MIKE WHITFIELD: AfCFTA offers SA the chance to become a more industrialised manufacturer
Further developing the automotive industry is a crucial cog in the wheel to growing the country’s manufacturing sector and its economy
During his second state of the nation address of 2019, President Cyril Ramaphosa spoke about prioritising the development of cross-border value chains in key sectors, including manufacturing.
“We want a South Africa that doesn’t simply export its raw materials but has become a manufacturing hub for key components used in electronics, in automobiles and in computers,” the president said.
His comments come in the wake of news that declines in manufacturing drove the SA economy down by 3.2% in the first quarter of 2019. This marked the biggest quarterly dip in a decade.
SA’s automotive manufacturing industry, in particular, contributes 7.5% of GDP and about 30% of SA’s export manufacturing output. The sector generates sustainable, relatively high-paying jobs across a full value chain — or ecosystem — that includes logistics, the beneficiation of raw materials, the component industry, the assembly industry, the upstream industry and distribution-related industries.
It follows, then, that developing the manufacturing sector — and within that, the automotive manufacturing industry — is crucial to growing the economy and reducing SA’s poverty gap.
About one-third of value addition in SA’s domestic manufacturing sector is derived either directly or indirectly from vehicle assembly and automotive component manufacturing activity, according to Michael Mabasa, CEO of the National Association of Automobile Manufacturers of SA (Naamsa). With Mabasa’s view, we tend to agree that diversification into new emerging markets is a continuing trend and underlines the automotive industry’s competitiveness drive and the continuous widening of the country’s traditional trading base. And crucial to this is the creation of flow and interregional trade in Africa.
African countries have taken a significant step forward in integrating their economies and increasing their competitiveness with the ratification of the African Continental Free Trade Agreement (AfCFTA). As countries begin to implement AfCFTA, regional and continental trade, their markets will become more integrated and it will be easier for companies to integrate into regional and global supply chains.
Original equipment manufacturers, or OEMs, across Africa are increasingly interested in the opportunities these developments are creating for increased trade and investment, at a time when the US government is increasing its efforts to support more trade and investment in and with African countries. It’s thus important that Africa harnesses and observes these evolving opportunities across the continent. AfCTA will allow goods and services for 1.2-billion people to truly utilise an intra-African trade model.
The biggest challenge in terms of creating a single market in Africa has to do with the relative imbalances that exist. In order to ensure its sustainability, a single market in Africa would have to be fair to all and one from which everyone can benefit. Such a market would depend on two-way flow and mutual benefit, so there could not be one dominant ‘player’.
Going forward, we perhaps need to look at trading blocs in north, south, east and west Africa; and at creating component movement within these trading blocs as well as between them.
With the realisation of a united African automotive industry still a long way off, our focus now should be on identifying the local markets that have the most potential and creating pacts which can ultimately translate into free trade.
The African Free Trade Agreement is a good starting point. Whether or not it will result in any meaningful progress in terms of bringing the continent together, remains to be seen, but it likely has the potential to — at the very least — create a framework within which we can identify the real opportunities in terms of the areas where we can add beneficiation, where we can trade and where there are movements.
Real commitment — from social partners, industry and government — is also needed in order to navigate this process. Without political will, in particular, establishing an industry becomes nearly impossible.
We have to start building the foundations in terms of regulatory frameworks, the free flow of goods and people and harmonised standards.
It is essential that at all times we keep front of mind that we are not trying to find one solution for all of Africa. Such an attempt would be futile because Africa consists of a diverse array of countries which each have their own identities and their own challenges. Rather, we are looking for a starting point, from which we can grow the continent and in turn, each of her own individual nations.
• Whitfield is the Chair of Nissan Group of Africa