Industry pact key to Africa’s auto ambitions

29 March 2019 | Web Article Number: ME201914115

Business Tech
Metals & Alloys
Motors, Drives & Transmissions

THE auto industry is so complex that a regional automotive pact is required before it can succeed in Africa.

That’s according former politician and now consultant, Alec Erwin, speaking at the National Association of Automotive Component and Allied Manufacturers (NAACAM) show, held in Durban recently.

Erwin, who was the trade and industry minister in the Mandela government, said only the aircraft and nuclear industries were more complex than automotive manufacture. This meant industrial policy and regional agreement were vital to overcoming barriers and building partnerships.

He said that worldwide, with few exceptions, successful auto industries had emerged to turn on regional axes and cited Korea-Japan agreements in South-East Asia and Mexico-Argentina in the Americas as examples of regional cooperation that Africa should learn from.

Sharing the stage with Erwin at the show was Xolelwa Mlumbi-Peter, a deputy director-general with the Department of Trade and Industry, and South Africa’s chief international trade negotiator.

Mlumbi-Peter noted that only 1.2 million cars were sold in Africa (2014 figures) despite a population of over one billion. “Clearly we have an untapped market,” she said.

Mlumbi-Peter, Erwin and others at the show spoke about how the South African auto industry needed to expand exports to the continent to capitalise on the market’s potential and as a way to increase volumes. This, they said, would bring economies of scale and sustain the high levels of localisation that were now being targeted in South Africa.

Regional cooperation would allow the continent to tackle thorny policy issues that were preventing the development of an intra-African automotive industry, said Erwin.

Both he and Mlumbi-Peter referred to barriers to entry in Africa identified by VW South Africa chair and managing director Thomas Schaefer, who was also at the show.

Schaefer, who is leading the charge for the German auto giant in signing up deals and memoranda of understanding in sub-Saharan Africa, listed four barriers to building the sector on the continent: the trade in imported second hand cars, which crowded out investment in manufacture; affordability; fuel quality that was incompatible with new generation cars; and logistics, including poor roads and high transport costs.

Schaefer said all these barriers could be surmounted provided there was sufficient political will. He cited Rwanda as a country that was growing a viable automotive market. Schaefer and VW Rwanda director Serge Kamuhinda briefed delegates on how the company had developed its own, smartphone-enabled ride hailing service to overcome problems with affordability.


The urgent need for South Africa's automotive component supply sector to focus on vehicle electronics if it is to meet ambitious new localisation targets also came under the spotlight at the conference.

Rajesh Ramkawal, chief operating officer of electronics manufacturer Yekani warned delegates that telemetrics and electronics have become commonplace in vehicles but "smokestack or conventional manufacturers" in the auto supply industries were in danger of being left behind.

He said that by 2020, embedded electronics would account for 35% of the value of a vehicle, with the figure rising to 50% by the 2030.

Ramkawal reminded the conference that the country's new Automotive Masterplan, which comes into force next year, sets a target of 60% of local content by value.

"Where is that 60% of digital electronics going to come from," he said. "Trouble is coming." He warned that "a massive step change" would be needed to meet the target.

Mervin Moodley, chief executive of Atlantis Foundries, an automotive castings manufacturer, said greater commitment to localisation - both through investment and partnerships - was needed from car makers if local component suppliers are to succeed in the component industry's priority sectors.

"We need long-term contracts. We need fair and sustainable pricing," said Moodley.

He told the conference that CEOs of the car-makers and original equipment manufacturers (OEMs) said all the right things about localisation, but then their procurement departments continued to source components from lower-cost suppliers overseas, in countries like Turkey and Vietnam, which had already "paid their school fees".

Two hundred exhibitors and almost 2000 visitors and delegates attended the conference. – staff writer and ANA

Related Articles