Africa's automobile industry is one of the continent's fastest growing sectors, but it lacks the necessary local technology to fully harness its potential to contribute to growth and development. This state of affairs has ensured that investing in the sector has become the preserve of just a few foreign companies in the automobile manufacture industry, largely based outside of the continent. But all this may change as recently improved profits and investment returns from auto manufacturers in South Africa are set to cause more investment inflow into other African countries as well.

As one of the few countries with the capacity to develop its automobile industry South Africa has enjoyed tremendous success in recent years, which many attribute to quick thinking by the government. As part of the government's strategy to switch from being an importer of raw materials to an exporter of processed goods with added value, the automobile industry has enjoyed tremendous boost and thus has made a positive contribution to the country's export GDP and corporate profits. Exports to GDP in South Africa is said to be at a 20-year high, which some leading analysts attribute to the depreciated level of the Rand against the Dollar, Yen and British Pound Sterling. Exports are now 37 per cent higher in dollar terms than they were in 2000.

Introduced in 1995 by the Government, the Motor Industry Development Programme (MIDP) allows carmakers to offset duties on imported cars and components with exports, allowing them to enjoy a much greater economy of scale as exports increase. The tremendous boost to the economy has made South Africa one of the most attractive of the world's emerging markets for auto-manufacturing. Companies such as VW, BMW, Mercedes, Ford, GM, DaimlerChrysler, Toyota and Honda all have substantial investment in the country, with sales and assembling facilities, good after sales and customer care services.

According to the organisers of Auto Africa Expo 2002, automotive exports are expected to reach an annual level of R75 billion by 2005. Passenger car exports climbed from 10,500 units in 1997 to 97,300 in 2001 and industry projections for 2002 and 2003 are for car exports to increase to 124,500 and 153,000 units respectively.

Paula Dippenaar, Chief Executive of Africa's biggest auto show commenting on the automobile industry's growth in South Africa said, "While the successful transition of SA's motor industry into a world class player has its roots in the Motor Industry Development Programme (MIDP), innovative automotive manufacturers have seized the challenge and helped turn a vision of achieving continuous growth and ustainable job creation into reality." But whereas South Africa has enjoyed great success with its reforms of the automobile sector, most parts of Africa have sadly not seen much investment in the sector. The ability of South Africa to improve and develop the sector is partly based on the existence of local expertise and its presence in the capitalist market for many years.

Despite policy initiatives by most other countries in Africa to open up its automobile sector, the sector's performance has not been that encouraging. Most countries such as Ghana, Nigeria, Cameroon and Cote d'Ivoire concentrate today on importing completed units for sale in the local market with more emphasis placed on after sales service. This really casts doubt over the ability of African countries to sustain any improvement on the performance of their manufacturing sectors. In the 1970s, Nigeria enjoyed a good boost in the automotive industry. The innovative engineering work in the country then resulted in car assembly plants in the country making more money in export revenue. Peugeot is one of the most popular marques in the country and the success of the industry ensured that the country enjoyed good returns from the export of Peugeot cars to neighbouring countries like Guinea, Ghana, Sierra Leone and Liberia.

The manufacturing sector is still active but a far cry from what existed in the past. Some automobile companies are still attractive to investors and the listed ones on Nigeria's stock exchanges are well patronised. But many observers believe that with the vast market potential and the availabled labour force the sky should really be the limit for investors in the sector. "I believe that we [Nigeria] have the resources to really improve on the automobile industry in a more efficient manner, but that has not been the case. The industry is far from right. We have seen most Nigerians far more interested in importing more expensive cars like the BMWs, Volvos and Mercedes, so I am sure this has affected the potential for any 'made-in-Nigeria' cars", Steve Ogbonnaya, a spare parts dealer in Nigeria said in an interview.

His assertion however is spot-on. Many people in Africa have rather a high taste but the fact is that none of those more expensive cars are produced locally; there is always some form of pressure on the foreign currencies needed for their purchase. On the other hand, however, importation of cars and their accompanying parts has also led to improved revenue collection for some government agencies in Africa. Reports say the Nigerian Customs Service (NCS) may surpass its revenue target for the year following the deluge of imports into the country; the NCS has recorded a total of N41.406 billion for the first half of the year 2002. Some experts say the increased importation of cars and other automotive products contributed to the improved bank balance of NCS.

With most African countries slow to adapt to the changing pattern of the complex automobile industry, most leading analysts are calling for stronger policy initiatives that could help improve the the poor overall state of the transport sector. Some leading analysts advocate policies that can promote the development of local technology. If the basic technical capacities are present they should include discouraging imports of completely built up units, providing incentives to local assemblers to increase local content in production (tax reduction and subsidies) and regulations to ensure local content in varying percentages.

It is believed that some of these policies, which were instituted in the development of automobile manufacture in South Korea, can provide significant lessons for African countries. It must however be pointed out that though some of these policies have not yet been fully implemented. Some countries have embarked on national programmes for transport technology development, and most of them are for automobile promotion, as was the case with South Korea and India. More recently, most African countries have fully embraced this idea and have gone down that route to improve the sector. Nigeria and Kenya are good examples of such moves. In the case of Nigeria the prototype has been demonstrated, while in the case of Kenya the prototype is yet to be adequately tested.

The lack of local manufacturing bases in Africa has led to growth in automobile distribution, servicing and repair across most parts of Africa. Distributors for Honda are quite widespread in most parts of Africa especially in the English-speaking countries of the continent.
It is estimated that sales of Honda cars in Nigeria and Ghana have improved markedly over the past two years. In the French-speaking West African countries, Peugeot is one of the most popular cars. Despite the generally high cost of cars to many Africans, demand has not waned. But cars such as Mercedes, 4X4s, BMW, Audi, VW, Peugeot, Honda, Nissan and Toyota sell quite well in countries like Ghana, Nigeria, Cote d'Ivoire, Cameroon and South Africa.

The sustained demand for cars in these countries is attributed to the improvement in their economies. The public sector plays a very active role in the automobile sector with most corporate bodies often offering car loans or a car as an incentive for new recruits. However due to the low income of most Africans, some people have resorted to importing over-aged cars mostly from Europe. This has led to governments adopting strong policies to curb the influx of cars that are deemed very dangerous to the environment.

In Nigeria, the Senate has banned vehicles above five years old from the date of manufacture from being imported into the country. Even though the move is aimed in part to curb port congestion, which has been a bane in the country for sometime, it has been strongly condemned by the United Berger Motor Dealers Association in Nigeria, one of the more powerful bodies in the automobile industry. Metche Nwadiekwe the President of the association has stated that, "the ban is unacceptable to Nigerians, including dealers in fairly used vehicles", adding that instead of a ban, the government should devise other means to stop the importation of junks into the country. He concluded that, "it is unfortunate that Nigeria that does not have the capacity to produce anything and can then go on to place a ban on some category of vehicles, knowing fully well the level of poverty in the country".

Industry analysts are of the opinion that the ban will make the proscribed vehicle unaffordable to ordinary Nigerians and, as such, the ban will also bring about an increase in smuggling across the border. In actual fact over the years the Nigerian Government has looked at ways of improving the automobile industry with the establishment of the National Automotive Council (NAC)..

The NAC is a Parastatal in the Federal Ministry of Industry, established by Decree No. 84 of the 25th August 1993 and is charged with responsibilities that include:

1. Regular study and review of the automotive parts/components development industry in Nigeria;
2. The recommendation of incentive measures for ensuring compliance with approved local programmes;
3. The approval and recommendation of new vehicle models envisaged for the Nigeria market, to ensure model rationalisation;
4. The right of inspection and other quality assurance activities in factories, ports and roads in pursuance of other objectives specified above;
5. Regular evaluation of the pricing structure and quality of the products of the assembly plants to ensure international competitiveness;
6. Forecasting the demand and supply patterns for various types of automotive vehicles produced in Nigeria and the basic raw material requirements;
7. Liaison with relevant organisations charged with the production of raw materials (such as sheet metal alloy and special steel);
8. Regularly review the penalties to be imposed for non-compliance with the guidelines and programmes specified by it.

Regulations in Cote d'Ivoire and Cameroon of the automobile industry have all been aimed at ensuring a trouble-free transport sector, given the high rate of road accidents in Africa and a far less developed transport industry.

Most recognised distributors offer after sales services and repairs but most of the old cars imported into countries are often handled by mechanics who may not have had any formal training. Most of these people graduate from working as an apprentice in a shop owned by a more "senior" mechanic.

It is not that the opportunities for growth and development are not there, as there is a wealth of human and natural resources; the problem lies in the lack of capital and, perhaps, the lack of political will needed to boost the sector.

Despite the many problems there is a great cause for optimism as most African countries have adopted policies and programmes aimed at turning the industry around. This has given the industry a much brighter prospect for the future.

It is estimated that from 1997-1998, about 280,000 automobiles were imported into Cote d'Ivoire whereas Cameroon recorded about 200,000. Many analysts and economists are of the view that as many African countries have opened up their automotive industry, the sector should see some marked improvement in the future. Also, government regulatory framework and investment codes in countries like Ghana, Cameroon, Cote d'Ivoire, Nigeria, Kenya and South Africa favour investment in the sector. With the aim to boost the private sector and also improve on employment opportunities, African economic policies in recent years have boosted incentives to encourage inward investment and the automotive industry is one of the most highly favoured.

Leading economists believe that with the current global economy and the many concessions available to African countries in the international market, the automobile industry offers a tremendous opportunity, as has been the case in South Africa. It is said that the significant boost in the industry in South Africa is also due to the fact that the industry had taken advantage of opportunities presented by the African Growth and Opportunity Act, with exports to the US having increased by 370 per cent in rand terms over the past two years, albeit from a low base. Dippenaar, the Chief Executive of Auto Africa Expo 2002 has also suggested that the New Partnership for Africa's Development (NEPAD) would provide further impetus for the automot ive industry.

Despite all the problems with the sector in Nigeria the local auto parts/components manufacturers are said to have performed very well especially in the light of the problems that affected the manufacturing sector in the last 15 years, and could still do better in the future. Some of them have been forced to close down due to the harsh economic environment and the dumping of sub-standard products into the country. What, however, is needed is for further investment in the production of items such as contact sets (breaker), spark plugs, headlights and other bulbs, fuses, brushes, gaskets, wiper blades, hoses, lifting jack and tools which are in much more demand for servicing the second-hand cars in the system.

In Nigeria the Government, aware of the importance of the auto industry as a veritable engine of development, is determined to establish a viable self-sustaining automotive industry. It therefore evolved a National Automotive Policy for Nigeria aimed at ensuring the survival, growth and development of the Nigerian auto industry using local human and material resources. To achieve the aims of the Auto Policy the Government also set up the NAC whose future plans include the provision of soft loans to the sub-sector; development of an Auto Test Center to test locally produced and imported components; funding research and development in auto related projects; training and retraining of manpower for the auto industry. The governments in Cote d'Ivoire and Cameroon have all instituted some of these policy initiatives to ensure that the industry is sustained.

As the population in most of these countries is growing, the trend depicts a robust demand for cars and other automotive products. What, however, is lacking is a low capital base and the technology- know how to tap into the potential. One of Europe's leading automobile producers, MAN, has become the latest manufacturer to join the many companies willing to do business in Africa and is planning to open operation bases in Nigeria, with a view to consolidating its own share of the nation's vibrant automobile industry. "We believe Nigeria has solved a lot of its problems, it has the biggest population in Africa and cannot be ignored. We believe that Nigeria is a country we must come back to", a spokesman said.

The future of the industry hinges on how technology and research and development will become part of Africa's investment curriculum. Many leading analysts advocate the promotion of R&D in the transport sector. Globally, industrial R&D in the transport sector has undergone major changes in the last two decades. There has been a substantial increase in R&D funds by vehicle manufacturers in industrialised countries, especially in the US, Europe and Japan, with a change in the direction and scope of funding. A change in the management and organisation is also advised for adoption by African countries. Even in the area of the large use and distribution of second-hand cars in Africa the promotion of standards and regulations can significantly be used to control emissions, especially from road vehicles, as was demonstrated in the USA with the 'Clean Air Act'. Nearly all countries in Africa have standards for vehicle emissions, but many have weak enforcement mechanisms, hence compliance is generally weak. Applying standards depends on several factors such as the manufacturing base of the country, capacity to enforce the standards and facilities to comply with the standards. Using similar standards in countries with assembly plants as those of the parent companies will ensure that updated technology will be transferred between both countries and thus help with the improvement of the industry in Africa. Strict standards can also be used to control second-hand imports.

As a growing industry in Africa, the prospect for the automobile industry looks bright and provides a very attractive prospect for investors. So long as there are no major political events, Africa's automotive industry will continue to grow. The democratic dispensation in countries like Cameroon and Nigeria has led to more responsible government that can take social services seriously. As a result of the commitment of government to fulfil election promises on health and education for example, teachers, nurses, university lecturers and doctors are given improved benefits, some of which include cars and other automobiles. As democracy takes root, it is expected that the industry will blossom.