HARMONISED regional trade policies and comprehensive national investment strategies could create at least three rivals to SA’s domination of the vehicle-manufacturing industry in sub-Saharan Africa, says a new report.
The report, Navigating The African Automotive Sector, published on Thursday by Deloitte, says Nigeria, Kenya and Ethiopia have the potential to take advantage of a new-vehicle market that some analysts think could grow by nearly 550% in the next 15 years.
Karthi Pillay, the head of the group’s African automotive practice, said: “Globally, the strategy for manufacturers is to get closer to their consumers — and Africa has a growing number of consumers entering the middle-income bracket.”
He added that the value chain of the automotive manufacturing industry was considerable and on its own could “kick-start the industrialisation of Africa, provided the continent can harmonise manufacturing and trade policies”.
The African new-vehicle market is tiny by global standards; last year, the continent accounted for about 1.55-million sales out of a worldwide total of 90-million, says the report. Some analysts, however, think economic growth and the emergence of a new, continent-wide middle class could push sales as high as 10-million by 2031.
Of current sales, SA, Morocco, Algeria and Egypt — all with established motor industries — account for 80%. Motor companies in the three North African countries cater mostly to domestic, Middle East and European customers, leaving SA to dominate sub-Sahara.
Nigeria has already started to muscle in on that dominance — with help from the South African government, which has committed to helping the West African country develop its automotive sector.
Several multinational motor companies have already established joint-venture assembly operations in that country. At the moment, assembly is almost exclusively from imported vehicle kits.
The South African subsidiaries of Ford and Nissan are among companies exporting kits to be bolted together and sold in Nigeria as “locally made”.
The arguments for Nigeria having its own industry are inescapable. As the Deloitte report points out, with a population of 180-million and a gross domestic product (GDP) of $493bn, the country is Africa’s most populous and has the biggest GDP.
Like most of Africa, however, Nigeria’s vehicle market is dominated by imported used cars and commercial vehicles. The Deloitte report says only about 10% of vehicles sold there are new.
Kenya already has a longstanding, although also relatively low-volume, motor industry dominated by truck manufacture. The country is also the chief gateway to East Africa, making it “a potential hub for automotive assembly and production”, says Deloitte.
Jeff Nemeth, head of Ford Motor’s sub-Saharan Africa activities, said last year he was astonished by Ethiopia’s potential. It may have Africa’s second-largest population, of 90-million, and ninth-largest GDP, at $63bn, but it also had the world’s second-lowest vehicle-to-population ratio.
Deloitte says that across Africa, there are only 44 vehicles for every 1,000 inhabitants against a global average of 180. In Ethiopia, says the report, it is two.