Tak­ing the ini­tia­tive

African coun­tries are queue­ing up to join the car­maker’s project

Financial Mail - - SPECIAL REPORT -

Thomas Schae­fer will soon be qual­i­fied to open an African travel con­sul­tancy. Since 2017, the Volk­swa­gen SA MD has been criss­cross­ing the con­ti­nent, cre­at­ing a web of ve­hi­cle as­sem­bly joint ven­tures. First it was Kenya, in Jan­uary 2017. This year he added Rwanda. Re­cently he signed mem­o­randa of un­der­stand­ing with Ghana and Nige­ria. Ethiopia is next. More coun­tries are in his sights.

It’s all part of a plan to cre­ate a co­he­sive, pan-african man­u­fac­tur­ing and mar­ket­ing net­work.

There’s al­ready an as­sem­bly plant in Algeria but most of the new em­pha­sis is on Sub-sa­ha­ran Africa. Schae­fer, who is also pres­i­dent of the As­so­ci­a­tion of African Au­to­mo­bile Man­u­fac­tur­ers, says: “We are only start­ing with our ini­tia­tives in Africa.”

Sev­eral mo­tor com­pa­nies talk of pan-african as­sem­bly ven­tures. Ger­man man­u­fac­turer VW, through its Sa-based sub­sidiary, is the first to turn in­tent into con­certed ac­tion. What makes the project unique is that VWSA has set out not only to meet mar­ket de­mand but also to cre­ate it. The Kenyan joint ven­ture is a tra­di­tional one: an as­sem­bly fa­cil­ity out­side the cap­i­tal, Nairobi, has an­nual ca­pac­ity to build up to 5,000 Polo Vivo cars built at VWSA’S East­ern Cape plant then part-dis­as­sem­bled for ex­port.

The Rwan­dan brief is wider. The Ki­gali-based com­pany has be­gun to build a range of VW ve­hi­cles sourced from around the world but it also of­fers in­te­grated mo­bil­ity so­lu­tions like car-shar­ing and Uber-style ride-hail­ing. There’s even a dealer net­work and af­ter­sales. The ven­ture is ex­pected to cre­ate about 1,000 jobs in as­sem­bly, tech­ni­cal sup­port and trans­port ser­vices. A sim­i­lar strat­egy is planned for Ghana, where VWSA is un­der­tak­ing a fea­si­bil­ity study into lo­cal as­sem­bly and mo­bil­ity ser­vices. Schae­fer says: “We plan to have the first cars on the road in Ghana early next year.”

Launch of the Ethiopian project is prob­a­bly a cou­ple of years away and likely to in­clude mo­bil­ity ser­vices for the cap­i­tal, Addis Ababa. But it won’t be a car­bon copy of other pro­grammes. Ethiopia wants VWSA to help it ex­port au­to­mo­tive tex­tiles and other com­po­nents to earn for­eign ex­change.

Since the launch of the Rwanda as­sem­bly plant in June, Schae­fer says the num­ber of other coun­tries ask­ing for sim­i­lar in­ter­ven­tions has been “mind-blow­ing”. The ques­tion is whether they have what he calls “the po­ten­tial and the nec­es­sary pol­icy frame­works”.

In Kenya and Rwanda, di­rect pres­i­den­tial in­ter­ven­tion blew away the usual gov­ern­ment red tape. Lead­ers of the two coun­tries fol­lowed through on prom­ises to take im­me­di­ate ac­tion to limit the num­ber of used ve­hi­cles — many im­ported il­le­gally — flood­ing their mar­kets. Ve­hi­cle man­u­fac­ture can’t suc­ceed where there is un­fet­tered ac­cess to cheap, dumped ve­hi­cles.

That’s the chal­lenge fac­ing Nige­ria, which had a thriv­ing mo­tor in­dus­try 30 years ago be­fore cor­rup­tion and gov­ern­ment ap­a­thy set in. It tried again in 2014, when cre­ation of a new au­to­mo­tive de­vel­op­ment plan drew in sev­eral global mo­tor com­pa­nies, in­clud­ing VW, at­tracted by the coun­try’s wealth, huge pop­u­la­tion and po­si­tion at the heart of a po­ten­tially huge West African mar­ket. This time around, fail­ure has been caused by eco­nomic col­lapse — the Nige­rian econ­omy is al­most wholly de­pen­dent on oil rev­enues — but also the re­fusal to con­trol im­ports.

That’s why Schae­fer says any VWSA in­volve­ment in Nige­ria is de­pen­dent on gov­ern­ment tack­ling the is­sue. At the re­cent memorandum sign­ing, at­tended by Ger­man chan­cel­lor An­gela Merkel, Nige­rian min­is­ters com­mit­ted to “the grad­ual tran­si­tion from the im­por­ta­tion of used cars to the man­u­fac­ture and dis­tri­bu­tion of new pas­sen­ger ve­hi­cles”.

Schae­fer says: “The next move is Nige­ria’s. We’re not tak­ing any more leaps of faith. Our par­ent com­pany did that in 2014 and we have a plant stand­ing idle. We have told Nige­ria we want to in­vest in their coun­try but only once they fol­low through on their prom­ises.”

Schae­fer makes it clear that none of VWSA’S for­ays into African coun­tries should be seen in iso­la­tion. The plan is to link the whole of Sub-sa­ha­ran Africa into a con­sol­i­dated ve­hi­cle and com­po­nents in­dus­try based around hubs in SA and East and West Africa.

Not all the in­ter­ven­tions are guar­an­teed suc­cess. “We’re light­ing camp­fires and see­ing which ones catch,” says Schae­fer. “With luck they’ll all get go­ing.”

The more that do, the bet­ter for SA. Do­mes­tic de­mand alone can­not sus­tain the cur­rent mo­tor in­dus­try, so Sub-sa­ha­ran Africa is a nat­u­ral ex­port tar­get. But any ex­pan­sion must be a part­ner­ship. SA can’t ex­pect the rest of the re­gion to roll over and buy its prod­ucts.

Schae­fer says: “Africa is our fu­ture. If we don’t get it right and cre­ate a sus­tain­able mo­tor in­dus­try for all of us on the con­ti­nent, none of the man­u­fac­tur­ers will still be in SA in a few years. It’s that im­por­tant.”

Start of a re­la­tion­ship: Rwan­dan pres­i­dent Paul Kagame with VWSA MD Thomas Schae­fer

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