Africa Automotive News September-October digital issue 2019

Feature
is to nurturing a domestic industry, so
is establishing a manufacturing base.
South Africa leads the continent’s auto
manufacturing sector with original
equipment manufacturers, longestablished
in the country and backed
by a vibrant community of 500 suppliers
and diversified manufacturers. Yet, head
up the continent and there is little auto
manufacturing until North Africa, bar light
manufacturing from imported kits.
Kenya only has three assembly plants,
and they all produce vehicles with wholly
imported parts that require no domestic
manufacturing input.
The Kenyan government, which has
identified the auto sector as a key driver
of the country’s industrialisation policy,
has promised incentives to encourage
a local industry. These include building
special economic zones which benefit
from tax holidays and low utility rates.
It has also introduced local input
requirements and tariffs on imported auto
components that could be manufactured
locally. Encouragingly, the assembly of
motor vehicles in Kenya grew by 31.4%
from 2013 to 2014, with assembly
figures forecast to almost double between
2013 and 2019. It’s improving the
country’s chances of becoming a hub for
assembly and production in the region.
It’s a similar story in Nigeria, where the
Automotive Industry Development Plan
(NAIDP) pledges to build auto industry
infrastructure including supplier parks and
clusters. Tax incentives include Nigeria
allowing car groups to import two fullybuilt
units at a discount duty of 35% for
cars and 20% for commercial vehicles, for
every one built locally. The government
also aims to boost skills and investment
and encourage a local component
industry to supply manufacturers at
competitive prices. It amounts to the
kinds of incentives that encouraged Ford
to begin assembling its Ford Ranger
pickup in the Nigerian city of Ikeja in
2015, partnering with Ford dealer group
Coscharis Motors on the project.
“Nigeria is a priority market for us in
Sub-Saharan Africa and this will allow
us to better serve our customers, both
from a retail point of view and in terms
of vehicle and parts availability,” says
Jeff Nemeth, president and CEO of
Ford Motor Company of Sub-Saharan
Africa. “We are committed to supporting
Nigeria’s developing automotive industry
and economy together with Coscharis,
and are looking forward to being active
in the community. New assembly
operations, even on a smaller scale like
this one, have very positive ripple effects
in the local economy and workforce.”
But nurturing indigenous manufacturing
is still difficult. Nigeria-based groups
Nissan and Peugeot also only assemble
the bulk of their vehicles from imported
semi-knocked down (SKD) kits because
there is no local manufacturing industry.
Even Nigeria’s own Innoson Vehicle
Manufacturing Company (IVM) based
in the south-eastern Anambra state,
assembles trucks and buses with
completely knocked-down (CKD) kits
with all the vehicles’ engines, gear boxes
and electrical parts imported from
overseas. Auto-related imports into
Nigeria accounted for around 11.5% of
total imports, worth around US$6.9bn in
2014, according to UNCTAD.
Automotive sector in Africa
Nigerian policy is currently making things
even more difficult. Like all manufacturing,
the auto sector is struggling under
currency policies and associated import
controls set up to conserve hard currency
and encourage local manufacturing by
prioritising strategic imports. It’s starving
the auto sector of inputs and leading to a
collapse in supplies of product lines from
glass to rubber. OICA estimates that total
new vehicle sales in Nigeria dropped by
more than half in 2017, compared to
2016. It’s this kind of foreign exchange
controls that are also limiting the ability
of companies to import SKD units
and parts for assembly and repair in
Ethiopia, where high taxes also make cars
unaffordable for most.
Exporting within Africa is also a challenge
for the continent’s carmakers because of
tariffs and barriers. Uganda and Tanzania
slap tariffs on cars assembled in Kenya,
the only country in the East African
Community with assembly capability,
because they don’t meet local input
criteria. It gives imported second-hand
cars the edge.
In recent times, Toyota South Africa saw a
fall in exports to the rest of the continent
as a result of higher tariffs in Nigeria,
Algeria and Angola. Meanwhile, South
Africa exports more vehicles to Europe,
the US and even Asia than it does to its
neighbouring African market.
“Vehicle exports to Europe and Asia
continued to show growth. Vehicle
exports to African markets recorded
substantial declines. This was due to a
combination of factors including ad hoc
24 Africa Automotive News l 2019 September-October issue l 2019