Taking the initiative
African countries are queueing up to join the carmaker’s project
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.”