Making light of challenges

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

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

SA LEADS THE WAY

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