October 01, (THEWILL) – Ahead of the October visit of the German Chancellor, Olaf Scholz, to Nigeria during which he is expected to discuss new German investments in the country with President Bola Tinubu, including the return of German auto giant, Volkswagen, CEO of the African Association of Automotive Manufacturers (AAAM), Dave Coffey, paid a working visit to Nigeria recently and responded to questions on the ongoing efforts of his association to expand and deepen the automotive industry in the continent, even as he expressed confidence that the current Automotive Bill in Nigeria will be passed into law and implemented. Excerpts.
How would you introduce the AAAM? Why was it formed and what are the objectives?
The African Association of Automotive Manufacturers (AAAM) was founded in November 2015 by global OEMs. AAAM is an automotive association focused on the continent of Africa with the vision to expand and deepen the automotive industry by working with African governments to shape and implement policies and ecosystems that will attract investors and unlock the economic potential of the continent. The members of AAAM are global OEMs, assemblers, component manufacturers and service providers that contribute to the development of automotive ecosystems. With the effective implementation of the agreed continental automotive strategy and progressive national auto policies and ecosystems, AAAM believes that new vehicle demand could increase from 1.1m to at least 3.3m per year and possibly 5m by 2035.
We understand that the association aims at deepening the continent’s auto industry and influencing policies. What about finding the market?…Because one thing is to produce and another is to sell.
To answer this question effectively requires me to articulate the automotive vision for Africa.
A Continental Automotive Strategy and Implementation Plan that was developed by the African Association of Automotive Manufacturers (AAAM), AfCFTA Secretariat, Africa Union (AU), UNECA, Afreximbank and ARSO was adopted as a living document by the AfCFTA Council of Ministers at a meeting in Botswana in February 2023. An AfCFTA Automotive Task Force has been formed to oversee, guide and implement this Strategy under the supervision of the Council of Ministers. Private sector/manufacturers’ representatives of State Parties can voluntarily participate in the Task Force with the immediate priority of the Task Force to resolve the Rules of Origin.
The architecture of the Continental Auto Strategy is built on a few important principles:
– Hub countries will assemble vehicles with neighboring economies sharing in the value chain; OEMs will not build a model in a Completely Knock Down (CKD) format in more than one country in Africa. The effective implementation of the continental automotive strategy will cause OEMs to decide where they manufacture what vehicles in Africa based on a country’s competitive and sustainable advantage and as part of their global manufacturing footprint.
– The component manufacturers follow the OEM investments, benefitting from the scale whilst investing in the technology requirements of the OEM and benefitting from the demand for spare parts manufactured off the same equipment.
– The development of Regional Value Chains including the transformation of raw materials will facilitate inclusivity and support for the continental auto strategy.
– Countries are to implement independent but compatible national policies.
– The architecture of these national policies will support continental production and trade (scale) whilst driving manufacturing competitiveness.
– It is important for regional alignment in terms of complementarity, in order to facilitate scale. For example, we are currently exploring a bilateral between Ghana and Cote d’Ivoire where Ghana assembles light vehicles and Cote d’Ivoire assembles bus, truck and trailers. Such a bilateral would bring about automotive free trade in accelerated time frames, as opposed to a 5 year or longer tariff phase down once the rules of origin are agreed.
– As assembly capacity grows the importation of used vehicles will transition from an unregulated environment of imports to used vehicles coming from vehicles assembled in Africa. In the short term we are driving a strong initiative to ensure vehicles exported to Africa are roadworthy.
– Scale will be enhanced by:
The harmonisation of minimum standards for new and used vehicles, spare parts and fuel.
Providing affordable mobility solutions and access to affordable investment and vehicle asset finance.
Governments are to source locally assembled vehicles.
What was the purpose of visiting Nigeria recently, and how successful was your mission?
AAAM’s purpose was to meet the automotive assemblers and to share the auto vision for Africa, our activities and progress on the continent. Nigeria has a key hub assembler role to play in Africa; it is important that the Nigerian private sector is aware of and in support of the continental strategy and gets on the AfCFTA auto stage. The strategy was well received. I want to note my appreciation for Luqman Mamudu who facilitated this meeting. We are linking auto private sector associations across Africa to promote collaboration – strong and aligned private sector associations are critical to realising the auto vision for Africa.
One major feature in most African countries’ industries is mere SKD assembly which does not enhance the deepening of auto technology. What is AAAM doing about transiting from SKD to CKD to ensure local content development?
The continental automotive strategy drives scale which enables the transition to CKD and deep value addition.
How best is the AAAM positioned to make auto financing work across sub-Saharan Africa?
AAAM is supporting the government of Ghana to develop an appropriate vehicle finance framework that will unlock demand – in addition AAAM has a vehicle financing working group that is exploring financing activities in Ghana with expert service providers from successful ecosystems. All these learnings will be important for sharing across Africa. In addition, Afreximbank has committed $1bn over 5 years to developing the full automotive value chain including vehicle and investment finance.
From your engagements with the Nigerian stakeholders, what is the progress on the efforts at getting the Auto Policy Bill signed into Law by the new President, Bola Tinubu?
For the first time in a number of years, I am optimistic that the current Bill will be passed into law and implemented.
How many Nigerian auto companies are currently members of the AAAM and what are you doing to bring more into the Association?
We currently have two members from Nigeria – AAAM has to earn its credibility and membership by delivering value and a future of prosperity. We plan to do that by supporting Nigeria to implement its auto policy with effective integration into the AfCFTA.
The attention of AAAM and OEMs seem to have been focused on Ghana since the past six years or so. Why is it so? And why not in Nigeria?
Ghana adopted and implemented a progressive policy – long term certainty for investors is critical.
What conditions do you think Nigeria should meet to encourage full resumption of local assembly of Volkswagen vehicles?
OEMs remain very interested in Nigeria – we need certainty of policy that has been passed into law and effectively implemented; this includes the required vehicle, fuel and parts standards to support investments.
With the expected resumption of Volkswagen operations in Nigeria, what do you see happening when the two plants (in Nigeria and Ghana) are producing the same brand of vehicles in close proximity for the not-too-big West African (ECOWAS) market?
The OEMs will ultimately decide what is produced based on a country’s competitive advantage – regional collaboration and complementation is key to driving scale and competitiveness; it is most unlikely that the OEMs will produce the same model in two ECOWAS locations.
North Africa seems to be tailing South Africa in the automotive industry, what would you say is responsible for the rate of growth in North Africa and what can a region like West Africa do to catch up?
Regulation of used vehicles in North Africa is well advanced.
Please, tell us more about Africa’s Trade and Investment event taking place from the 9 – 15 November 2023 in Cairo, Egypt. What is AAAM trying to achieve with this event?
The aim is to showcase Africa’s evolving automotive industry – we need to make people aware of the automotive opportunity, facilitate partnerships, linkages and trade and to engage on topics that are key to unlocking the auto potential of Africa.
What are the challenges facing the auto manufacturers in Africa?
The political willingness to legislate and implement a stable and progressive automotive policy is the key to unlocking the economic opportunity – South Africa and Morocco are great examples where significant auto investment continues to take place year after year whilst providing skilled employment at scale.
Who is Dave Coffey?
Dave Coffey, who has spent most of his working career in the automotive industry, graduated from the University of Natal in South Africa with a degree in B.Sc. Mechanical Engineering in 1984 and subsequently obtained an MBA from the University of Cape Town in 1992. He is currently the CEO of the African Association of Automotive Manufacturers (AAAM). He previously held senior positions within various automotive supplier companies including Dorbyl Automotive Technologies and Bel-Essex Engineering. Before taking up his position at AAAM, he was the Managing Director of Shatterprufe, a manufacturer and distributor of automotive glass in South Africa. Dave has also been active in various business organisations during his career, including being President of the National Association of Automotive Component and Allied Manufacturers (NAACAM) twice, as well as being President of the Nelson Mandela Bay Chamber of Commerce.
