When German Chancellor Angela Merkel visited West Africa in August 2018, Volkswagen signed two memorandums of understanding, one with Ghana and one with Nigeria.

The Ghana agreement bore fruit. Volkswagen started vehicle assembly in Accra’s North Industrial area in April. The company expects to produce about 5,000 vehicles every year, with plans to increase production subject to demand.

Meanwhile, Nigeria’s automotive policy remains unsigned into law by the government and the company’s presence there remains “dormant”, says Thomas Schaefer, chairman and managing director of Volkswagen South Africa.

Schaefer, based in Port Elizabeth, is in charge of Volkswagen’s sub-Saharan presence, which includes assembly and marketing activities in Kenya and Rwanda.

Nigeria’s size and diversity means that it’s politically much harder to achieve consensus for a change than in a smaller country, Schaefer says. The size of the country’s market could justify 10 large factories, says Schaefer. A point that the company has repeatedly stressed to the Nigerian government. “We wish they would sign and get on with it.”

Ghana has targeted vehicle assembly and automotive components manufacturing as strategic priorities in its industrial development plan.

  • Their policies, Schaefer says, are very close to those that have successfully adopted to encourage automotive production in countries such as South Africa and Thailand.
  • Key measures adopted by Ghana to stimulate local production include banning the import of salvaged vehicles and setting a maximum age of 10 years on cars that can be imported.
  • Toyota and Nissan are also considering starting vehicle assembly in Ghana.
  • Ghana has a “clear strategy and vision” and has “put a proper policy in place,” in such areas, he said. “The President wanted it. They made it happen. I hope it encourages their neighbour.”

South Africa

The COVID-19 pandemic, Schaefer says, has been like a “magnifying glass” for South Africa. “It showed the best and the worst” of the country.

  • The country’s biggest problem is to find a solution on state-owned enterprises (SOEs), notably South African Airways and Eskom. If they could be fixed, economic prospects could start to look brighter, he says. “I’ve got a lot of hope for this country.”
  • COVID-19 has led to a hiring freeze for all but critical functions, but Schaefer is hopeful that job losses can be avoided. “We wouldn’t be able to let go of a shift.”
  • Volkswagen has now moved up to two out of three shifts at its factories.  Schaefer hopes to be able to restore the third in September.
  • While spending in some of Volkswagen’s export markets in Europe and Asia may have been delayed by COVID-19, car purchase decisions in the local South African market may simply turn out to be cancelled, says Schaefer. “There’s more clarity in international markets.”
  • The outlook for 2021, Schaefer says, is “not too bad.”

Schaefer is bullish on the global outlook for electric vehicle adoption and suspects that putting petrol in cars will one day seem as outdated as smoking on an airplane.

That point will come sooner than many expect, he says.

  • Battery prices will continue to fall, making electric cars more competitive in cost terms.
  • South Africa can do more to encourage the take up of electric vehicles by putting incentives or penalties in place. “You need either one or the other to move forward.”
  • The danger otherwise, especially in a cost-conscious market such as South Africa, is that electric vehicles will remain condemned to a “niche” existence, he says.
  • The sticks and carrots for motorists don’t always need to be financial. Schaefer points to Norway, the world’s leader in electric car adoption, as an example where the access allowed for different kinds of vehicles has encouraged take-up. “We don’t have that yet.”

Bottom Line
Nigeria risks being left behind by more nimble neighbours in attracting automaker multinationals.

 

Source: Africa Report

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