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OPINION: Auto sector is uniquely placed to help Africa achieve industrialisation goals

OPINION: Auto sector is uniquely placed to help Africa achieve industrialisation goals

by MIKE WHITFIELD
CAIRO, – 13th JULY 2021,/ Centre for African Journalists (CAJ News) – THE economic and social disruption caused by Covid-19 in the last year has been nothing short of devastating, with many people likely to fall into extreme poverty.

This makes it extremely urgent that we work swiftly to implement economic policies that support industrialisation, create jobs and promote trade and investment.

Here, Africa has a unique opportunity, as the continental free trade area commenced in January and nations work towards shared rules of engagement, including for the automotive sector.

With 17% of the world’s population, Africa accounts for only 1.3% of global consumption. It’s estimated that, once fully implemented, with tariffs removed and rules of origin agreed, the effect of the African Continental Free Trade Area (ACFTA) will be to lift the gross domestic product of most economies by between 1 and 3%.

These figures are impressive, but if we succeed in promoting automotive manufacturing, and associated skills and technology transfer, the real beneficiaries will be ordinary consumers. They will be more likely to secure formal sector jobs, receive skills training, and vehicle fleets will be safer and more environmentally friendly.

Currently, however, African consumers are unlikely to ever own a private vehicle, and if they do, such a car is likely to be a second-hand grey import, with little recourse to an after-sales network should parts be required or the car prove defective.

There are only 42 vehicles per thousand people on the continent, against a world average of 182, and with rapidly urbanising societies, there is an urgent, unmet need for mobility that is safe and affordable.

The existing vehicle fleet is built up from pre-owned vehicles sourced from other regions, built to a variety of standards and is older rather than younger. They have not been developed to take advantage of African road conditions and fuel types.

In 25 countries, there are no emission standards at all and second-hand cars that are older than nine years are regularly imported. This means that they offer few of the passenger and pedestrian safety features that are standard in more developed markets, and negatively affect air quality.

Older models are prone to breakdowns but have non-existent or substandard warranties and service plans, so they are more expensive for consumers to repair. With spare parts difficult to find, owning a car can be a frustrating experience for a consumer in Africa who was looking forward to a better quality of life.

Meanwhile, for business owners who rely on their vehicle, the downtime can be devastating. In solving this issue, appropriate vehicle finance products will need to complement a concerted push for local manufacturing.

There is also an opportunity cost. These cars are imported legally but are not part of a manufacturer’s official distribution system – they are grey imports – so there is a lack of recourse for consumers and their existence deters potential investors from manufacturing locally.

Importing these cars impacts the balance of payments for Africa and means that the continent cannot buy capital goods which are needed for investment and industrialisation.

I strongly believe that it is time for us to work together to promote local automotive manufacturing, and that under the ACFTA, we have an unprecedented opportunity to do so.

Around the world, the automotive sector is a key enabler of industrialisation, as it allows countries to move into light industrialisation, trade components and raw materials, and promote exports.

Agreement on the rules of origin for the sector will be key, as this will allow goods that have a certain amount of local content to be zero-rated for import tariffs when trading between African countries. We have to balance the needs of investors, and what will give them certainty for planning, with those of governments who must look at participating in the entire value chain, and see how best to promote the sector across varying market conditions and readiness for industrialisation.

This is the work that’s now being undertaken, and we are optimistic that they will be agreed upon soon.

On the back of the rules of origin, we must promote a unified automotive sector. This will allow those countries who already have established automotive sectors – such as Morocco, South Africa and Egypt – to sell their vehicles more easily across the continent.

Ghana, Kenya and Rwanda have also developed policies to promote local manufacturing, and there is room for them to build their economies too.

Smaller economies, who may be in a different phase of development, will have the opportunity to join this value chain by supplying components or raw materials. The outcome will be a virtuous circle of investment and skills transfer.

As a global company, Nissan has shown its commitment to local manufacturing in Africa with existing hubs in South Africa and Egypt and support for Ghana’s nascent automotive sector. It is our responsibility to create jobs and support industrialisation initiatives. We are looking forward to playing our part in this exciting development.

Distributed by Centre for African Journalists (CAJ News) on behalf of Nissan Africa.

About Nissan in Africa
Nissan’s Regional Business Unit in Africa serves 42 Sub-Saharan Africa markets with 14.7% market share and 37 national sales companies across the continent. In total, the company offers a range of 24 vehicles to retail and commercial customers in the region. South Africa serves as a light-commercial vehicle manufacturing hub for the region with its Rosslyn plant northwest of Pretoria producing the NP200, NP300 and forthcoming all-new Nissan Navara. The South Africa plant employs approximately 2000 employees with additional assembly plants located in Nigeria and Ghana. For more information visit our website at http://www.nissan.co.za or follow us on LinkedIn for more updates.

NB: Mike Whitfield is the Chairman and Managing Director for Nissan Africa and Nissan Egypt.

Media contact:
Nthabiseng Mokoape-Motsepe
Head: Communication Sub Sahara Africa
Nissan Africa
Mobile: +27-836548763
Email: nthabisengm@nissan.co.za

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