Twelve automotive associations have signed a memorandum of understanding (MoU) to drive the development of the automotive industry in Africa.

The automotive sector, whilst key for the industrialisation of Africa, is often associated with numerous challenges, including market fragmentation; a lack of regulatory alignment between African countries, as well as between the European Union (EU) and Africa; industrial and trade policies that are not conducive to local and foreign investment; affordability issues; as well as a lack of access to finance for consumers and local suppliers, says the African Association of Automotive Manufacturers (AAAM).

However, intra-African trade can be bolstered and diversified by developing a Pan African Auto Pact, which could expand the African new-vehicle market from one-million units a year to five-million units a year, notes the association.

“A coalition of the willing will see the development of manufacturing sites and allied industries and services – both for the [vehicle manufacturing] and supplier sector –thereby laying the foundation for pan-African integrated automotive value chains which will incorporate neighbouring countries, thus building a regional and continental production network.”

The launch of the African Continental Free Trade Area (AfCFTA) gives a boost to pan-African trade and investment opportunities, especially for the automotive industry, says the AAAM.

The AfCTFA agreement was one of the catalysts that led to the initiative to develop an MoU among European and African automotive associations, initially driven by the AAAM, the German Association of the Automotive Industry and the German-African Business Association. However, this has now grown into an MoU between 12 associations.

The MoU commits the associations to work jointly on seven key priorities, says the AAAM.

These include setting up a permanent round table between the African Union, the EU and auto industry associations.

EU and African governments are also to pursue trade initiatives through the implementation of existing agreements, with the aim of increasing business opportunities and further expanding EU-Africa trade in automotive products.

The MoU also commits to advancing the integration of African companies into global value chains and to support the building of the necessary infrastructure and logistics. 

The memorandum further calls on the EU to enhance its support for the implementation of the AfCFTA, and to favour Africa’s industrialisation and the expansion of the African automotive market.

The MoU also calls for governments to support knowledge transfer, provide financial resources and give political priority in establishing a pan-African production and trade system that will reinforce and expand existing African automotive value chains.

Lastly, the memorandum encourages the EU to financially support the development of sustainable and smart mobility, as well as affordable vehicle financing solutions to increase mobility within African cities.

“The trade and investment climate in Africa can only be improved together,” says AAAM CEO Dave Coffey.

“We are convinced that Africa has great potential to develop a promising automotive industry that will provide long-term employment.

“The fact that African and European associations have agreed on key points to further develop the industry on the continent is an important milestone. Now political representatives are to support this by creating the framework conditions for the industry to develop and grow.”

The MoU signatories are the AAAM; the German-African Business Association; the German Association of the Automotive Industry; the Kenya Association of Manufacturers; the Tunisian Automotive Association; the National Association of Automotive Component and Allied Manufacturers in South Africa; the National Association of Automobile Manufacturers of South Africa; the European Association of Automotive Suppliers; the European Business Council for Africa; the European Automobile Manufacturers’ Association; the Nigeria Automotive Manufacturers Association; and the Automotive Assemblers Association Ghana.