Africa has seen significant growth in the automobile manufacturing and assembly industry recently.
While South Africa has long been a dominant player in the industry, other countries on the continent have also seen a rise in this sector. The growth is attributable to several factors, including increased demand for automobiles in Africa, government initiatives to support the industry, and the availability of skilled labour and natural resources.
One major factor driving the growth of the automobile manufacturing and assembly industry in Africa is the increasing demand for vehicles on the continent.
Vehicle production in progress
As the African economy continues to grow and urbanisation increases, there is a greater need for transportation. In addition, the growing middle class in Africa can afford more expensive items such as automobiles, further contributing to the demand.
Government initiatives have also played a role in Africa’s automobile industry growth. Many countries have implemented policies to encourage the establishment of automobile manufacturing and assembly plants.
For example, in Ethiopia, the government intended to effect tax incentives and duty-free importation of machinery and equipment for companies setting up plants – all of which have come to a halt due to unrest in the country.
Similarly, the Moroccan government has established special economic zones for the automobile industry to attract foreign investment and create job opportunities.
The availability of skilled labour and natural resources has also contributed to growth in the industry in Africa. Many African countries have a large pool of skilled workers, particularly in the engineering and manufacturing disciplines. In addition, the continent is rich in natural resources such as oil and metals, which are crucial to producing automobiles.
One country that has seen particularly significant growth in the automobile industry is Morocco. The country has a long history of automobile production, with the first assembly plant established in the 1950s.
In recent years, the sector has continued to expand, with companies such as Renault, Peugeot, and Toyota setting up plants in the country. The Moroccan government has also implemented many initiatives to support the industry, including establishing special economic zones and drafting the National Automotive Plan.
Kenya is another African country that has seen a rise in the automobile manufacturing and assembly industry. The country has attracted companies such as Toyota and General Motors to set up plants, and the government has implemented policies to support the sector.
For example, the government has established a National Automotive Policy, which aims to develop the industry by promoting local suppliers and the creation of a skilled workforce.
2023 is a year of a step change for the African automotive industry – five countries are either implementing progressive automotive policies or will approve and implement such policies, namely Ghana, Cote d’Ivoire, Nigeria, Egypt, and Kenya. Up to now, it is only Morocco and South Africa that have successfully and competitively industrialised their auto industries with production volumes of 1 million vehicles.
In conclusion, the automobile manufacturing and assembly industry in Africa, excluding South Africa, has experienced significant growth in recent years.
This growth is due to many factors, including increasing demand for vehicles, government initiatives to support the industry, and the availability of skilled labour and natural resources.
Morocco and Kenya are among the countries that have seen substantial growth in this sector, and likely, other African countries will also see an increase in the industry in the future.
With a total manufactured or assembled vehicle production of 1 million, Africa is punching well below its weight - and should see annual volumes of around 5 million and potentially scale up production.
The fact that Africa is now a free trade region (AfCFTA) is a vital step in accelerating the automotive sector on the continent and could make it one of the largest trading blocks in the world.
“There is no way every country in Africa can have an auto manufacturing operation,” says Mike Whitfield, Managing Director of Nissan Africa Regional Business Unit. “However, if those other countries are willing, they can participate and co-operate in the value chain by hosting first, second or even third tier manufacturers supplying into the automotive industry.”
Though Africa is experiencing a population boom and rapid urbanisation, motorisation still lags. The solution to the problem is to create automotive hubs and capitalise on the AfCFTA to unlock the economic potential.
In a long career as a trade unionist, member of Parliament, and now working for Ubu Investment Holdings, Alec Erwin has been intimately connected to the South African auto industry through the Local Content programme, MIDP and AIDP.
“Key elements to making an African auto industry work are efficient customs administration, a proper tariff mechanism and safety standards, and homologation procedures must be international,” he says. “Then the supply chain needs to be developed.
Financial assistance to help companies achieve the required standards needs to be asset-based finance rather than government grants or loans, and this will happen if the investor sees all those elements are in place.
The Africa Association of Automotive Manufacturers (AAAM) was founded in November 2015 by global OEMs and is a pan-African automotive association focused on the continent dedicated to working with African governments to develop and implement progressive auto policies and ecosystems.
In November 2021, South Africa hosted a round of the Intra African Trade Fair, and AAAM became a part of this with the Africa Automotive Show – and will do so again in the next one in Abidjan, Côte d’Ivoire, from November 21 -27, 2023.
Africa (excluding South Africa) currently accounts for only 0,5% of the global automotive market (600 000 units), and its motorisation rate is just 42 vehicles per 1 000 inhabitants – significantly below the global average of 203.
The Africa Automotive Show at IATF2023 will have a dedicated Auto Exhibition, an Auto Forum, and a B2B/B2G for the Auto Industry. The Automotive Forum will bring together selected Heads of State and Government, Ministers responsible for Trade and Industry and Captains of Industry to discuss primary issues affecting the auto industry and provide practical solutions.
“The aim is for the Africa Automotive Show to be the single most important trade and business development gathering for all automotive role-players - from raw material suppliers, vehicle and component manufacturers, dealers, importers, aftermarket parts manufacturers and suppliers, and those from the financial and allied industries – from all parts of the continent,’’ says Africa Automotive Show Director Andrew Binning.
Binning said the Africa Automotive Show - hosted by the African Association of Automotive Manufacturers (AAAM) – is a fundamental activity of the cross-sectoral IATF2023 and would include a dedicated automotive exhibition, a high-level conference, and match-making meetings.
As the event focuses on trade and partnerships promoting the development of regional automotive value chains, participants representing all aspects of the automotive value chain will be attending the week-long event in Cote d’Ivoire next year.
CEO of AAAM Dave Coffey
IATF2023, hosted by the African Export-Import Bank (Afreximbank) in collaboration with the African Union and AfCFTA, is anticipated to draw 35 000 visitors from 75 countries and 1600 exhibitors to conclude around $ 43 billion in trade and investment deals.
Dave Coffey, the CEO of AAAM says: “Cote d’Ivoire and the West African region provide an excellent and relevant location for this edition of “Africa’s premier automotive show.
The Africa Automotive Show is happening at an opportune moment as the automotive industry is gaining traction in Africa. The development of regional value chains will propel vehicle inter-trade between assembly hubs across Africa.
Cote d’Ivoire is currently developing its competitive automotive value proposition that will have radical economic benefits for the country and region in the medium and long term. The project is a joint effort with Ghana and other countries in West Africa and will develop their sustainable automotive niche to drive scale and industrialisation.
Coffey pointed out several of the challenges facing the Africa auto industry, including:
• Lack of harmonised standards, homologation, and vehicle ID.
• Poor infrastructure and high logistics costs.
• Affordability challenges due to lack of asset-based vehicle finance products.
The report-back sessions in Abidjan in November will detail the progress made.
