there is a massive market for cars. “What we need to be doing is moving to integrate Africa into global value chains and to have at least 1% of the total global production volumes, a 60% level of local content and to foster 100% employment growth. “However, to be competitive, we need a process of multi-national led industrialisation.”
In a long career as a trade unionist, member of Parliament and now working for Ubu Investment Holdings, Alec Erwin has been intimately connected to the South African auto industry through the Local Content programme, MIDP and AIDP. “Key elements to making an African auto industry work are efficient customs administration, a proper tariff mechanism and safety standards and homologation procedures must be international,” he says.
“Then the supply chain needs to be developed. “Financial assistance to help companies achieve the required standards needs to be asset-based finance rather than government grants or loans and this will happen only if the investor sees all those elements are in place. “This is a journey we are undertaking but Ghana became one of the first countries to put that framework into operation and almost immediately secured three new major investments.”
Mike Vincent from Deloitte echoed the sentiments of Erwin and described Africa as a large eco-system that needed all of its elements to be working together to be sustainable. “The macro-objective is to increase the African share of global new cars sales from 1% to 2% by 2026 and to double the motorisation rate from 42 cars per 1 000 people to 80 per 1 000 in the same timeframe.
“The automotive sector cannot flourish without a focused auto policy and a supportive government and original equipment manufacturer (OEM) helps catalyse the entire value chain.” Currently, some 27 countries in Africa have no regulations governing the importation of used vehicles and this large population of cars that do not have to meet any level of minimum standards for safety is a major issue that needs resolution.
According to Reuben Gisore, Technical Director from the Nairobi-based African Organisation for Standardisation, the problem goes even deeper when “no-name brand” parts, sometimes second hand are used because the cost of genuine parts is more than the actual price of the car.
“Vehicle homologation is a process of applying standards and processes to ensure regulatory compliance for any specific market and which makes it a legal requirement so manufacturers cannot assemble or sell non-compliant vehicles,” explained Deon Strydom, head of homologation for Nissan South Africa.
“Many North African countries have homologation processes in place but currently only Ghana and South Africa in sub-Saharan Africa have official processes.” South Africa is currently discussing a new requirement to come into effect in January 2026 that will make anti-lock braking, front crash bags, ISOfix points, front, side and rear impact testing and Euro V emission standards mandatory.
The Intra Africa show at the Durban ICC closes on Saturday.
