22 Aug 19

Ghana lures OEMs with tax breaks

Is Ghana turning in to the car manufacturing capital of Africa? That certainly seems to be its ambition. The West African country is luring OEMs to its shores with tax breaks of up to 10 years. 

And the interest appears to be mutual. Last year, Volkswagen and Nissan agreed to set up plants in Ghana – on the condition that the country implements an official incentive plan. In January, Renault joined that club. And in March, Toyota and Suzuki announced they would set up a joint-venture manufacturing unit in Ghana. 

But the Ghanaian government's support for its nascent car industry is conditional: the full, 10-year tax breaks only apply to OEMs manufacturing entire vehicles in Ghana. If they merely assemble parts manufactured elsewhere, the tax break will only last for five years. 

To further encourage Ghana's national car industry, the country will increase its vehicle import duty on new and used vehicles from 5-20% to 35%. Importing used cars older than 10 years will be banned, Ghana's Trade Minister announced. 

Planned for later this year, Volkswagen's plant in Ghana will mark the German brand's sixth location in Africa. In 1951, it set up a plant in South Africa, which now has a capacity of 170,000 vehicles per annum. More recent additions, in Nigeria (2015), Kenya (2016), Algeria (2017) and Rwanda (2018), each have a capacity of upwards of 5,000 vehicles p.a.

It'll be a while before Ghana surpasses South Africa as the continent's main car-manufacturing nation. No less than seven manufacturers currently produce vehicles in South Africa – generating close to 7% of the country's entire GDP. 

Authored by: Frank Jacobs