Mak­ing light of chal­lenges

SA is lead­ing a mo­tor in­dus­try charge across Sub-sa­ha­ran Africa. But there will be no quick re­sults

Financial Mail - - SPECIAL REPORT -

Is the Dark Con­ti­nent fi­nally ready to step into the man­u­fac­tur­ing light? A con­certed plan by multi­na­tional mo­tor com­pa­nies and the SA gov­ern­ment to un­lock Africa’s in­dus­trial po­ten­tial is start­ing to take shape.

SA is at the fore­front of ef­forts to cre­ate a mo­tor in­dus­try span­ning Sub-sa­ha­ran Africa. For­mer trade & in­dus­try min­is­ter Alec Erwin, with gov­ern­ment’s bless­ing, is ad­vis­ing other coun­tries on au­to­mo­tive pol­icy. The Sa-based African As­so­ci­a­tion of Au­to­mo­tive Man­u­fac­tur­ers (AAAM) is co-or­di­nat­ing in­dus­try ef­forts to en­cour­age pan-african de­vel­op­ment.

Volk­swa­gen SA (VWSA), hav­ing al­ready set up as­sem­bly joint ven­tures in Kenya and Rwanda, re­cently signed state­ments of in­tent to do the same in Nige­ria and Ghana, and has its eyes on

Ethiopia. Nis­san SA MD Mike Whit­field says: “A num­ber of com­pa­nies are look­ing at pi­lot projects in dif­fer­ent lo­ca­tions.”

Toy­ota SA MD An­drew Kirby says: “We are ex­plor­ing a num­ber of op­tions.”

Au­to­mo­tive In­vest­ment Hold­ings, which runs three small-scale as­sem­bly plants in SA for Asian mo­tor com­pa­nies, has been asked to look at copy­cat deals else­where, in­clud­ing Uganda and Namibia.

There are signs that African gov­ern­ments are pre­pared to step back from the pro­tec­tion­ism that has stymied in­tra-re­gional co­op­er­a­tion. The re­cent sign­ing of the African Con­ti­nen­tal Free Trade Agree­ment by mem­bers of the


African Union could un­lock huge trade op­por­tu­ni­ties, if rat­i­fied.

Africa was tagged the Dark Con­ti­nent by 19th Cen­tury Euro­pean ex­plor­ers be­cause they con­sid­ered it a place of mys­tery. These days, some busi­ness peo­ple call it the Fi­nal Fron­tier — the world’s last un­con­quered mar­ket.

This in­vin­ci­bil­ity is not for want of try­ing. Mo­tor com­pa­nies have been build­ing ve­hi­cles in SA for the best part of a cen­tury — not only for the lo­cal mar­ket but also in the hope that mar­kets to the north would open up.

Masanori Katayama, pres­i­dent of Ja­panese truck­maker Isuzu, says the de­ci­sion to buy out Gen­eral Mo­tors’ SA op­er­a­tions at the end of 2017 was driven by the de­sire to build ve­hi­cles for sub-sa­ha­ran Africa. Chi­nese mo­tor com­pany BAIC gives the same rea­son for its de­ci­sion to sink bil­lions of rands into a brand-new ve­hi­cle as­sem­bly plant in the East­ern Cape.

Other, estab­lished com­pa­nies have had a sim­i­lar dream for decades. But it’s been a frus­trated one.

Mar­kets to the north of SA are dom­i­nated by used ve­hi­cles dumped by Ja­panese, Euro­pean and North Amer­i­can ex­porters. Of­ten im­ported il­le­gally through por­ous borders, they are some­times re­ferred to as “grey im­ports”.

They in­clude ve­hi­cles un­saleable any­where else in the world. Mar­tyn Davies, head of Deloitte’s African au­to­mo­tive di­vi­sion, re­vealed this year how cars sub­merged by the 2011 Ja­panese tsunami which wrecked the Fukushima nu­clear plant were dried out and shipped to African cus­tomers un­aware of their ori­gin.

SA doesn’t al­low the im­por­ta­tion of used ve­hi­cles. That’s why, last year, the lo­cal in­dus­try sold over 550,000 new ones. The next big­gest Sub-sa­ha­ran mar­ket was Kenya, with fewer than 12,000. In Nige­ria, with a pop­u­la­tion three times the size of SA’S, the num­ber was be­low 10,000.

Nige­ria is per­haps the best ex­am­ple of the chal­lenges fac­ing the mo­tor in­dus­try in Africa. In the 1980s, it had a thriv­ing in­dus­try pro­duc­ing over 200,000 ve­hi­cles an­nu­ally. But lack of gov­ern­ment com­mit­ment al­lowed it to at­ro­phy and die.

In 2014, en­cour­aged by multi­na­tional mo­tor com­pa­nies anx­ious to ac­cess a West African mar­ket with a big­ger pop­u­la­tion than the US, Nige­ria an­nounced a new au­to­mo­tive strat­egy. Sev­eral mo­tor com­pa­nies set up joint ven­tures with lo­cal part­ners.

But the re­vived in­dus­try was vir­tu­ally still­born. The col­lapse of global oil prices starved the oilde­pen­dent econ­omy of rev­enue and for­eign cur­rency. Gov­ern­ment’s prom­ise to halt the free flow of dumped ve­hi­cles came to noth­ing. When it did try, it was stymied by cus­toms and ex­cise of­fi­cials who de­clined to im­pose

What it means: In­ter­na­tional mo­tor com­pa­nies be­lieve Africa’s time has come, de­spite sev­eral false starts in the past

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