Unlocking automotive value addition within the SSA economy was key to realising an automotive masterplan for the region, said Professor Justin Barnes of B&M Analysts. In addition, sustainably growing vehicle and automotive component production through an SSA Auto Pact around three to four nodal points, spreading value to regional economies, was critical, he added. This was among the findings of research conducted by Barnes who is also executive director of the Toyota Wessels Institute for Manufacturing Studies. Barnes highlighted the findings of his research “Driving African Industrialisation: Establishing a Sub-Saharan Automotive Pact”, at the KwaZulu-Natal Export Week conference in Durban recently. He said research had shown that there had been a demand for 1.5 million vehicles on the continent in 2017, and only 596 260 vehicles had been produced in SSA, of which just 24 307 had been produced outside of South Africa. SSA subsequently had an automotive sector trade deficit of $6.7 billion in 2017. “We have 34 million adults in SSA who can afford a new vehicle. Vehicle demand is set to reach 2.1 million units by 2035 – 900 000 new and 1.2 million preowned,” Barnes said. Of this demand just 650 000 are expected to be produced in SA. He said there was an opportunity to create an automotive masterplan for SSA. “The automotive industry plays a disproportionately small manufacturing role in the region – outside SA – with preowned vehicle imports and a plethora of small, disconnected domestic markets ensuring limited scope for the creation of a sustainable large-scale automotive industry,” Barnes said. He added that the key to realising the plan was to unlock automotive value addition within the SSA economy and to sustainably grow vehicle and automotive component production through an SSA Auto Pact around three to four nodal points, spreadingvalue to regional economies. He said vehicle assembly could be conducted in one or two hubs, such as South Africa, while surrounding countries focused on the production of vehicle components. However, constraints to a successful manufacturing economy included the lack of a common market, the lack of economies of scale, and the flood of pre-owned vehicle imports which needed to be addressed. He said India was an interesting case study as it had banned pre-owned vehicle imports in 2017 which had led to its new vehicle market growing to 4 017 539 units, up from 3 424 836 in 2015. In comparison SSA’s new vehicle sales declined to 1 501 484 down from 1 919 921 for the same period. “If preowned vehicle imports are eliminated we estimate that the demand for new vehicles in SSA will reach 1.9 million units by 2035,” Barnes said. Nigeria could potentially consume 277 000 vehicles, Kenya 98 000, followed by Tanzania, Cote D’Ivoire, Cameroon, Ghana and Ethiopia, which could each have domestic market potential of more than 50 000 vehicles by 2035. If OEMs and component manufacturers were able to supply this demand locally, some 304 935 jobs would be created in the sector. He said WTO trade related investment measures (TRIMS) based on the trade of goods, which focuses on investment measures that discriminate between imported and exported products and create import or export restrictions was needed to implement the pact. “The building block of the SSA Auto Pact is to incentivise OEMs and component manufacturers within the SAAM (SA Automotive Masterplan) to invest in other auto pact economies. In exchange, participants get to enjoy expanded SSA market access,” he said. Barnes added that recognition and support for investments and possible recognition of components sourced and traded within the region were also key, while other essential elements to succeed were the harmonising of standards, customs administration, preowned import restrictions, government procurement agreements and investment and finance support and facilitation. “There needs to be an agency to craft out some sort of investment pact. This would be a game changer that would move us up to no 10 or 12 in global manufacturing and attract attention from OEMs,” he said.
INSERT: If pre-owned vehicle imports are eliminated we estimate that the demand for new vehicles in SSA will reach 1.9 million units by 2035– Justin Barnes
