By Moses Akaigwe and Walter Ukaegbu, Abuja
The announcement on Thursday by Ghana’s Minister of Trade and Industry, Alan John Kyerematen, that four global automakers, including Hyundai and Kia, had reached an agreement with the government to establish assembly plants in the country did not come to many in Nigeria as a surprise.
This is because, since the introduction of Ghana Automotive Development Policy (GADP) in 2019, many of the original equipment manufacturers have been looking at the West African country as a safer and more rewarding investment destination than Nigeria, which has an older auto policy that took effect in 2014.
Ghana Automotive Development Policy was envisioned to make the country an automotive hub from where vehicles assembly locally, would be exported to other markets in the West African region, obviously including Nigeria, which is many automakers’ target albeit known for its weak industry.
First to be attracted by the GADP was Volkswagen, which opened an assembly plant in Accra in August, 2020 – two years after signing memoranda of understanding with both Ghana and Nigeria – while the plan to establish a similar facility in Nigeria remains on hold till today.
Responding to The Sun’s inquiry on why Volkswagen promptly honoured its agreement with the Ghanaian government and had not done the same in Nigeria, a spokesman for Volkswagen Group South Africa s head of group communications, Andile Dlamini, explained that lack of legal support for the Nigeria Automotive Industry Development Plan (NAIDP) was one of the discouraging factors. Dlamini also cited the unwillingness on the part of Nigeria to impose stricter measures against the importation of used vehicles, as another reason Volkswagen had not started assembling vehicles in Nigeria as it has done in Ghana.
“The Nigerian government undertook to implement the draft automotive policy, which was before the National Assembly, into law. This would have paved the way for certainty for automotive manufacturers to establish themselves in Nigeria in a meaningful way. The policy would create a fostering environment to competitively introduce new vehicles, by phasing out used vehicle imports of dubious quality, safety and emissions.
“Improved levying of duties and taxes, which at present favour used over new vehicles, was also promised. To date, the policy has not been signed and the used vehicle issue has not been addressed to a point that provides certainty that the new vehicle market can grow within normal market forces. Ghana has followed up on these commitments,” the VW spokesman told The Sun.
OEMs are also taking advantage of Ghana’s bouquet of incentives, including the offer, in 2019, of tax holidays of up to 10 years, which Volkswagen and Nissan were the first to gleefully accept.
Apparently encouraged by this friendlier investment climate, Nissan, Suzuki, Sinotruk, and Toyota had earlier followed this trail blazed by Volkswagen to the Ghanaian auto industry, and had already been operating in the country before last week’s latest development.
Kantanka, another auto maker in Ghana, is the country’s answer to Innoson in Nigeria, being an indigenous brand set up by a Ghanaian. Kantanka is also well respected and enjoys the support GADP accords to the foreign brands operating locally.
This was why only a few in the industry were surprised when Ghana’s Minister of Trade and Industry disclosed through his Twitter handle that Hyundai and KIA, which belong to the same parent company in Korea, plan to establish assembly plants in Ghana by the end of 2022.
“The Ghana Auto Development programme” will create “6,600 manufacturing parts jobs in Ghana,” Kyerematen said.
He explained that the incentives from government to the local auto industry, which were consistent with GADP’s provisions, were intended to attract the auto makers to Ghana. Setting up local manufacturing plants in Ghana, according to the government, should grow its economy and create jobs.
In 2020 amid the coronavirus pandemic, Ghana’s President Nana Akufo-Addo unveiled Volkswagen vehicles assembled in the West African country for the first time.
That investment came in the framework of the G20 Compact with Africa (CwA), which was launched under Germany’s G20 Chairmanship in Berlin in June 2017.