‘Why a sustainable auto sector is crucial to continent’

RioAfrica contributed less than one per cent to global vehicle production in 2015. As a result, more Africans are beginning to understand why there are only about 42.5 million registered vehicles in use in the continent of approximately one billion people.

The African Association of Automotive Manufacturers (AAAM) presented the plights of players in the sector, and stressed the need for a sustainable automotive sector on the Africa continent to Nigeria President, Muhammadu Buhari and other top government executives in Abuja recently.

The rate of the continent’s motorisation, which is only 44 vehicles per 1000 inhabitants not only underscores the need for Africa, particularly Nigeria, to address key sector challenges, but also for operators to work together to access the huge potential in the sector.

Automotive Insights published by Deloitte Africa, showed that while the continent is flooded with second hand vehicles imported from U.S and other parts of the world, Africa imports four times more automotive products than it exports. In 2014 alone, the continent imported automotive worth US$48 billion and exports worth only US$11 billion, thanks to the development in South Africa.

Statistics published by the AAAM showed that the sector contributes 7.5 per cent to the Gross Domestic Product of South Africa; provides 320,000 employments, total automotive value chain impact on employment amounting to about 700,000 jobs. It also attracted $750 million investment in 2015, and 2015 figure of vehicles and components exports from the country amounted to $11 billion.

Nigeria, Ethiopia and Kenya, are currently making moves to boost activities in their automotive sector but experts said a lot need to happen for the efforts to make imprint in global statistic.

Though Nigeria is the most populated country in Africa, and has a GDP of $296 billion in the latest August 2016 assessment, the lack of domestic vehicle production capability turned passenger vehicles to the country’s second-largest import category after petroleum oils or bituminous minerals, with automotive related imports. Basically, second hand vehicles standing at US$6.9 billion account for about 11.5 per cent of Nigeria’s total imports, Deloitte experts said.

Nigeria’s National Automotive Industry Development Plan (NAIDP) launched in 2014, attracted global investors and the sector was projected to contribute at least 4.5 per cent of 2016 global automobile sales and add about 25 per cent to national GDP in the first quarter of 2016.

But the projections could only be feasible on the long term considering current economic reality and unaddressed challenges in the sector, ranging from infrastructure deficits, inadequate data, lack of automotive finance scheme, policy environment to lack of sincerity among players.

But many experts believe that the automotive sector could unlock the economic potential of the African continent if government support and sustain industrialisation effort.“As the African continent becomes increasingly important within the global economy, it is crucial that we develop an automotive sector strategy backed up by incremental investments in infrastructure, skills development and in-market localisation programmes. This will make new vehicles more affordable, boost the industrialisation of the economy and lead to the growth of middle income households, which will be the main driver for new vehicle sales,” Chairman of AAAM and President/CEO, Ford Motor Company Sub-Saharan Africa Region, Jeff Nemeth, told Nigerian government recently.

To the association, “One of the biggest challenges Africa face is the lack of reliable data on the number of new and second-hand vehicles sold on the continent.Nemeth told The Guardian that the association, founded by BMW, Ford, General Motors, Nissan, Toyota and Volkswagen, is determined to delivered a promising automotive sector to future Africans by working with governments across the continent.

AAAM’s mandate is to engage with government, industry bodies and representatives from the motor sector to provide advice on opportunities to formalise, develop and grow all aspects of the local automotive industry.

This includes promoting an investor-friendly regulatory framework that will support the development and implementation of policies to establish a viable automotive manufacturing industry on the continent that includes both assemblers and suppliers.

“To unlock this market potential will require greater government and private sector partnerships to develop a formal legislative environment that is conducive to longer term growth. It needs a more robust automotive strategy that promotes a sustainable and stable environment in support of local manufacturing operations,” Nemeth added.

Nemeth, who believed that fostering regional integration on the continent would accelerate development, noted that trade treaties aimed at encouraging trade among African countries are necessary to promote the automotive sector on the continent.

Raising the alarm that the automotive policy in Nigeria may be heading for doom if government did not act fast, industry players had said investments and efforts put into the plan may also remain a mirage, if government refused to tackle key challenges.

Chairman, Nigeria Automotive Manufacturers Association and Managing Director, VON Automobile Nigeria, Tokunbo Aromolaran, called on the government to twist the NAIDP to add backward integration, create stable environment and legislation that would support the policy sustainably.President of Coscharis Group, Cosmas Maduka, had also noted that the industry would accelerate if government tackled importation of second hand vehicles to boost new car market in the country, as the sale of new vehicle is very little in the country.

But Group Managing Director of Proforce Limited, Ade Ogundeyin, had said desired growth in Nigeria’s automotive sector and other African counties is largely tied to the willingness of government and players to prioritise local content development and show sincerity towards policy implementation.Nigeria’s Minister of Industry, Trade and Investment, Okechukwu Enelamah, had however assured of government’s commitment to implement the policy, noting that the present administration would create enabling environment, which would give incentives to complement efforts of investors.

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