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Automotive Manufacturing to Be the Major Driver of African Trade

….As Annual Vehicle Sales Grows from 1 to 5 Million Units

By : Rotimi Asher, Lagos

As the single biggest international market, African Continental Free Trade Agreement (ACFTA) prepares to start its second implementation phase in less than a month, vehicle manufacturing and food processing have been promoted as the next great drivers of intra-African trade.

According to recent research by the United Nations Conference on Trade and Development (UNCTAD), ‘’reaping the benefits of ACFTA, automobile manufacturing is expected to have the highest untapped export potential ($1.4billion). It is predicted to have the greatest export, following tariff liberalization. Tariff liberalization promises an extra export potential of 18 percent by 2025.’’

The research says, ‘’ population and economic development are expected to open these industries, as well as tariff liberalization under the ACFTA. This might result in a multibillion-dollar bonanza for African nations. Partial tariff liberalization will increase intra-African trade by $9.2 billion by 2025

‘’ Recently, there has been a surge in demand for new automobiles on the continent, driven by a growing middle class with a preference for new vehicles at the cost of used vehicles imported from abroad markets such as Dubai and Japan,’’ the report said.

The report stated, ‘’ the ACFTA has the ability to harmonize  national and regional objectives through a coherent and integrated policy framework, especially on investment and competition policies in the context of phase 2 of the African Continental Free Trade Agreement.’’

‘’GDP and population growth are  expected to boost supply and demand for goods and commodities to unlock the bulk of the untapped trade and investment potential($13.3 billion) while removal of current market frictions in African trade could yield up to $8.9 billion.”

Supporters of ACFTA also believe that full tariff liberalization in the automobile manufacturing and food processing sectors will liberate billions of dollars in regional trade, as the continent stands to gain from the world’s biggest single market.

According to the African Association of Automotive Manufacturers, the growth of regional value chains would drive new vehicle sales in Africa from 1 million to 5 million units each year.

On its part, another International research outfit, Mordor Intelligence says,  ‘’ by 2023, west and north African countries will be the key drivers of growth in the automotive sector, with Morocco and Ghana touted as the biggest players, supplementing sales from South Africa, which currently accounts for 85 percent of all vehicle sales in Africa. Both South Africa and Morocco have aggressive automotive export goals.’’

‘’ The industries benefitting the most from tariff liberalization are also those that promise to have an increasing export potential based on supply and demand dynamics over the next five years,’’ according to the report.

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