If plans to create a Pan-African Auto Pact succeed, it can potentially create a market of four-million new vehicles a year, says African Association of Automotive Manufacturers (AAAM) chairperson Thomas Schäfer.

Larger-scale vehicle production in Africa is currently limited to countries such as South Africa and Morocco. Most African vehicle markets consist of second-hand imported vehicles often not suited to the continent’s conditions.

The AAAM was inaugurated in 2015 by founding members BMW, Ford, General Motors [now Isuzu], Nissan, Toyota and Volkswagen, with a focus on developing key markets in Africa.

New members include the likes of Peugeot and Renault. Component manufacturers and finance institutions, such as Standard Bank and Bosch, have also become members.

The AAAM’s focus is not solely on creating markets for new-vehicle sales, but also on guiding African governments to use vehicle manufacturing as a stepping stone to wider industrialisation, notes Schäfer.

“The AAAM focuses on four pillars,” he explains. “The first pillar deals with the automotive policies African countries need to enable trade and industrialisation. The second pillar is about technical matters, such as homologation, legal inspections and standards. The third pillar is about training, education and skills. The fourth pillar is more administrative in nature – trade shows, events within the African context to promote and build the industry.”

Schäfer says work around the pillars has been outsourced to consultancy firm Deloitte, with former South African Minister of Trade and Industry, Alec Erwin, working as a specialist policy consultant.

“He is helping us to reach out to countries such as Ghana and Kenya to help them create properly structured automotive policies.”

Ghana is one of the countries that has responded positively to AAAM input.

Ghana has approved a policy that will effectively phase out used-car importation, says Schäfer. 

The country will also offer preferential vehicle finance to locally assembled vehicles, as well as put in place the required industry standards.

Ghana is also already engaging with the South African component industry to establish a supplier industry. 

“This is a prime example of what you can do with a forward looking government and good engagement between politicians and business,” says Schäfer. “We want to do this across Africa.”

He says the idea is to find those countries with the political will to create the environment necessary to establish a viable automotive industry. 

“The idea is to create a framework that will ultimately allow private investors to participate in the African automotive industry.

“In our books this is Ghana, Rwanda, Kenya and Ethiopia. With them, together with South Africa, we will then work on creating a Pan-African Auto Pact.”

This Auto Pact will operate on a government level.

“We hope to establish a network between the selected countries that will be a win-win for everyone,” notes Schäfer.

“In South Africa we produce Polos, bakkies and premium vehicles. In Ghana they could do small sedans, or big sports-utility vehicles, or yellow metal or tractors, for example.

“Ghana has about 30-million people. Even if Ghana develops to its full potential they could move to a maximum annual market of 300 000 cars. That is by far not enough. That is half South Africa and we are battling. We really need to work together to grow the auto industry and create the sizeable markets we require to make a positive economic impact.”

Schäfer believes participating African countries would need around three years to prepare and implement their respective automotive policies before the Auto Pact can come into existence.

Following this, a regional hub-and-spoke model could see Ghana be the champion of the West Coast, for example, reaching out to countries such as Benin and Togo to give some of the work in the value chain to them.

“The Ivory Coast is a big producer of rubber, so why not get tyres from them and, in turn, provide them with the vehicles they need?” says Schäfer.

“Regional collaboration can substantially increase production volumes – it just needs to be unlocked in a proper win-win scenario.

“This idea to build all the cars in South Africa and then send them to the rest of Africa – that’s not going to fly. African countries want industrialisation, they want jobs, they want forex preservation. We need to develop a deal that offers everyone a positive outcome.”