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 - 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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Colin-on-Cars - Nissan taps into Africa

Nissan Africa has revised its management structure to strengthen its foray into the African auto market.

“These are clear signals of the importance of Africa to Nissan globally through this new increased focus on the continent” says Joni Paiva who was newly appointed as Africa President. Paiva will also continue his current position as Divisional Vice President, overseeing Sales and Marketing, India.

Sherief Eldessouky has been appointed Managing Director of Nissan Africa with effect from April 1, 2023, replacing Mike Whitfield, who will now become the Group Strategic Advisor for Policies, Political Affairs and External Relations.

Sherief Eldessouky

“I am thrilled about this opportunity, I have been given,” says Whitfield who established Nissan Africa as a regional business unit in 2020 “Africa is a key market with an unmatched growth potential and the way we unlock that will be through a combination of intelligent mobility solutions and creating a coalition of willing countries to develop a thriving and sustainable automotive manufacturing industry.

Mike Whitfield

Eldessouky, who previously combined the twin roles of being Nissan Egypt country director and driving the transformation of Nissan Africa, has spent his life in the automotive industry in a career that has taken him from his native Egypt to Brazil, China, Korea, the United States and Uzbekistan, among others.

He joined Nissan in 2020 as head of the OEM’s automotive manufacturing operation in Egypt and was appointed country director at the end of that year.

“Nissan is well positioned on the continent, with an incredible legacy,” says Eldessouky, our job as a management team has been to establish just how we bring more wealth and value to a region with promising automotive growth opportunities with its rate of 42 vehicles per 1 000 compared to the global average of 182.”

Joni Paiva

“I am confident that with the team we have in Africa and the support that we get from our Nissan colleagues in the rest of the world, that we will achieve this.”

The position of country director Nissan Egypt will be filled by Mohamed Samad, who will return to Cairo from Japan where he has been based. Kabelo Rabotho remains country director for Nissan South Africa.

Maciej Klenkiewicz, currently Managing Director RBU Central Eastern Europe (CEE) will expand current scope to include Independent Markets Africa, making the most of his previous ASEAN importer management experience replacing Hide Kuwayama who is assuming a new position in Nissan’s global headquarters.

“These are exciting times for Nissan Africa,” says Paiva. “We have a very strong management team in place to drive the medium-term plan of ‘Let’s Build’ and to deliver the mobility solutions that Africa needs.”

The appointment are the latest iterations in a raft of changes and consolidations, which have seen Nissan Africa take responsibility for the North African territories of Algeria, Morocco and Tunisia last year.

Visitors and delegates to the Africa Automotive Show and the Intra Africa Trade Fair in Abidjan in November will be able to hear about the full spectrum of growth within Africa of the auto industry, both in terms of sales and manufacturing or assembly.

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Colin-on-Cars - Driving Africa automotive forward

The African automotive business is driving forward and a Memorandum of Understanding (MOU) signed virtually between 12 automotive associations within the ambit of the EU-Africa Business Forum recently looks to accelerate the processes.

The automotive sector, whilst key for the industrialisation of Africa is often associated with several challenges including, persistent market fragmentation, lack of regulatory alignment between African countries and the two continents, industrial and trade policies not conducive to local and foreign investment, lack of access to finance for consumers, local suppliers and affordability.

Expand

However intra-African trade can be bolstered and diversified by developing a Pan African Auto Pact, which aims to expand the African new vehicle market from 1-million to 5-million units and connecting African regions for the common good.

A ‘coalition of the willing’ will see the development of manufacturing sites and allied industries and services – both for the OEM and supplier sector – thereby laying the foundation for Pan-African integrated automotive value chains, which will incorporate neighbouring countries to build a regional and continental production network.

Boost

The launch of the African Continental Free Trade Area (AfCFTA) gives a boost to pan-African trade and investment opportunities, especially for the automotive industry and creates the momentum to stimulate a European-African dialogue between policy makers and important stakeholders.

This was one of the catalysts that led to a joint initiative to develop an MOU amongst European and African Automotive Associations, which initially driven by the African Association of Automotive Manufacturers (AAAM), the German Association of the Automotive Industry (VDA) and the German-African Business Association (Afrika-Verein) has now grown into a cooperation between the 12 associations that signed the MOU, which has the support of both the African Union and the European Union.

Plan

The MOU encourages enhanced dialogue contributing to the development of a joint plan to grow the automotive sector in Africa, through integration into the global and European value chains resulting in quality jobs.

Whilst encouraging a favourable investment climate to support market integration and innovation and the joint creation of models of standardisation, harmonisation and safe mobility. Furthermore, it is intended to advance the debate about sustainability whilst considering alternative powertrains and digital solutions and to further develop affordable mobility solutions leading to a viable African vehicle market.

The MOU commits the 12 organisations to work jointly on several key priorities including:

- The setting-up of a permanent round table between the AU, EU, and industry associations in line with the spirit of an established European-African Business Network that will foster the dialogue between Africa and Europe.

- To request the EU and African countries Governments to pursue trade initiatives through the implementation of existing agreements to increase business opportunities and further expand EU-Africa trade in automotive products.

- It also commits to advance the integration of African companies into the global value chains and to support the building of the necessary infrastructure and logistics. This will include investment and growth opportunities provided for EU companies partnering with African companies and will result in supply chains being more easily accountable.

- The MOU further calls on the EU to enhance its support for the implementation of the African Continental Free Trade Area in view of favouring Africa’s industrialisation and the expansion of the African automotive market.

Importantly the MOU calls for governments to support knowledge transfer, provide financial resources and give political priority in establishing a pan-African production and trade system that will reinforce and expand existing African automotive value chains.

Support

Lastly it encourages the EU to support financially the development of sustainable and smart mobility and affordable vehicle financing solutions to increase the mobility of the population in African cities and support therefore infrastructure development.

Whilst also calling on public authorities to provide programs and financial support for research on alternative powertrains and the value chain of green technology solutions in Africa.

Commenting after the signing of the MOU, David Coffey the CEO of AAAM said: "The trade and investment climate in Africa can only be improved together. We are convinced Africa has great potential to develop a promising automotive industry that will provide long-term employment.

“The fact African and European associations have agreed on key points to further develop the industry on the continent is an important milestone. Now political representatives are to support this by creating the framework conditions for the industry to develop and grow."

Signatories of the MOU

African Association of Automotive Manufacturers (AAAM)

Dave Coffey, CEO

German-African Business Association (Afrika-Verein der deutschen Wirtschaft)

Dr. Markus Thill; Member of the Management Board

German Association of the Automotive Industry (VDA)

Andreas Rade, Managing Director

Kenya Association of Manufacturers (KAM)

Ashit Shah, Chairman Automotive Sector

Tunisian Automotive Association (TAA)

Myriam Elloumi, Vice President

National Association of Automotive Component and Allied Manufacturers (NACAAM), South Africa

Renai Moothilal, Executive Director

National Association of Automobile Manufacturers of South Africa (NAAMSA)

Mikel Mabasa, Chief Executive Officer

European Association of Automotive Suppliers (CLEPA)

Sigrid de Vries, Secretary General

European Business Council for Africa (EBCAM)

Dr. Markus Thill, Member of the Management Board AV

European Automobile Manufacturers’ Association (ACEA)

Eric-Mark Huitema, Director General

Nigeria Automotive Manufacturers Association (NAMA)

Tokunbo Aromolaran, Chairman

Automotive Assemblers Association Ghana (AAAG)

Jeffrey Peprah, President

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