By Moses Akaigwe
The president of African Association of Automotive Manufacturers (AAAM), Mike Whitfield, has a deep knowledge of, and a wealth of experience in, the automotive industry, which commenced when he joined Nissan in 1981. Before assuming his present position of managing director of Nissan Africa on December 1, 2020, he was the chairman and managing director of Nissan Motor Egypt, managing director of Nissan South Africa and later the chairman of Nissan Africa South (which covers South Africa and sub-Sahara Africa).
Always upbeat that Nigeria’s automotive industry has the potential to thrive if the right framework is firmly in place, he has at different times interacted with top officials of the Nigerian government and was part of the AAAM leadership that met President Muhammadu Buhari at the Aso Rock Villa, Abuja, on the development of the industry in January 2016.
In this exclusive interview, Whitfield comments on the implementation of Nigeria’s National Automotive Industry Development Plan (NAIDP) also referred to as Auto Policy; how the automotive industry in Africa can benefit from African Continental Free Trade Agreement (AfCFT); the challenge posed by grey imports (vehicles not made for Nigeria) and second-hand automobiles; why big auto makers and original equipment manufacturers (OEMs) are now giving priority to Ghana over Nigeria in their investments, and other issues.
Impact of ‘Nissan NEXT’ Plan unveiled in 2020 on the sub-Saharan Africa market
Nissan NEXT is a four-year plan for us to achieve sustainable growth, financial stability and profitability by the end of fiscal year 2023. We will do this by optimising the way we do business and rationalising our costs to the benefit of our customers by concentrating on key markets. The creation of the Africa Regional Business Unit is a key part of achieving the Nissan NEXT ambition, because Africa is the last frontier in terms of automotive markets, because it has the lowest motorisation rate at 42 vehicles per 1,000 people against the global average of 182; Africa has 1.3 per cent of the global vehicle population, against 17 per cent of the world’s population; Africa will have the largest working age population on the globe by 2034; and its population will reach 2.5 billion by 2050, when one in every four people in the world will be from Africa.
Over and above this, the African Continental Free Trade Agreement will create the biggest economic trading bloc in the world.
An important aspect of Nissan NEXT has been to establish Rosslyn in South Africa as our LCV (light commercial vehicles) manufacturing hub for the continent, with the best ever version of our flagship Nissan Navara, which is now being made in Africa for Africa. The second key part has been our ongoing efforts to work with African governments who have the will to create their own automotive sectors.
Addressing low purchasing power in Africa with Nissan NEXT
It’s a major part of our strategy. Improving Africans’ buying options hinges on a combination of firstly being able to buy local because that will always be a more affordable option than by buying imported vehicles and secondly working to unlock asset-based finance at affordable rates. I’m currently president of the AAAM and I can tell you that we have been speaking to Afreximbank in particular, as well as other banks about this. We are also in the process of rolling out a ground-breaking pan-African study of the issue. Making vehicles locally is key because they don’t attract the same import duties as vehicles that are brought in, but it is more than that; when there is a proper automotive industry development programme in place, all of a sudden, you can attract vital foreign investment because these policies provide certainty, guarantees and protection.
Challenges confronting automakers in Africa
The key challenges are: Grey imports, lack of access to asset finance at all or at affordable rates, and lack of homologation, which means that a lot of the vehicles on the roads are neither made for the severity of the roads in those countries or to run on the quality of the fuel that is available. For homologation and grey imports, the best way to resolve these is through working with governments to create the groundwork for sustainable automotive industries through the drafting of development policies underpinned by the necessary legislation which is then enforced. That’s what we have all been hard at work with, finding opportunities, helping create the empowering legislative environment and then actually putting our money where our mouths are and investing.
Benefits AfCFTA offers to Africa’s auto industry
The African Continental Free Trade Agreement will be the world’s largest trading bloc. It is the single greatest opportunity the continent has to finally unlock its economic potential. It also has the scale required to create an integrated and globally competitive African automotive sector. But the automotive industry has a key role to play in the actual realisation of the AfCFTA through creating automotive industrial hubs and regional markets, which will ultimately trade with each other. The World Bank estimates that the effective implementation of the AfCFTA could potentially increase Africa’s combined GDP (gross domestic product) by US$450 billion by 2035 and lift 100 million people out of poverty by increasing inter-African trade by 80 percent. At the AAAM, we believe that we could create a market of five million vehicles per year, up from the current 1.1 million. This is one of the reasons the AAAM is working so hard to create a coalition of the willing among African governments to create a sustainable indigenous automotive industry – and working just as closely with the AfCFTA secretariat, positioning the automotive industry as a vanguard for the AfCFTA.
Nigeria’s National Automotive Industry Development Plan
We were all immensely excited when the NAIDP took effect. Nissan were the first movers in Nigeria in 2013. All of us believed the country had the potential to become a major market, which is why so many OEMs were keen to invest, but, unfortunately the vision and policy weren’t properly implemented. When the OEMs realised these implementation challenges, they looked elsewhere in ECOWAS, because that in itself is a major economic region filled with potential because it’s literally the same size in people terms as North America. Nigeria’s 2020 Finance Bill has created a real risk to industrialisation, but we remain actively engaged with the Federal Ministry of Industry, Trade and Investment regarding the automotive policy and the future of the auto industry. We haven’t given up.
Nigeria as potential force in auto industry
Absolutely. Nigeria is a major economy, pre-COVID-19, the biggest in Africa and yet it has a car market of only 10,000 new vehicles per year for a population of more than 200 million. We all believe in the potential of the country, which is why we are continuing to engage with government at every level to bring about the policy certainty and implementation we all need before making major investments. Creating a successful and sustainable automotive industry is a long journey, but South Africa is an example of what can be achieved if there is a partnership between government and the private sector. Today, 60 years later, the South African automotive sector directly employs 470,000 people and three times more in the value chain. It contributed 7.1 per cent to the GDP in 2019 and earned US$ 14.3 billion through exports.
AAAM and task of developing Africa’s auto industry
The AAAM was formed in 2015 by global OEMs and component manufacturers with the specific aim of working with African governments to unlock the economic potential of the last automotive frontier in the world, by developing a network of private, public and government stakeholders committed to establishing a sustainable automotive industry in the continent. We are currently actively engaged with governments in Egypt, Ethiopia, Kenya, Nigeria and Morocco.
We have several Nigerian members, most significantly Stallion, Nissan’s Nigerian partner.
AAAM and Innoson Vehicle Manufacturing Company, Nnewi
We are fully aware of them; they have made great strides in the Nigerian automotive space. The executive director of AAAM, Dave Coffey, is reaching out to them, if he hasn’t already by the time this is published.
Why Ghana is getting priority over Nigeria
The answer is simple. Investment in automotive assembly and component manufacturing plants is both long-term and extremely expensive. Policy certainty and a political willingness to enforce the policy to protect investment and ensure a level playing field are critical. The government of Ghana provided both, as evident in the speed with which things progressed from Nissan’s memorandum of understanding in 2018 to a situation where there are now two assembly plants in operation with another two, including ourselves, scheduled to be commissioned before the end of the year. We are still very keen on Nigeria, as I have said above, which is why we remain in continuous contact with the government of Nigeria and its officials to resolve the policy issues and concerns that we have.
Moving from SKD vehicle assembly to CKD on the continent
This is a vital question. Not every country can sustain an assembly plant, or develop it to CKD and then integrative manufacturing. But, it can play a role in either manufacturing components or beneficiating the raw materials that it possesses to create them. Three immediate examples are rubber, copper and cobalt. They are all exported from Africa and then imported as tyres, car wiring systems and batteries. The same can be said for the raw materials that make up just about every other part of the car, down to the platinum and palladium in catalytic converters. What the AAAM is actively trying to do is encourage governments to establish automotive industry development programmes informed by regional auto pacts that allow for the creation of all parts of the automotive value chain – of which component manufacture is an indispensable part – and ensure that these will be sustainable and viable.
Challenges posed by second-hand vehicles, grey imports
Of the 54 countries that make up Africa, only four completely ban second-hand imports. Nigeria, where 80 per cent of all vehicle sales are grey imports, imposes a 15-year age restriction, while Ghana penalises the importation of vehicles older than five years. More than 80 per cent of the vehicle fleet in Africa is grey or second-hand. Grey imports and used vehicles are affordable in the short term for the consumer, but more expensive in the long term. There are no warranties, no spares and no after-sales service, because none of the OEMs are involved in importing them and supporting them afterwards.
The second, more ominous, part of the problem is that these vehicles are often unsafe and environmentally unfriendly because they are not made for the severity of African roads or the quality of the fuel that is available. They have to be modified by non-OEM mechanics often at the expense of the very features that made them so desirable in the first place.