Africa Automotive - 2024 Growth of Africa's Automotive Sector

In 2024, Africa's automotive sector witnessed notable progress, primarily spurred by increased local production and advantageous trade policies. The continent is attracting a variety of automakers, both international and local, who recognise the potential within the region. This interest has led to a rise in automotive manufacturing plants across multiple African countries, reflecting a deliberate move towards regional production. The industry is also seeing a diversification of vehicle models being produced, catering to both local market demands and export opportunities.

Efforts to bolster the automotive industry are evident in the investments being made in infrastructure and technology. Countries such as South Africa, Nigeria, and Morocco are key players, offering a blend of skilled labour and favourable business environments. This development is creating job opportunities and fostering skills transfer, contributing to broader economic growth.

Another critical factor in this growth is the increasing collaboration between governments and industry stakeholders to create supportive policies and initiatives. These include tax incentives for manufacturers, streamlined customs procedures, and efforts to harmonise vehicle standards across the continent. Such measures are aimed at making Africa an attractive destination for automotive investment.

Furthermore, the push towards sustainability is also shaping the sector, with an increased focus on electric vehicles and green manufacturing practices. This trend is aligning with global shifts towards environmentally friendly motoring solutions, positioning Africa as a forward-thinking player in the global automotive arena.

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Impact of the African Free Trade Agreement

The African Continental Free Trade Agreement (AfCFTA) has the potential to transform the automotive industry across the continent. By connecting more than1,3-billion people into a single market, the AfCFTA provides significant opportunities for automakers to expand their reach and streamline operations. Additionally, a World Economic Forum report anticipates that global business under this agreement could boost the African automotive industry by $12-billion by 2027. These developments promise a more integrated market, reducing tariffs and improving trade efficiencies among African nations.

The removal of trade barriers under the AfCFTA is expected to ease the movement of automotive components and finished vehicles across borders. This will likely result in lower costs for manufacturers and consumers alike, fostering a more competitive market environment. Additionally, the agreement encourages regional value chains, allowing different African countries to specialise in various stages of vehicle production. This approach can lead to increased efficiency and higher-quality outputs.

Moreover, the harmonisation of regulations and standards across member states will simplify compliance for automakers, making it easier for them to operate in multiple countries. This is particularly beneficial for small and medium-sized enterprises looking to enter the automotive market. The AfCFTA's emphasis on economic integration and industrialisation aligns with the broader goal of sustainable development, positioning Africa as an increasingly attractive destination for automotive investment.

Indicators of Growth in the Automotive Industry

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The positive trajectory of Africa's automotive sector can be seen through various indicators. Afreximbank, in collaboration with the African Association of Automotive Manufacturers, is actively supporting industry growth. By harmonising automotive standards, developing training programmes, and providing financing, they aim to facilitate industry growth, with Afreximbank committing $1 billion to these efforts.

Vehicle production and sales figures are on the rise, reflecting increased consumer demand and manufacturing capacity. The establishment of new manufacturing plants in various African nations demonstrates robust confidence from both international and local investors. These investments are not only boosting production but also generating employment opportunities and enhancing skill development.

Furthermore, the automotive sector is benefiting from a rise in partnerships and joint ventures aimed at leveraging local expertise and global technology. This collaborative approach is leading to improved production processes and the introduction of innovative vehicle models tailored to the African market.

Another crucial indicator is the development of supply chain networks that are becoming more sophisticated, ensuring the efficient movement of automotive components and finished vehicles. These advancements are essential for meeting the growing demand for cars and motoring solutions across the continent.

In summary, these indicators highlight the increasing dynamism within Africa's automotive industry, showcasing a sector poised for sustained growth and development.

Industry Challenges

The African automotive industry, despite its promising growth, faces a range of challenges that could impede its progress. One of the most pressing issues is the inadequacy of infrastructure. In many regions, road networks and port facilities are not sufficiently developed to support efficient supply chain operations. This situation creates bottlenecks that can delay the movement of automotive components and finished vehicles, thereby increasing costs and affecting competitiveness.

Economic instability in some African nations also poses significant risks to the industry's growth. Fluctuations in currency values and inflation rates can create an unpredictable business environment, making it difficult for automakers to plan long-term investments. Additionally, political instability in certain areas can deter potential investors and disrupt existing operations.

Another challenge lies in the regulatory landscape, which can vary significantly from one country to another. This lack of uniformity complicates compliance for automakers, particularly those looking to operate across multiple African nations. While efforts are being made to harmonise vehicle standards under initiatives like the AfCFTA, achieving comprehensive regulatory alignment remains a work in progress.

Furthermore, access to financing is a critical hurdle for many local enterprises looking to enter the automotive sector. High interest rates and limited availability of credit can stifle innovation and restrict the growth of small and medium-sized enterprises that are essential for a vibrant automotive ecosystem.

Labour issues, such as the availability of skilled workers, also present obstacles. While some countries are investing in training programmes, the overall skill level of the workforce needs to be elevated to meet the demands of advanced automotive manufacturing.

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Technological Progress and Innovation

Technological advancements are playing a pivotal role in Africa's automotive evolution. There is a noticeable rise in electric vehicle production and adoption, driven by the continent's commitment to sustainable development. Pilot projects for sustainable vehicles are already underway in Rwanda, Egypt, and South Africa, with e-mobility startups emerging across the continent. The introduction of smart technologies in vehicles, such as advanced driver-assistance systems and connectivity features, highlights Africa's readiness to embrace innovation and align with global automotive trends.

Market Potential and Consumer Preferences

Africa's automotive market is burgeoning, spurred by emerging economies and an expanding middle class. These factors are significantly reshaping consumer preferences across the continent. There's a noticeable shift towards vehicles that prioritise sustainability, reflecting broader global trends towards environmentally conscious motoring. This change in preference offers automakers a valuable opportunity to introduce eco-friendly models that align with the increasing environmental awareness among African consumers.

In addition to the demand for sustainable vehicles, there's a growing appetite for advanced features and technologies in cars. African consumers are becoming more discerning, seeking vehicles equipped with the latest in safety, connectivity, and comfort. This trend is pushing automakers to innovate and adapt their offerings to meet these evolving expectations.

Moreover, the rise in disposable income among the middle class is leading to a higher demand for a diverse range of vehicles, from economical models to luxury cars. This diversity in consumer demand is encouraging manufacturers to broaden their portfolios to cater to different segments of the market. The interest in luxury and premium vehicles, in particular, is indicative of a market that is maturing and becoming more sophisticated.

The burgeoning interest in electric vehicles is another critical aspect of the changing market dynamics. Governments and private entities alike are increasingly promoting electric mobility as a sustainable alternative to traditional combustion engines. This is not only in line with global sustainability goals but also addresses local issues such as urban air pollution and fuel dependency.

Overall, the evolving market potential and consumer preferences in Africa present a promising landscape for the automotive industry. By responding to these trends, automakers can tap into a market that is both growing and increasingly sophisticated in its demands.

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Future Outlook and Opportunities

Looking ahead, Africa's automotive sector is poised for further advancement, driven by a combination of strategic investments, policy reforms, and technological innovation. The region's commitment to enhancing infrastructure and reducing trade barriers sets the stage for a more integrated and efficient automotive industry. Continued collaboration between governments and industry stakeholders will be crucial in creating an environment conducive to growth and innovation.

One of the most promising opportunities lies in the development of electric vehicles, with several countries already pioneering initiatives in this space. The shift towards sustainable motoring not only aligns with global trends but also addresses local challenges such as air quality and fuel dependency. This focus on green technology could position Africa as a leader in the adoption of environmentally friendly automotive solutions.

Additionally, the rising middle class and increasing urbanisation are expected to drive demand for a diverse range of vehicles, from budget-friendly models to premium cars. This expanding market offers a lucrative opportunity for automakers willing to tailor their offerings to meet the specific needs and preferences of African consumers.

Partnerships and joint ventures between local firms and global automakers are likely to enhance the transfer of knowledge and technology, fostering innovation and boosting production capabilities. As these collaborations flourish, they will contribute to the overall competitiveness of Africa's automotive sector on the global stage.

In summary, the future of Africa's automotive industry holds significant promise, with numerous opportunities for growth and development as the continent continues to embrace modernisation and innovation.

Originally published on CHANGECARS

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Africa Automotive: Budget for electric vehicles and free trade

The 2024 Budget Review: Consolidated Spending Plans document, which was released in conjunction with Finance Minister Enoch Godongwana’s National Budget Speech, revealed the Department of Trade, Industry and Competition (DTIC) has reprioritised R964-million for the transition to electric vehicles. This move aligns with the New Energy Vehicles White Paper, which was approved by the Cabinet in 2023.

Finance Minister Godongwana detailed South Africa’s financial standing during his budget speech at the Cape Town City Hall. He explained the reprioritised funds complement the funding secured for the Just Energy Transition Investment Plan and the implementation plan for electric vehicles.

Mampho Modise, Deputy-Director General: Public Finance at National Treasury, clarified the reprioritisation would not impact the DTIC’s incentive programmes. Instead, most of the reprioritised funds would come from a Special Economic Zone (SEZ) fund. The decision to stop establishing new SEZs and focus on improving existing ones was made some time ago.

Christopher Axelson, National Treasury’s Deputy-Director General for Tax and Financial Sector Policy, further elaborated on the potential impact of the incentive. He predicted it would lead to large investments and a revenue forgone of R500-million in 2026/27 as those investments start to take place.

South Africa’s focus on new energy vehicles (NEVs) comes as automotive manufacturers worldwide are accelerating the push towards electric vehicles, moving away from combustion-based ones. NEVs utilise alternative energy sources instead of traditional fossil fuels. They are designed to be more environmentally-friendly and energy-efficient, aiming to reduce greenhouse gas emissions and dependence on non-renewable resources.

By the end of 2022, South Africa had 4 764 NEVs on local roads, according to the National Association of Automobile Manufacturers of SA.

Last year, during the medium-term budget, Godongwana stated the country’s transition to a low-carbon economy should be integrated into a comprehensive green growth strategy and industrialisation plans. He noted that the government plans to implement tax and expenditure measures to support the automotive sector during this transition.

In his budget speech, the finance minister said: “The Electric Vehicles White Paper outlines our strategy to transition towards a broader new energy vehicle production and consumption in South Africa, starting with electric vehicles.”

The African Continental Free Trade Area (AfCFTA) agreement, ratified by the majority of African countries, aims to consolidate 55 economies into a single, competitive mega-market of more than a billion people. This would make it one of the largest free trade areas globally.

The AU projects that the agreement will stimulate revenue growth and lift 30-million of Africa’s extremely poor out of poverty. However, despite the excitement surrounding the treaty, the implementation has been delayed, pushing back potential benefits and raising questions about the AU’s ability to execute the plan effectively.

The AfCFTA, first agreed upon in July 2019, is a cornerstone of the AU’s 50-year strategy to bolster Africa’s economic growth. It seeks to deepen economic integration in Africa by facilitating the flow of goods and services between countries, promoting cross-country investments, eliminating trade barriers, and advancing open visa policies.

The AU also hopes to use the plan to boost local manufacturing and secure a larger share in global trade, where Africa currently contributes only 3%.

All AU member states, except Eritrea, have signed the agreement. They will be represented through the eight recognized regional economic blocs, including the South African Development Community (SADC) and the Economic Community of West African States (ECOWAS). The treaty became operational in January 2021.

Collectively, the agreement represents a united African market of 1,3-billion people, worth approximately $3-trillion, roughly equivalent to India’s gross domestic product. The AU aims to reduce or eliminate tariffs on 90% of products and generate an additional $450-billion in revenues for Africa by 2035. If the agreement proceeds as planned, the AU estimates Africa’s economy will expand to $29-trillion by 2050.

The AfCFTA agreement presents significant opportunities for the Moroccan automotive sector, one of the best-developed on the continent, particularly for its affordable inputs, finished exports, advantageous labor, and reduced customs tariffs. This is according to the 9th edition of the CFC Africa Insights report.

The report, titled “AfCFTA: Unlocking the Potential of Intra-African Trade,” suggests increased trade integration with African partners, especially in North and West Africa, could lead to economies of scale. Morocco is well-positioned to benefit from the establishment of cross-border value chains, and the sector also holds promise for economies across the region.

In 2022, international automotive trade reached $1,6-trillion, surpassing that of crude oil and natural gas. The report underscores how automotive supply chains, spanning across borders, enable numerous countries to contribute to vehicle production.

Under the AfCFTA, the Moroccan automotive sector stands to gain two key opportunities: access to low-cost inputs and an outlet for finished goods exports. By integrating Morocco’s automotive sector with neighboring economies, Moroccan producers can capitalize on lower labor and material costs in Africa.

The report highlights Nigeria’s current tariff on unassembled cars stands at 5%, but is anticipated to decrease to 0% by 2030. This shift could generate employment opportunities and stimulate economic growth.

In his Budget speech, South Africa’s Finance Minister emphasised: “It aims to transition the automotive industry from primarily producing internal combustion engine vehicles to a dual platform that includes electric vehicles, by 2035.

“To encourage the production of EVs in South Africa, government will introduce an investment allowance for new investments, beginning March 1, 2026.

“This will allow producers to claim 150% of qualifying investment spending on electric and hydrogen-powered vehicles in the first year.

“The incentive will be implemented in addition to the existing support under the Automotive Production Development Programme.”

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Africa Automotive: Stellantis plant opens in Algeria

The manufacturing facility in Tafraoui, Algeria promised by Stellantis in 2022 is now a reality with the start of production of Fiat 500 and Doblò models in a plant that saw an initial investment of €200-million and will assemble 90 000 cars annually for the Algerian market with a 35% localisation rate.

A Letter of Intent was signed between Stellantis and the Algerian Authorities to accelerate Stellantis contribution to the development of the Automotive Industry; a step 2 ambition, in terms of production capacity, local integration rate and the creation of a Stellantis Academy in partnership with the Algerian Education Ministries. This new phase is associated with conditions of success that are being discussed between the two parties.

"Today, a letter of intent regarding the expansion of Stellantis' industrial project in Algeria will be signed to increase the production capacity of this plant, which will be oriented towards the local and export markets," declared Ali Aoun, Minister of Industry and Pharmaceutical Production, during his speech. "We, as public authorities, commit to ensuring the support of all investment projects aimed at creating wealth and employment."

"Our Dare Forward 2030 plan envisioned Algeria being cemented into Stellantis’ regional future, and today we’re proud to have followed through on this plan by bringing Fiat brand to the country and providing great models to our Algerian customers through the manufacturing of the cars in Algeria,” said Stellantis CEO Carlos Tavares. “This is the beginning of a journey of growth and development for the benefit of the citizens of Tafraoui and Algerian customers. With today’s further announcement, we are poised to increase our commitment towards the country.”

The Tafraoui plant, covering an area of 80 acres, will initially have an annual assembly capacity of 90 000 cars, featuring a range of four models, beginning with the Fiat 500 and the Fiat Doblò. In 2024, it aims to produce 40 000 units in SKD. The plant will reach 90 000 units in CKD including painting welding and stamping by 2026.

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The industrial project has already created 500 direct jobs in Algeria in 2023, with the aim of reaching 1 200 jobs by end of 2024 and 2 000 jobs by 2026. In addition, the local supplier ecosystem will create more than 1 600 indirect jobs by 2026.

Stellantis launched its commercial operations in Algeria in March this year and has had a very strong ramp-up, closing the year with more than 50 points of sales covering 65% of the Algerian territory while offering nine models and two brands: Fiat and Opel; with a team with close to 900 people and a robust logistics setting to deliver daily cars to our esteemed Algerian customers.

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Africa Automotive - Nissan announces new agreement as Africa ramps up

Automotive activity across Africa is ramping up at speed ahead of the Intra Africa Trade Fair being held in Cairo next month – the latest being the announcement Nissan’s long-standing Algerian partner, Groupe Hasnaoui, has signed a renewed distributor agreement extending its history with the Japanese OEM, which dates back to 1993.

Nissan Africa President Joni Paiva says: “It’s a momentous occasion for us, as we seek to unite the entire continent under one organisation for the first time in our global company’s 90-year history.

"This is part and parcel of our mid-term growth strategy, to unlock the potential that this continent has as the world’s last automotive frontier by providing the best line-up of models to answer Africa’s mobility needs in a sustainable, safe and aspirational way.”

Nissan Africa is the only OEM on the continent to have two fully owned plants, in Egypt and South Africa and two DKD facilities in Ghana and Nigeria.

“We are excited about this partnership,” adds Maciej Klenkiewicz, Nissan South Africa & Independent Markets Africa Country Director, “We have ambitious plans for the Algerian market and specifically with the locally built Nissan Navara.”

The North African markets of Algeria, Egypt and Libya have been identified as key markets for the new Navara, along with a range of exciting packages that will be introduced with the model across the continent, he said.

“SUV leadership also forms part of our product strategy in Africa; we have started introducing an exciting range of new models, such as the Magnite, Qashqai and X-Trail to the African continent.”

Paiva added: “We have a wonderful legacy in Africa, due in no small part to the vehicles we produce and the partnerships we have established and nurtured over the last 60 years in some cases. It is wonderful to have a partner such as Groupe Hasnaoui in a strategically important market such as Algeria.

“Together, we navigate challenges, embracing a vision for the future built on trust and shared values. This agreement symbolises our collective commitment to sustained growth and prosperity in the Algerian automotive landscape.”

Opening a business roadshow in Algeria recently, Ms Kanayo Awani, Executive Vice President, Intra-African Trade Bank, Afreximbank said: “It Is time for Africa to take her destiny in her own hands and to determine her own developmental agenda. However, doing so will not be easy. It will require commitment, courage, and deliberate action. Traders need to seek out new market opportunities rather than the conventional route of turning to markets abroad.”

She added the African Continental Free Trade Area “promises to revolutionise trade, reshape markets across the region, boost output in the manufacturing and service sectors, and fundamentally transform Africa’s economic structure.”

Speaking about the Intra-African Trade Fair, she said it was created “to deal with the challenges of lack of access to trade and market information” and she praised the Algerian Government for deciding to hold a Country Day at IATF2023 in Cairo, saying that “it gives me confidence that Algeria is poised to lead  the charge for African trade.”

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Africa Automotive - Volkswagen supports Africa growth

Volkswagen is fully supportive of growth in the automotive industry in Africa, having taken over the assembly responsibilities of the plant in Ghana from its licenced importer, Universal Motors Limited.

The Africa Union commemorates it 60th anniversary this year on Africa Day with the slogan ‘Our Africa, Our Future’ and this slogan resonates strongly with Volkswagen as the company continues to grow its presence on the continent.

Ghana is the fourth Volkswagen assembly location in Sub-Saharan Africa after Kenya, Rwanda and South Africa, where Volkswagen has been manufacturing vehicles for more than 72 years.

Volkswagen Group South Africa (VWSA) Chairperson and Managing Director, Martina Biene, is positive about Africa’s growth potential, saying a number of African countries have introduced compelling incentive plans for locally assembled vehicles to attract OEMs such as Volkswagen to invest in the development of the automotive industry on the continent.

From left Volkswagen Ghana Chief Executive Officer, Jeffrey Peprah, Martina Biene, Chairperson and MD of Volkswagen Group South Africa, Andrew Potgieter, VWSA advisor to Ghana, Ulrich Schwabe, VWSA Production Director and Thomas Milz VWSA Sales and Marketing Director at the recent Ghana plant opening.

“We are encouraged by the automotive policy changes which some of the countries have implemented or in the process of implementing. These policies will help us to sell new high-quality vehicles which are backed by a well-established global brand to our African customers,” said Biene.

Biene added Sub-Saharan Africa has become very important for the sustainability of Volkswagen.

Future

“The future of Volkswagen is in Africa. We are therefore accelerating our growth strategy on the continent by playing a pioneering and leading role in the development of the automotive industry.”

Volkswagen already has a presence in 17 countries in Sub-Saharan Africa where it sells passenger and commercial vehicles through licensed importers.

“We will continue to grow the Volkswagen brand in these markets and strengthen our aftersales support to customers. Ongoing training is provided to technical staff at the Volkswagen locations to meet customer requirements and expectations,” Biene added.

Growing

According to the African Development Bank of the world’s 10 fastest growing economies, five are in Africa - Rwanda, Côte d’Ivoire, Benin, Ethiopia and Tanzania.

Biene affirmed Rwanda and Côte d’Ivoire are also two of Volkswagen’s fastest-growing markets. Rwanda, with an economy growing at close to 8%, shows significant potential for increased mobility solutions and electric vehicles due to its relatively young, tech-savvy population and growing middle class.

“Rwanda has been the success story of our growth plans in Sub-Saharan Africa. It is also the innovation hub of our sustainable mobility lighthouse projects on the continent. Our mobility solutions services business, which includes ride-hailing and corporate car sharing, broke even last year. Rwanda was also the first country in Sub-Saharan Africa to launch a Volkswagen electric vehicle with the e-Golfs,” concluded Biene. 

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Colin-on-Cars - Boost for auto industry in Senegal

Development of the automotive industry in Senegal will be getting a boost from the Coega Development Corporation (CDC) that will provide advisory services and expertise to the West African country.

This follows this year’s Intra-African Trade Fair Conference opened by President Cyril Ramaphosa, and is part of the Coega Africa Programme.

“Final negotiations between Senegalese Investment Agency, PAIMRAI, and the CDC have recently concluded with the CDC and Automotive Investment Holdings (AIH) being appointed to elaborate a strategy for the development of the automotive industry in Senegal,” says Dr Ayanda Vilakazi, CDC Head of Marketing, Brand and Communications.

The Intra-African Trade Fair 2021 took place from 15-21 November 2021 under the theme African Continental Free Trade Area (AfCFTA) - a single market for goods and services across 55 countries, aimed at boosting trade and investment.

Analysis

The Senegalese Automotive Industry Strategy developed by the CDC and AIH will provide a comprehensive analysis of the automotive industry in Senegal, its potential and the upstream and downstream linkages that can be developed with countries such as South Africa and Morocco, which are the leading vehicle manufacturers in the continent. 

The appointment of the CDC sees the organisation expanding its project footprint throughout the continent, with projects currently in Zimbabwe, Cameroon for the Central African Republic, and now Senegal. Drawing from 21 years of expertise in project managing mega and complex infrastructure projects in South Africa for public and private sector, the Coega SEZ has successfully developed its Automotive Zone and attracted investment exceeding USD 895-million.

Dr Vilakazi explains the Sub-Sahara Africa automotive sector currently accounts for less than 3% of global production, against 30% for China, 22% for Europe and 17% for North America.

“The motorisation rate in this region was very low in 2018, with 42 cars per 1 000 inhabitants, against 837 in the United States, 173 in China and 214 in South Africa, for a world average of 180 cars per 1 000 inhabitants.

“This rate hardly exceeds 3% in Senegal, which means only 30 people out of 1 000 own a private vehicle.”

Nascent

Apart from Nigeria and Ghana, the automotive industry remains nascent in the member countries of the Economic Community of West African States, whose process of industrialisation faces the threat of used car imports from Europe, Japan, United States, Canada, and other countries.

The sub-regional and regional integration, through the development of upstream and downstream links in the automotive industry value chain, will stimulate industrialisation and competitiveness throughout Africa. According to research conducted by Dakar’s Foreign Trade Office, about 100 000 vehicles are imported to the country every year, which require constant replacement of parts due to difficult climate and infrastructural conditions.

Senegal imports almost all spare parts. However, strong government focus on encouraging automotive industry in the country is an important driving force for Senegal. Stringent environmental regulations on pollution and carbon emissions are necessitating heavy investments.

As the leading Special Economic Zone (SEZ) in Africa, the CDC is poised to foster collaboration with the rest of the continent to promote the coordinating, championing, and driving of the implementation of free trade across borders and take advantage of supply chain networks and technological advancement.

“We believe the African Continental Free Trade Area (AfCFTA) will provide investors with easy access to new, rapidly developing markets while it has the potential to lift 30 million people out of extreme poverty but achieving its full potential will depend on significant policy reforms and trade facilitation measures,” says Ms Nkuli Mxenge-Mayende, CDC’s Global Market Manager.

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