The African Export-Import Bank (Afreximbank) and the African Association of Automotive Manufacturers (AAAM) have entered into a memorandum of understanding (MoU) for the financing and promotion of the automotive industry in Africa.

“The strategic partnership with AAAM will facilitate the implementation of the bank’s automotive programme, which aims to catalyse the development of the automotive industry in Africa as the continent commences trade under the African Continental Free Trade Area (AfCFTA),” says Afreximbank president Professor Benedict Oramah.

Under the terms of the MoU, Afreximbank and AAAM will work together to foster the emergence of regional value chains with a focus on value-added manufacturing, created through partnerships between global original equipment manufacturers (OEMs, or vehicle manufacturers), suppliers and local partners. 

The two organisations plan to undertake studies to map potential regional automotive value chains on the continent in regional economic clusters, in order to enable the manufacture of automotive components for supply to hub assemblers.

To support the emergence of the African automotive industry, they will also collaborate to provide financing to industry players along the automotive value chain.

Potential interventions include lines of credit, direct financing, project financing, supply-chain financing, guarantees, and equity financing, among others.

The MoU also provides for the partners to support, in conjunction with the African Union Commission and the AfCFTA Secretariat, the development of coherent national, regional and continental automotive policies and strategies. 

With an integrated market under the AfCFTA, abundant and cheap labour, natural resource wealth, and a growing middle class, African countries are increasingly turning their attention to support the emergence of their automotive industries, says the AAAM. 

Therefore, the collaboration between Afreximbank and AAAM will be an opportunity to power the aspirations of African countries towards re-focusing their economies on industrialisation and export manufacturing and fostering the emergence of regional value chains.

“The signing of the MoU with Afreximbank is an exciting milestone for the development of the automotive industry in Africa,” says AAAM CEO David Coffey.

“At the 2020 digital Africa Auto Forum, the lack of affordable financing available for the automotive sector was identified as one of the key inhibiters for the growth and development of the automotive industry in Africa. Having Afreximbank on board is a game changer and a hugely positive development.

“It is wonderful to have a partner that is as committed as the AAAM to driving the development and growth of our sector on the continent; this collaboration will ensure genuine progress for our industry in Africa.”

Other areas covered by the MoU include working with the African Union and the African Organisation for Standardisation to harmonise automotive standards across the continent and developing an automotive focused training programme for both the public and private sector.