There’s a compelling reason for Africa to start building its own vehicles

Seven months ago, the African Continental Free Trade Agreement came into operation. It was a historic
moment because the agreement is without doubt the greatest opportunity to unlock the unbelievable potential of what will be the biggest economic bloc in the world.

It’s certainly the last automotive frontier. Less vehicles are owned in Africa than anywhere else in the world.

Africa accounts for only 1.3% of the world’s vehicles, yet comprises 17% of the globe’s people. The motorisation rate is 42 per 1 000 individuals, compared to the global average of 182. The biggest problem is that 80% of the African vehicle fleet is second-hand, imported from the UK, the US and Japan.

They’re cheap in the short term but expensive in the long term, because there are no standards, safety or environmental.

There’s no uniformity so it’s almost impossible to get spare parts and because there’s no warranty, it’s almost impossible to get the short-term financing that is common elsewhere in the world to buy new vehicles.

As for new vehicle sales, outside of government and corporate purchase, it’s difficult to create a viable market because the simple economics are that it’s cheaper to import second-hand cars, which is why the best solution is to work with governments to create automotive industrial development policies and programmes.

These policies look to create incentives of automotive manufacturers to set up assembly plants in those countries, transferring skills, industrialising and diversifying their economies.

Automotive industries create critically important balances of trade; earning foreign exchange by exporting locally made vehicles rather than spending vitally needed foreign funds to import them.

At the moment, Africa really only has two major automotive manufacturing hubs – South Africa and Morocco, with Egypt trailing in third position.

The SA automotive sector directly employs 470 000 people and three times more in the value chain. It contributed 7.1% to the GDP in 2019 and earned about R206 billion through exports.

SA produced 631 921 vehicles in 2019. That same year, 536 612 new vehicles were sold in the country. In Nigeria, by contrast, only 10 000 new vehicles were sold. Bear in mind, these two countries are Africa’s biggest economies.

SA in the biggest producer of vehicles in Africa.

The Association of African Automotive Manufacturers believes there is a market potential of five million a year. The key to that is creating automotive hubs in Africa, which at the moment would be centred in Kenya, Egypt, Ethiopia, Nigeria and Tanzania.

Not every country can produce vehicles, it’s simply not sustainable, but what they can do is play a major role in the value chain by beneficiating their natural resources and creating components like copper for wiring systems, cobalt for batteries or rubber for tyres.

Those who don’t produce raw materials can benefit with their trading blocs under rules of origin to ensure they receive vehicles that are duty-free, but homologated for their regions.

Just as not every country can make vehicles, not every region can make the same vehicles, but equally there isn’t a single solution to mobility.

There’s also another compelling reason for Africa to start building its own vehicles and trading within its regions – in less than 30 years’ time the vehicles that Africa has been accustomed to absorbing from the rest of the world for so long will be electric.

The problem is that Africa will not be ready. What we should be doing is working towards this, helping to industrialise our continent, preparing for that transition by developing an automotive sector that creates real mobility solutions for a continent with the youngest population and a growing middle class which is rapidly urbanising.

That same automotive industry will also have to keep abreast of international developments, policies and trends so that the vehicles we produce here will be as desirable to foreign markets as they are locally.

Whitfield is managing director of Nissan’s Africa regional business unit and president of the Association of African Automotive Manufacturers.