On Thursday, 14 May 2020, SSCG Consulting hosted a Webcast on Automotive and Manufacturing in Africa - Accelerating Industrialisation to discuss latest updates, perspectives, practical solutions to challenges and opportunities across the industries and region. Speakers included: - Martyn Davies - Managing Director: Emerging Markets & Africa , Automotive Industry Leader at Deloitte - Michael M. MABASA - Executive Director and CEO, National Association of Automobile Manufacturers of South Africa (NAAMSA) - Fadzai Nyamasve - Director for Strategy and Growth , AECOM Africa - Fredrik Morsing - Managing Director at Scania West Africa - Dave Coffey - Chief Executive Officer at African Association of Automotive Manufacturers (AAAM) - Luqman Mamudu - CEO of Transtech Industrial Consulting and Director of Policy and Planning at the National Automotive Council, Nigeria - Renai Moothilal - Executive Director, National Association of Automotive Component and Allied Manufacturers (NAACAM)

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THURSDAY, 14 MAY 2020
AUTOMOTIVE AND MANUFACTURING IN
AFRICA
ACCELERATING INDUSTRIALIZATION
SUMMARY REPORT

2. TABLE OF CONTENTS
Introduction …………..…………………………………………………………………….…...……………………………………………………………..3
Panel discussion: Regional automotive industry landscape ………….…………………………………...……………….…………………….…..4
Panel discussion: How policy can accelerate the auto industrialisation in Africa …………..…………………………………...……………...5
Case study: Nigerian automotive industry - opportunities and challenges ………….…………….……………...….…………...…………...…6
Panel discussion: The importance of supply chain in driving industrialisation and OEM production in Africa …………...……...………...7
Panel discussion: How technology can advance industrialisation ………….………………………………….……….……………..…………...8
Questions and answers …………..………………………………………………………………………………...………………………….……............9
Key takeaways ….……...………...……….………………………………………………….…………………….…………………...………….............10
How SSCG can support your business ..………………………………………………….…………………………………………….……….............11
Contact us …….………...………...……….………………………………………………….…………………….…………………...………….............13
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3. INTRODUCTION
COVID-19 has disrupted and reshaped
global economies, markets and supply
chains. The International Monetary Fund
(IMF) projects that global growth will
shrink to 3%, with the EU’s dropping to
6.5% and Africa’s being cut to 3 - 8%. With
manufacturing transitioning to
digitalisation, the industry is growing with
advancements being seen in the
increased use of technologies such as
artificial intelligence (AI), three
dimensional engineering (3D), mobile
equipment (ME) and fifth-generation
cellular wireless (5G). There is also an
increased use of automated smart
technologies.
The global automotive industry is also
shifting very quickly as products are being
centered around consumer demand and
expectations. This year, the market is
expected to grow at a Compound
Annual Growth Rate (CAGR) of 6.5%.
The African automotive industry is
relatively small and is segmented by
geography and vehicle type. South
Africa is the only mature market in the
continent but 85% of new vehicle sales
are in Morocco, Egypt and Algeria. New
promising markets are being seen in
Kenya, Rwanda, Ethiopia, Senegal,
Nigeria, Ghana and Angola.
Infrastructure to support wider supply
chains need to be developed.
Martyn Davies
Managing Director: EMA ,
Automotive Industry Leader at
Deloitte
Renai Moothilal
Executive Director
NAACAM
Dave Coffey
Chief Executive Officer
AAAM
Fadzai Nyamasve
Director for Strategy and Growth
AECOM Africa
Luqman Mamudu
Director of Policy and Planning
National Automotive Council,
Nigeria
Fredrik Morsing
Managing Director
Scania West Africa
Michael M. MABASA
Executive Director and CEO
NAAMSA
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There should be inclusive growth in the
continent especially in industrialisation.
There is no sector like manufacturing that
creates embedded structured
employment where unionised workers
would be organised and receive on
average 12 - 15 paychecks a year. Most
African countries have extremely low
manufacturing capacities, which is a sign
of a lack of long-term proactive industrial
strategy implementation.
However, It’s not just about
manufacturing...an ecosystem that
includes transportation, infrastructure and
such, needs to be created.
Industrialisation can be kickstarted in
Africa not by change in policy but by
having long-term generational play
around auto.
PANEL DISCUSSION: REGIONAL AUTOMOTIVE INDUSTRY LANDSCAPE
Providing that we can cut the flow of
dumping of pre-earned products into
Africa from the reared markets like the US
to East Africa, and Japan to West Africa,
there will be an opportunity to create the
required ecosystem for the industry. This
would result in recipient governments
along with business industry organisations
being able to then start forming new
policy in support of creating new areas of
car sales growth. Very few regions can
essay that in the current environment.
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Market demand should be accompanied
by financing because new cars need to
be affordable. There is no need of having
policies and ecosystems when the cars
can't be bought by the target
Unfortunately, Africa is used as a dumping
ground for new-used and used vehicles.
There needs to be a reduction in second
hand and grey vehicle imports. This
limitation will ensure safety and support
the manufacturing of new vehicles. This
will of course be a transitional phasing out
process like what the Ghanaian
government is doing.
Having such a low base of new car sales
will see growth within the right automotive
system post COVID-19. A Pan-African
auto pact will benefit the continent. This
will be furthered even more with
compatible regional policies. The vision is
to have hubs in Eastern, Southern,
Western and Northern Africa further
enhancing the free trade agreements
between countries.
PANEL DISCUSSION: HOW POLICY CAN ACCELERATE AUTO INDUSTRIALISATION IN AFRICA
The continent has a low vehicle density
of 42 cars for every 1000 inhabitants,
which is well below the global average
of 180. The US for example has an
average of 830 while Europe is 530. This
shows there is huge potential for growth
and job creation as long as we build
effective automotive ecosystems.
From research done last year, a
conservative estimate shows that new
car sales in Sub-Saharan Africa can
grow from the current 100,000 to 2 million
in the next 15 years. Even though
COVID-19 is currently negatively
impacting economies and raising costs,
it creates an opportunity when coming
out of the pandemic in that there will be
less need for global supply chains in
favour of local sourcing. Political
predictability and legal certainty are
important for automotive investors
because they need the confidence of a
stable regulatory framework that passes
certain aspects into law. market.
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A policy to enhance local industrialisation
was launched in Nigeria in 2014. It was a
generous policy from the country’s
government as it included a 7% tariff
differential between fully imported cars
and locally manufactured ones.
Unfortunately in spite of this, little has
been achieved due to lack of political
will represented by the delay in legislating
the Investments Confidence Act as part
of Nigeria’s Finance Bill.
Manufacturing in Nigeria is dominated by
local low value-adding players. It
accounts for less than 10% of the market
share. This has resulted in negligible
contributions to the gross domestic
product (GDP). The abundance of
natural resources should be taken
advantage of. A Dangote refinery for
example is about to be launched to take
advantage of the country’s high rate of
oil production.
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This refinery is intended to produce plastic
composite material that can be used in
auto manufacturing. Unfortunately, the
market is unprotected from the
importation of second hand vehicles. The
insecurity in Nigeria is also a cause for
concern to investors. The upside however
is in the digitalisation and more use of ICT
within the industry.
Because the industry is still very much at its
infancy stage, globalisation has a
negative impact as it means that external
players are the ones controlling the
market in Nigeria. More emphasis should
be on a hybrid that takes the positives
from globalisation and works them to fit
the local industry needs, i.e. glocalisation.
CASE STUDY: NIGERIAN AUTOMOTIVE INDUSTRY - OPPORTUNITIES AND CHALLENGES

7. In the OEM space, there is a shift
happening in the market in South Africa.
Vehicles are not primarily being sold
locally because 64% of what is produced
in the country is not consumed in the
country. Exports are to around 154
countries worldwide but only 13% of these
exports are to other African countries.
There is now a concerted effort to work
more with countries on the continent to
create the auto pact. There won't be an
immediate substitution of components
from other global destinations but OEMs
and large component manufacturers now
have a framework within which they can
work to promote local industrialisation.
PANEL DISCUSSION: THE IMPORTANCE OF SUPPLY CHAIN IN DRIVING INDUSTRIALISATION AND OEM
PRODUCTION IN AFRICA
The disruption by COVID-19 has exposed
a lot of risk that has spurred
governments into rethinking their supply
chain models, especially with many
African countries being heavily reliant
on China. South Africa for example has
implemented a policy decision to
develop its own automotive masterplan,
a 15 year strategy to focus on
deepening and widening localisation.
39% of auto manufacturing components
can be found in South Africa...the goal is
to ramp this up to 60% in the 15 year
timeframe. The over reliance on
external/foreign supply chains is
suffocating the country's ability to meet
some of the ambitious targets it has set
for itself. For instance, it took 124 years to
produce the current 600,000 automotive
industry products. The goal is to double
this output in the next 15 years.
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8. The key is in the planning stages of new
projects. We can speed up the planning
process using new technologies. Many
service providers are integrating new tech
into everyday life. There is an
advancement in using technology
especially now in the midst of a pandemic
where social distancing is now the norm.
3D printing for example is being used
more now with disruptions in the supply
chain that have been caused by
COVID-19.
With 3D printing, you can locally produce
a piece of equipment that would
previously have had to likely cross an
ocean before reaching you. This has cut
down on shipping times and costs just as
one of the immediate quantifiable
benefits to use of more technology.
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Automation has grown across the industry
to increase productivity especially in
assembly lines. Automation could be
something as simple as changing logic
code or something more expensive like
changing your supply chain.
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PANEL DISCUSSION: HOW TECHNOLOGY CAN ADVANCE INDUSTRIALISATION

9. How can we improve and/or develop the
aftermarkets in Africa?
Training is key...there are many ambitious
and hardworking people willing to join the
industry but they come with a lack of
experience.
Enforcement of legislation should also be
priority as it ensures that there is an even
playing field for all within the industry. That
way no one company has an unfair
advantage over another.
QUESTIONS AND ANSWERS
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10. Africa is awash with second hand/used
vehicles which is inhibiting the growth of
the local auto industry.
Used cars occupy more than 80% of
vehicle sales. Africa’s is an aging fleet
which has in turn caused safety
challenges where the continent has the
highest per capita road fatalities in the
world. According to the World Health
Organisation (WHO), the current rates are
expected to increase by 112% by 2030.
Policy drivers play a key role in
developing the interconnected
ecosystems. Something positive that has
come out of this pandemic is the
development of new avenues of
production for local companies.
KEY TAKEAWAYS
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The automotive industry in Africa is not
monolithic. This means that there isn't a
one size fits all policy that would be
blanket applied for all African countries.
Companies should be incentivised to
invest and produce locally. It’s good for
the continent to have labour-intensive
production as this will result in more job
creation.
Regional trade should be promoted on all
levels. Widen the scope of production and
enforce and reinforce policies that
promote collaboration within the
continent. Automotive manufacturing
doesn’t have to stay pigeon holed within
the industry. Companies can diversify their
portfolios by producing other things. The
shortage of personal protective
equipment (PPEs) for example was an
opportunity for some auto
production/assembly plants
to produce things like masks and
ventilators to be used in the fight against
COVID-19.
We need to get buy in for regional trade
to be successful especially in the
targeted hub countries. Africa will never
be like the European Union (EU) but we
do have similar institutions like the
Economic Community of West African
States (ECOWAS) that are unique to
Africa. These types of structured
institutions can be used to remove trade
barriers and thus grow industries across
the continent.
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11. SSCG Consulting is global strategy and
management consulting firm. We
provide advisory, consulting and
operation support to clients across
diverse sectors of the economy. Our
mission and objectives are to help our
clients solve complex business challenges
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HOW SSCG CAN SUPPORT YOUR BUSINESS

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The SSCG team is here to help. Contact us for more information and/or to discuss your specific requirements and how we can be
of assistance.
Eugene Nizeyimana
CEO, SSCG Consulting
Eugene.Nizeyimana@sscg-group.com
+(44) 1213642000
www.sscg-group.com
CONTACT US

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