Inside Africa: A Look at the Growing Automotive Industry
Kantanka Cars
A luxurious, flashy, and unique “supercar” became the object of many car-lovers’ affection when it popped up in 2013 from a small carmaker based in Morocco. More recently, the Laraki Epitome made headlines when American-Moroccan rapper, French Montana, purchased his own at $2.5 million. It is still not very well-known, though Montana’s name now being attached to the car’s own brings some more worldwide recognition. The Laraki Epitome came with an LS-series engine and turbochargers along with several other customizations for Montana, the owner of the only Epitome known to have been made. The car has been described as a “Moroccan engineering masterpiece,” and it is an example of the potential innovation to come from the African continent.
Africa has been an importer of vehicles for a long time, and most cars driven throughout the region are secondhand. However, Africa is setting itself up to be able to tap into the automotive industry, address its own needs, and spark some new activity in the manufacturing job field. There are Birkin Cars, Innoson Motors, Kantanka Cars, Kiira Motors Corporation, Mobius Motors, Wallyscar, and, clearly, Laraki. Birkin has made some sales abroad in the United States, Japan, and in some parts of Europe. Wallyscar also also reached international markets on a small scale. Innoson helps meet the needs of its home country of Nigeria, with its Nigerian government as a frequent customer. Kiira sets itself apart from many other manufacturers in Africa. Supported by the Ugandan government, it produces hybrid electric vehicles. The automotive industry is small at this time, but seeing these companies shows how there could be a potential for job production across the region.
Morocco is home to Laraki, the maker of the $2 million luxury car, and South Africa also has a relatively well established automotive industry, contributing some to the regional economy. South Africa has had the industry for nearly 100 years and the most significant level of production in the region takes place there, though other countries appear to be taking the leap into automotive production. Globally, the automotive industry is an important one, competitive and with a great need for continuous innovation. It requires consistent policy, energy, infrastructure, advanced manufacturing capacity, and the ability to tap into markets. Production is expensive, meaning that for companies to make a profit, they have to look at cost cutting methods like reducing the number of vehicle models in production, reducing the number of tools needed to be purchased. There is also a need for longer production runs and greater emphasis on infrastructure.
Though the global market is dominated by larger economies such as the United States, the European Union, China, Brazil, Russia, and India, smaller economies like those that populate much of Africa can still step up to fill the more localized need for vehicles and transportation. South Africa has implemented the Motor Industry Development Plan to support a greater focus on development of the industry. Over in West Africa, Nigeria has a similar plan, the Nigerian Automotive Industry Development Plan, a plan to address industrialization of the economy. These plans assure that the governmental policies and the industry align and begin looking to further industrialize the region.
Sectoral GDP growth in Africa (percentage per annum)
The African Development Bank Group has identified the low level of industrialization as a “major problem in Africa” and its “Achilles heel.” Sub-Saharan Africa is experiencing a $16.3 billion in automotive trade deficit, though it is an expanding market that just needs some investment. Africa has underperformed in manufacturing, though the impressive urbanization and population growth across the continent. Manufacturing is still straggling behind in industry and manufacturing gross domestic product. In 2000, there was a bit of a boom, though manufacturing remains at the low end of the continent’s GDP, with services being the main sector of growth since the 1960s. While the lag is understandable, it does pose a problem for a region working to establish more self-sufficiency and less reliance on outside markets.
The domestic markets are small, and the ability to sustain high-level manufacturing limited due to a lack of infrastructure and trained workforce. Because of this, Africa has been import-dependent for a long time. Without more manufacturing occurring, the ever-growing urban populations are unable to produce their own necessary resources, including jobs and commodities, and run the risk of becoming “consumption cities” reliant on the good Samaritan efforts of outside entities. Basic goods, including vehicles to support transportation in the region, have to come from other countries instead of allowing the urbanized population to look to its own region to support its needs.
In 2013, sub-Saharan Africa imported approximately 1.5 million vehicles, excluding South Africa which already has a somewhat established automotive industry, and this number is expected to continue to go up over the next decade. Sub-Saharan Africa is typically thought of as a cluster of smaller markets, though the smart manufacturer could see the potential, especially with the African Continental Free Trade Agreement, which is expected to provide an economic booster shot to participating African countries as previously reported in this column.
Building up a profitable automotive industry that contributes to the region’s GDP, promotes sector and employment growth and meets the needs of the region. AfCFTA could remove the barriers between smaller markets to meet some of the needs of the industry: allowing for bigger production runs to increase profitability and promoting policy that supports the trade and establishment of infrastructure to increase the need for reliable transportation. The removal of barriers between markets, once the free trade agreement is fully implemented, could be the catalyst needed to see the automotive industry in Africa begin the thrive and support its own populations through job creation and greater production, decreasing the need for second-hand vehicles from other regions of the world.
