The motor industry can be a model for African trade and industrial integration, says a report by the World Economic Forum (WEF) and Deloitte.
Without urgent action the continent, already a fringe player in global trade, risks “further marginalisation” because of the disruption caused by Covid-19.
Economists say the pandemic may discourage industrial globalisation in favour of regional self-sufficiency. That’s bad news for Africa, which relies overwhelmingly on external trade. In 2019, says the report, “16% of total African exports and 12% of African imports were to and from African countries”.
SA alone was responsible for 35% of those exports and 15% of imports. In Europe, 68% of imports and 66% of exports were traded regionally. In Asia, it was 56% and 62% and in the US, 53% and 39%.
Africa needs to embrace a similar “self-supportive regionalism”, says the report.
The continent took the first step on January 1, when the AU launched the African Continental Free Trade Area, described by the report’s authors as “perhaps the most ambitious free-trade project since the World Trade Organization itself”.
If the continent can increase its share of global trade from 2% to 3%, it is estimated this will generate an extra $70bn. At current exchange rates, that’s more than R1-trillion. Most of that growth will have to come from intra-African trade.
The report, “Connecting Countries and Cities for Regional Value Chain Integration”, says that for the free-trade area to succeed, countries will have to co-ordinate trade and industrial policies.
Desire alone won’t make it happen. “It is a complex process, requiring infrastructural foundations to be overlaid with pragmatic pro-business policies,” says the report, which will be the basis of a forthcoming WEF debate on Africa.
The motor industry has already begun the process. Multinational companies are encouraging both individual governments and trade blocs to create regional motor industries.
With SA well established at the foot of the continent, Kenya, Ghana and Ethiopia have been identified as the main manufacturing hubs of a co-ordinated sub-Saharan African industry.
Neighbouring countries would provide support services such as components and technology. The report estimates such a strategy would create about 60,000 new jobs and attract billions of rand in investment.
Ghana has already attracted three major motor companies, with others on the point of committing to it since unveiling investor-friendly automotive policies in 2019.
If the motor industry can succeed in Africa, others will follow. “An expanding manufacturing sector has been the backbone of economic take-off everywhere since the Industrial Revolution,” says the report. “The success of many Asian economies, including China, is in sharp contrast to the lack of progress seen in Africa, where manufacturing has failed to play a similar socially uplifting role.
“With proactive and concerted action, there is now a new window of opportunity for Africa to ramp up its manufacturing sector. There is no sector that creates jobs, deepens local value chains, encourages the growth of a service economy and embeds intellectual property quite like manufacturing,” according to the report.
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