The Managing Director of the Nissan Africa Regional Business Unit, Mr. Mike Whitfield who doubles as the president of the African Association of Automotive Manufacturers has shared his view on the economic prospects of the automobile industry in Africa expressing optimism that the Japan Motors Nissan Assembly plant in particular is a shining example.
Read his opinion below;
At the end of March, I had the privilege of witnessing the commissioning of a brand-new automotive assembly plant in Ghana. 18 months before there had just been a barren site in the industrial area of Tema, outside Accra. Now there is a 5000 sq. m factory with two assembly lines and testing line, with a 3100 sq. m testing track – unique in the region. There is also a high-tech water testing bay with its own underground tanks all on a 22000 sq. m site.
The Japan Motors Nissan assembly factory is the most advanced, state-of-the-art facility of its kind in West Africa. It’s a flagship project, not just for the organisation I work for, but for Africa. It is a symbol of so much that can be achieved if we have the same sense of purpose and commitment. The story actually began in 2018. I met with the Minister of Trade and Industry, Alan Kyerematen to take the first steps in a process that would lead to us signing a memorandum of understanding, which led to becoming one of the first movers in Ghana.
There’s an incredible amount that goes into a process like this and it all starts with the drafting of an automotive industry development policy and then enacting it. It’s important because you need level playing fields for everyone involved, especially the investors. An automotive industry development policy starts with addressing one of the elephants in the room: grey imports.
In Africa, 80% of the African automotive market is made up of imported second-hand vehicles. They flood into the continent, but the problem is that they’re not made for the road conditions or the fuel grade. There is no aftersales service worth the name and certainly no warranty. Even the OEMs that actually produced them, which have operations in Africa, are powerless because they don’t carry the necessary spare parts or have the technicians who are trained on them.
It’s a lose-lose situation for everyone involved, especially the motorist because there is little to no resale value in their vehicle. Indeed, many grey imports have to be ‘tropicalised’ by ‘mechanics’ on the side of the road removing the catalytic converters which are part and parcel of every vehicle sold in Europe and then fiddling with the sensors in the engine to allow these vehicles to run in Africa.The net result is a vehicle that has effectively voided almost every single one of the manufacturer’s warranties, that is potentially unsafe and almost certainly environmentally unfriendly. Perhaps the biggest concern is that there is no other benefit to the country either. It literally is the polar opposite of the situation in a country where there is a proper automotive industry development policy.
By outlawing the importation of second-hand vehicles and starting to produce your own, there are immediate benefits. For a start the vehicles that are produced locally are totally supported by the OEM (Original Equipment Manufacturer); there are sufficient parts and qualified technicians. But the benefits don’t stop there, as the industry evolves; we start seeing the rolling out of affordable financing schemes by banks to allow for mass private ownership of new vehicles as well as the development of a sustainable, indigenous used car market which can also be financed because there will be proven service records that can help properly value the vehicle.
Finally, there’s the cherry on top, the increasing use of localised content in the manufacture of the vehicle as the industry transitions away from the rudimentary Semi Knocked down phase to complete local assembly for the African and international market. Not every country can manufacture vehicles, it is unsustainable and economically unviable as scale is critical in this globally competitive sector. What we need to do is to find countries who want to manufacture components helping us meet the proposed 40% African continent threshold that the AfCFTA will require for vehicles to be manufactured and sold. There is a huge scope for locally made components, especially consumables like auto glass, batteries, brake pads, leaf springs and shock absorbers.
But it’s a long road that has to be travelled. South Africa is a wonderful case in point. In 2019, before the COVID-19 pandemic, it contributed 7.1% to the country’s GDP and earned US $414,4-billion in exports. The industry directly employs 470 000 people and three times as many indirectly. In 2019, South Africa produced 631 921 vehicles, selling 536 612 of them locally. By contrast, only 10 000 new vehicles were bought in Africa’s biggest economy, Nigeria.
We speak of Africa as the last automotive frontier because only 42 out of every 1 000 people on the continent own their own vehicle as compared to the global average of 182. Here’s another comparison: Africa and India’s populations are much the same size at 1.3-billion each. The GDP is very close too, yet almost three times more vehicles were sold in Indian in 2018 (4.4-million) than were sold throughout Africa that same year (1.3-million).
The African Association of Automotive Manufacturers believes creating automotive hubs across the continent, establishing 20 new CKD plants, could help Africa sell 5-million vehicles per year by 2035. The automotive industry is very well positioned thanks to the work of the AAAM, to become the vanguard of the African Continental Free Trade Agreement (AfCFTA). This has not just effectively created the largest trading bloc in the world; the World Bank believes it could raise 100-million people out of poverty and add US$ 450-billion to the continent’s GDP by 2035 too. Africa needs mobility solutions, but its member states need to provide sustainable employment, industrialise their economies and earn vital foreign exchange through manufacturing for export markets. A fully fledged pan African automotive industry can do all of that and more.
I saw the first seeds of that in Accra. 18 months ago, Japan Motors sent 12 highly qualified engineers to be trained on assembling the all new, built of more Navara, at Rosslyn outside Pretoria, Nissan’s African LCV manufacturing hub. When they returned home after seven weeks, they were followed by a team of 18 high level Nissan trainers from the plant who went on to train a further 25 Ghanaian technicians. This team can assemble 6 625 units per shift, but the initial plan is only to do 1 800 units while we prepare for demand to pick up. Potentially this factory could produce 31 666 vehicles per annum and employ more than 110 highly skilled automotive technicians, the equal of their peers anywhere in the world.
But 18 months ago in Tema there was only a barren site and none of those jobs. It just shows what we can do as Africans when we share a common purpose and a will to make things happen.