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14 ∙ AFRIKA WIRTSCHAFT

14 ∙ AFRIKA WIRTSCHAFT ∙ FEATURED TOPIC ∙ AUTOMOTIVE INDUSTRY IN AFRICA IN THE FAST LANE Jobs, mobility, and quality of life – why Africa would profit from a strong automotive industry. Author: Nana Gerritzen _2/2018

∙ AFRIKA WIRTSCHAFT ∙ FEATURED TOPIC ∙ 15 rior to the 1980s, there was no real automotive industry to speak of in China. However, the country has been the world’s largest producer of cars since 2008. At the beginning of the 1990s, China was producing around 500,000 cars a year, but last year this figure was a staggering 28 million. Chinese gross domestic product quadrupled in the same period of time, increasing from USD 360 billion to USD 11.2 trillion. The industrialisation of the automotive industry has created millions of jobs. The industry has also made a significant contribution to economic growth, and brought about increasing wages and rapid urbanisation. In addition, it has managed to get more and more of the Chinese public behind the wheel: in 2017, China represented the world’s largest automotive market, with 24.7 million passenger cars and 4.2 million commercial vehicles sold. Development of the automotive industry has had similar effects in South Korea, India, and Brazil. “If a nation’s people can create and manufacture cars, they can create and manufacture anything”, claims Edward T. Hightower, who worked for more than 20 years as an engineer and manager at General Motors, Ford, and BMW, and recently had his book Motoring Africa published. Afrika, das letzte Neuland der Autobauer (“Africa, the last uncharted territory for automakers”) was the headline run three years ago by the Handelsblatt in an article on Africa’s need to catch up in the automotive industry. Of the 97 million vehicles produced around the world last year, only 1.1 million came from Africa – mostly from South Africa and Morocco. In addition, the level of vehicle ownership on the African continent is still extremely low: according to the International Organization of Motor Vehicle Manufacturers (OICA), only 50 out of every 1,000 Africans own a car. In contrast, in the United States, 800 out of every 1,000 residents are vehicle owners. With over 368,000 new cars sold last year, South Africa easily tops the rankings of African car sellers. Still, for the same year, 3.44 million new cars were registered in Germany – almost ten times the amount in South Africa. However, the trend is changing – between 2005 and 2015, the number of cars sold on the African continent increased by 50 percent – and the automotive industry is reacting. Mercedes Benz, BMW, Volkswagen, Renault-Nissan, Toyota, General Motors and Ford have been producing in South Africa for decades, and there are also truck manufacturers such as MAN. In the supplier sector, there are around 500 companies operating in South Africa alone. And what works on a large scale in China, also works in the African auto pioneers of South Africa and Morocco. According to the OICA, in 2016, South Africa produced 600,000 vehicles, and Morocco produced 345,000. Both countries profit from the growing automotive industry, and the Moroccan government plans to have production ramp up to a million cars per year in the near future. The North African country has managed to attract investors with low wages and labour costs, and the growing automotive production should also draw suppliers. Between 2005 and 2015, the number of cars sold on the African continent increased by 50 percent. AFRICA INCREASINGLY IN FOCUS Although South Africa and Morocco are the undisputed leaders of the African automotive industry, there is a lot happening in many other countries as well. Automakers and suppliers are watching the growing markets in Africa with increasing interest. Low rates of vehicle ownership, a growing middle class, and low competition are catching the eyes of an increasing number of companies. The African free trade agreement signed in March lowers internal tariffs and is intended to boost trade – it can be hoped that it will result in increased foreign investment across the continent, including in the automotive industry. At the beginning of the year, Volkswagen founded Mobility Solutions in Rwanda. With app-based services, the group wants to do more than just achieve value creation – it wants to increase mobility in the East African country, initially in the form of private carsharing and ride-hailing. From summer, up to 5,000 cars will be assembled per year in the capital city of Kigali, and will result in 500 to 1,000 jobs being created by Volkswagen to start with. The initial investment amount totals USD 20 million. The corresponding app is being programmed by a Rwandan start-up. “We want to take a new approach to things here and try a solution different to the traditional business model of building cars and selling cars”, said Thomas Schäfer, Chairman and Managing Director of Volkswagen Group South Africa in discussion with the German-African Business Association. “Of the 1.2 billion people living in Africa, a maximum of two to three million can afford a new car. However, the number of people that have two, five, or ten dollars in their pocket, and need to get from A to B ranges in the high hundreds of millions.”, reported Schäfer, who is responsible for the Sub-Saharan region, comprising 49 countries and 920 million people. There is presently next to no competition in Rwanda. To get to work, the doctor, or a restaurant, most Rwandans take motorcycle taxis. Most of the cars on the country’s streets are expensively imported used cars, mainly from Japan. In its plans to bring carsharing to Africa, Volkswagen is also receiving support from the German federal government. At the end of February, Gerd Müller, German Federal Minister of Economic Cooperation and Development, gave the green light to a first mobility initiative in Kigali involving the Rwandan government, Volkswagen, Siemens, SAP, and the mid-sized Inros Lackner, a Rostock-based engineering firm. “We can contribute our expertise in the field of extending individual mobility to digital, intelligent, and smart solutions in logistics”, “Automobile production is a compelling approach to meeting the mobility needs of Africa’s emerging middle class, while building profitable companies and creating jobs”, says Edward T. Hightower. © Edward T. Hightower, Motoring Ventures LLC _2/2018

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