The Africa Continental Free Trade Area (AfCFTA) agreement is a unique opportunity for the automotive sector in Africa, says Alec Erwin, an African Association of Automotive Manufacturers (AAAM) policy expert and former South African deputy minister of finance and minister of trade and industry and public enterprises.
“It's a real opportunity to industrialise in a key sector,” Erwin said during a webinar last week on the AfCFTA and the auto sector. However, Erwin warned that Africa cannot continue to import all its vehicles.
“Even importing these very cheap sub economic exports out of other economies, the balance of payments effect is still massive.
“It's creating real pressure on our balance of payments in Africa and squeezing out other capital goods that we need for our industrialisation,” he said.
Mike Whitfield, the president of AAAM and MD of Nissan Africa, said one of the key issues is the need to promote safety and the standards of the actual vehicles that come into Africa.
“We shouldn’t see Africa as a dumping ground for vehicles out of developed markets. We need to make sure that we support the ongoing development of safety and homologation standards,” he said.
Erwin added that the programmes to manufacture vehicles around the world are relatively complex, but some programmes have started in Africa with Ghana recently adopting a fully fledged and complete programme that has resulted in investments in Ghana.
Whitfield said vehicle fleets in Africa are essentially built up from pre-owned vehicles from the EU, the US and Japan, which made the auto sector in Africa sub-optimal and economically and environmentally ineffective.
Whitfield added that it was difficult to build a supplier base and official distribution and aftermarket systems because these fleets consist of a very diverse and old fleet, with a wide variety of standards that create vehicle financing challenges and result in very low vehicle sales volumes.
“In line with the AfCFTA, we need policy specific interventions that are created in Africa to position Africa’s automotive industry, not only from a free trade agreement perspective but also the automotive and value chain, because if we don’t do that, we will remain sub-optimal.
“With the foundation of the AfCFTA, the activities and the opportunities the industry does bring, the timing could never be better. If we miss this opportunity, I don’t believe we will be able to do it later,” he said.
Erwin said the AAAM has proposed to the AfCFTA to have a sub agreement specifically for dealers with the strict and detailed rules around auto if it intends to fast-track the auto sector.
He said the AAAM also strongly recommends the need for a specific agreement to cover the special conditions for the auto sector that also addresses the concerns of the smaller economies that may not attract the assembly of vehicles but can benefit from the other aspects of an automotive programme.
“It is critical that we do this in the context of the AfCFTA negotiations as fast as we can,” he said.
Whitfield said there is a lot of opportunity for the automotive sector in the vision of the AfCFTA, particularly as only South Africa and Morocco have significant production volumes.
He said these opportunities are significant for all African countries.
Whitfield said only 1.3% of global automotive production happens in Africa but Africa has 17% of the global population.
In addition, there are only 42 vehicles per 1 000 people in the African continent compared to the world average of 182, he said.
“Africa has a young, growing population that, with the rapid rise of urbanisation, needs mobility as well.
“It's critical that we all work together and realise the potential that can be realised in Africa for Africa.
“We see the free trade agreement ultimately being a catalyst to help us unlock the opportunities in Africa for Africa,” he said.
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