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Africa|Automotive|Industrial|Logistics|Manufacturing|Refining|Resources|Road|Safety|Sustainable|Manufacturing |Solutions|Infrastructure
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AAAM to unlock Africa’s economic potential – CEO

DAVID COFFEY "The continental strategy promotes countries to align with and complement neighbouring countries in order to facilitate inclusivity and the development of the automotive industry" - David Coffey

GEARED FOR SUCCESS Implementation of the continental automotive strategy through the required policies will increase new-vehicle demand in Africa from 1.1-million units a year currently to five-million units a year by 2035

27th January 2023

By: Leah Shelene Asaram

Features Reporter

     

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The African Association of Automotive Manufacturers’ (AAAM’s) objective is to expand and deepen the automotive industry across Africa by working with African governments. This will be achieved by developing, refining and implementing auto policies and ecosystems that will attract investors and unlock Africa’s economic potential.

AAAM CEO David Coffey says the association is actively working with key stakeholders in various African countries; the hub assemblers initially include Ghana, CÔte d’Ivoire, Nigeria, Egypt, Ethiopia and Kenya.

Morocco and South Africa are currently the only two countries in Africa that have significant automotive manufacturing industries, with Morocco producing 403 007 vehicles in 2021 and South Africa 499 087 vehicles in the same year, he says.

Other than Egypt, which produced more than 1 00 000 vehicles in 2021, the rest of the continent has fragmented, low volume semi-knocked down production facilities in various countries, notes Coffey.

Africa also has a low motorisation rate of 42/1 000 inhabitants, whereas the global average is 182/1 000 inhabitants. There is a lack of harmonised standards and homologation, in addition to the unregulated importation of three- to five-million used vehicles yearly, notes Coffey.

He says poor infrastructure, high logistics costs, affordability challenges, and a lack of component manufacturers are also inhibiting the automotive industry from contributing to the industrialisation of Africa.

Industrial Policy

The AAAM, along with the African Continental Free Trade Area (AfCFTA) Secretariat, the African Union, Afreximbank, United Nations Economic Commission for Africa and African Organisation for Standardisation, has developed a draft continental automotive strategy and implementation plan, which is currently under review by the AfCFTA member States.

Moreover, the AAAM signed a memorandum of understanding in February last year, with four European private-sector associations and eight African associations to collaborate on driving the development of the automotive industry across Africa.

Coffey notes that the continental strategy promotes countries to align with and complement neighbouring countries in order to facilitate inclusivity and the development of the automotive industry.

The first component required is the political willingness to legislate and implement a progressive automotive policy, which includes taking advantage of the benefits of the evolving and significant single market of the AfCFTA.

The second component focuses on the development of regional value chains and the transformation of raw materials.

The aim is to develop a strong component manufacturing base and to create linkages and partnerships across and external to Africa, resulting in viable, sustainable production and trade.

“About 60% of spare parts sold in Africa are used, and while the remaining 40% are new, half of them are counterfeit parts. There is such a huge manufacturing opportunity by introducing standards to regulate spare parts in the interest of safety and reliability.”

Coffey adds that it is also important to assess what natural resources a country has, as transformation of these resources, including minerals, could be that African country’s significant contribution to the automotive value chain.

The last component addresses demand creation and deeper industrialisation. While Africa’s share of the global population is 17.2%, vehicle demand in the continent comprises only 1.3% of global demand.

Coffey states that many people cannot afford a new vehicle; thus, implementing an efficient and safe used car ecosystem along with affordable and innovative mobility solutions, will increase automotive demand.

He says that automotive policies also need to address creating access to affordable finance options in Africa.

“The architecture of national auto policies, while independent, are ideally compatible and designed to conform to an ecosystem that supports continental production and trade while driving manufacturing competitiveness.”

Coffey says the implementation of the continental automotive strategy through the required policies will increase new-vehicle demand in Africa from 1.1-million units a year currently to five-million units a year by 2035.

Policy Development

Ghana will implement the balance of its policy provisions this year after announcing its automotive programme in 2020, notes Coffey.

This includes taking the big step of banning the importation of used vehicles that are older than ten years.

“In addition to supporting the industrialisation of this sector this will help to decrease the risks of accidents on the road and enable customers [to use] roadworthy vehicles.”

Egypt announced its automotive policy in June last year, with final parliamentary approval on October 27, 2022. The country has formed an Automotive Supreme Council to oversee implementation and the attainment of objectives of the policy.

The Kenyan national assembly approved the Kenya National Automotive Policy on May 25, 2022, and an automotive council will be formed to implement the policy this year.

In Côte d’Ivoire, AAAM policy experts were commissioned by government to research and develop an automotive policy, which was completed in December 2022.

KPMG was commissioned by the Nigerian government to conduct an independent automotive policy review of the country; this was completed in 2022.

There is also substantial demand for minerals in the automotive industry. Electric vehicles require cobalt, manganese, lithium and nickel – all of which are in Africa; 70% of these minerals are being exported unprocessed to China.

“This is a major loss on localisation – we have the potential – now we need the policies,” Coffey concludes.

Edited by Zandile Mavuso
Creamer Media Senior Deputy Editor: Features

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