Pact to unlock opportunities
AUTO SECTOR: BREAKTHROUGH FOR AFRICA ➜ The launch of trade agreement probably ‘continent’s single biggest achievement since colonialism’.
The Africa Continental Free Trade Area (AfCFTA) agreement, which was launched on 1 January, is regarded as a catalyst to help Africa unlock the opportunities on its own continent, particularly in the automotive sector.
Wamkele Mene, secretary-general of the AfCFTA secretariat, says the launch of the agreement is probably the biggest single achievement by the continent since colonialism and stressed that it would take much longer to industrialise Africa without the AfCFTA.
“We have a very unique opportunity in Africa to, for the first time since the end of colonialism, accelerate industrial development, leveraging on the legal framework that the AfCFTA has provided,” he said during a webinar on the agreement and the auto sector.
Alec Erwin, former deputy minister of finance and minister of trade and industry and public enterprises – who is now a policy expert to the African Association of Automotive Manufacturers (AAAM) – said the free trade agreement is a fundamental breakthrough and a unique opportunity for the automotive sector in Africa.
A real opportunity
“It’s a real opportunity to industrialise in a key sector. In an economy like South Africa, an integrated auto sector contributes more than 7% to our GDP, so it’s a very significant industrial sector. In Morocco, you see the same. It is contributing 5%, 6% or 7% of Morocco’s GDP,” said Erwin.
“We have proposed to the [AfCFTA] negotiators that it would be wise, if we want to fast-track the auto sector, to have a sub-agreement specifically dealing with the rules around auto, which have to be strict and detailed.
“This is an opportunity which we all think we should seize, also working closely with Afreximbank [African Export-Import Bank] and others, to introduce the support for financing strategies, both for asset finance and for infrastructure.”
Attract investors
Mike Whitfield, the president of AAAM and MD of Nissan Africa, said the association was formed to expand and deepen the auto sector on the continent by working with various governments in Africa to help shape and implement policies and ecosystems that will attract investors and ultimately unlock the economic potential of the continent.
Whitfield said there is a lot of opportunity for the automotive sector in the vision and intention of the AfCFTA, considering that significant production volumes only really exist currently in two countries, South Africa and Morocco, with some production in Egypt.
“The finalisation of the AfCFTA agreement and the rules of origin with respect to automotive are vital to the realisation of the AAAM’s vision of building a successful automotive ecosystem that will lead to a sustainable industry of scale that creates significant jobs, while assisting in the industrialisation of the automotive sector in Africa,” said Whitfield.
“The opportunities for all of us are really significant, considering that 1.3% of global automotive production happens in Africa and yet Africa has 17% of the global population and 42 vehicles per 1 000 people in the continent where the world average is 182 and Africa has a young, growing population that, with the rapid rise of urbanisation, needs mobility as well.”
Erwin stressed that Africa cannot continue doing what it has been until now, which is to import all its vehicles. “Even importing these very cheap subeconomic exports out of other economies, the balance of payments effect is still massive,” he said.