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Ethiopia’s latest descent into civil war raises further questions about its readiness to play a leading role in the development of a pan-African motor industry.

On Wednesday, UN and AU representatives were scrambling to persuade government and rebel leaders to back off from all-out conflict that some say could destabilise the wider East African region.

Despite the country’s history of internal conflict and famine, and an almost nonexistent  new-vehicle market, motor companies are drawn by what they see as Ethiopia’s potential – its population of more than 112-million is second in Africa only to Nigeria’s, and the economy is growing strongly, albeit off a pitifully low base.

The African Association of Automotive Manufacturers (AAAM), leading moves to create a series of interlinked, regional motor industries, considers Ethiopia a prime base for development. Volkswagen is among the companies considering vehicle assembly there.

A few months ago, companies were citing the country’s political stability as reason for their bullishness. Just this week, Gabriel Almeida, COO of new-vehicle retailer Salvador Caetano África, spoke positively of Ethiopia’s “scope” to become a significant market.

In the long term they may all be proved right, but for now, it’s hard to get away from the comment of 18th-century English writer Samuel Johnson, who, on hearing that an acquaintance planned to remarry after an unpleasant first marriage, described it as “a triumph of hope over experience”.

Almeida was speaking at an online seminar on how to develop a sustainable African new-vehicle market. The event was organised by SA’s department of trade, industry & competition.

In 2020, according to figures from the International Association of Motor Vehicle Manufacturers, SA, Egypt and Morocco contributed 733,246 to the continent’s total market of 912,863. That left 179, 617 to be shared among 51 other countries – an average of 3,522 each.

Almeida said his company, which operates in 33 countries, sold more than 40,000 vehicles last year. Almost all of those were to corporate and government customers. Individual buyers were almost invisible.

Simphiwe Nghona, Standard Bank’s head of vehicle and asset finance, said that with a middle class numbering about 300-million and about 42 vehicles for 1,000 people – less than a quarter of the global average of 180 – Africa was ripe for sales growth.

For this to be tapped, African governments would have to limit the influx of dumped, used vehicles flooding most markets, and enable development of affordable purchase finance. He said: “Interest rates are too high and banks don’t have credit databases. This makes it difficult to offer finance. There is a significant opportunity for vehicle sales for personal use but we need a supportive policy environment.”

Nedbank’s Thabang Mahlangu observed: “Governments need to reduce the amount of red tape. Certain markets are prohibitive in terms of their investment attractiveness.” He added: “We’ve done quite poorly in terms of financing on the continent.”

SA’s current challenge is precisely the opposite: it has the demand but not always the vehicles to satisfy it. The impact of July’s unrest, which forced local manufacturers to reduce production and hampered the movement of imported vehicles, lasted until September. Then, just as things were returning to normal, a three-week strike in the steel and engineering sector halted production of some components.

The Automotive Business Council reported last week that new-vehicle sales grew by 6.1% in October from the corresponding month of 2020 – up from 38,694 to 41,035. After 10 months, aggregate 2021 sales of 386,537 were 27.2% ahead of last year’s 303,941.

Motor companies and dealers say the numbers could be even better but for lack of stock. The international shortage of microchips continues to limit availability. October’s strike-linked lack of components made it worse.

Exports were hurt particularly badly. October’s 33,844 were 30% lower than the 38,694 of a year earlier. One reason was that Mercedes-Benz SA, one of the industry’s biggest exporters, is still getting up to speed after launching a new C-Class car in midyear.

At the end of October, aggregate vehicle exports of 245,829 were 12% ahead of last year’s 219,520. Don’t get too excited: at the end of June, before production constraints set in, the gap was 66%.    


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