Exploring Africa’s untapped potential

Africa is braced to become a central hub for automotive manufacturing in 2022. It is a continent abundant in raw materials with a strong mining heritage, rich in commodities and with a growing workforce. As with the rest of the world, it is struggling under the intensity of the pandemic but, unlike the rest of the world, currently has fewer than 10% of its population vaccinated.

By Alison Pittaway, Desk Editor, Global Fleet 

Despite this, the IMF (International Monetary Fund) lists 48 African countries as having the fastest-growing economies, including: Rwanda, Niger, Benin, South Sudan, Côte d’Ivoire, Ghana, Kenya and the DRC.

The WHO (World Health Organisation) estimates that less than 9% of the Continent’s population has received a single vaccination. The rest of the world is currently at almost 50%. While the situation persists, tourism, one of Africa’s primary industries, is at a standstill.

With inflation rates expected to rise globally, the situation in Africa looks set to worsen. Already at 11%, high inflation rates put the brakes on consumer spending and makes it difficult for African citizens to access loans for vehicles.

Despite its troubles, Africa benefits from the world’s largest free trade agreement. Under the terms of the AfCFTA (African Continental Free Trade Area), the commodity boom will continue to flourish and there are signs that skills development and investment into infrastructure is transforming the labour market.

According to the World Bank, Sub-Saharan Africa is home to 1.2 billion people, half of whom will be under the age of 25 by 2050.

Several African countries have embarked on structural reforms, such as the unification of exchange rates in Sudan, fuel subsidy reform in Nigeria, and the opening of the telecommunications industry to the private sector in Ethiopia. Other reforms that deliver reliable electricity, including better functioning of public utilities, are set to power the manufacturing sector and the digital economy.

Untapped potential for the automotive sector

The United Nations published a report that shows vehicles have the largest untapped export potential of $1.4 billion. There is also a growing demand for new vehicles in Africa, driven by a rising middle class.

A recent article on Techcabal by Conrad Onyango/bird includes information from the African Association of Automotive Manufacturers. It sees the development of regional value chains driving new vehicle sales, currently at one million units, to five million annually.

Morocco and Ghana are already established in the automotive sector but South Africa is currently responsible for 85% of all vehicle sales. Carbo Verde, Equatorial Guinea and Gambia are said to have the largest untapped potential.

By the end of 2022, officials hope to announce a third global automaker to build an automotive assembly plant in Morocco. The country is also providing consumer incentives to get local buyers to consider switching to electric vehicles. By 2025, Morocco wants annual sales of electrified vehicles to rise to 70,000 - 100,000.

A recent Reuters news bulletin stated that a top official from the state-owned Kiira Motors Corporation (KMC) in Uganda said that the country is aiming to start assembling new vehicles by June 2022, with an initial production capacity of 5,000 units per year.

In 2020, Volkswagen launched Rwanda's first locally assembled car at its new factory in Kigali, hoping to tap into a demand for ride-sharing in the region.

To me, Africa is full of promise and hope, but often treated as a dumping ground for old cars and a source of cheap labour. While the sun scorches the soil, it creates immense potential for solar energy generation that is as yet untapped. It also, however, creates challenges and natural disasters that are hard to overcome. But African people are highly resourceful and it’s heartening to have witnessed a decade of development in automotive manufacturing and mobility delivered by inspiring, home-grown entrepreneurs. Long may it continue.

Image courtesy of Shutterstock

Authored by: Alison Pittaway