On Wednesday, Volkswagen signed a deal to use the Kenya Vehicle Manufacturers plant in Thika to assemble its car models beginning with the Volkswagen Vivo. The announcement follows closely in the wake of a similar deal with CMC Motors Group in July this year with a commitment to pump money in KVM in what they termed as ‘investing according to scale and opportunity’, in the KVM plant.
Hailed by President Kenyatta as a milestone in his administration’s determined push to grow the manufacturing base and transform Kenya into an industrialized nation, the announcements have been welcomed by industry players. According to a Deloitte Africa Motor Industry insights report, in 2014, Kenya had a vehicle fleet of around 1.3 million units, of which 80 percent were second-hand.
The report quips that in 2012 the average age of vehicles on Kenya’s roads was 15 years. This, in turn resulted in additional problems like frequent break-down of vehicles, high levels of pollution, and a sizeable black market industry for spare parts.
As the Kenyan motor industry grapples to find its footing to establish a formidable motor industry in the region, South Africa seems to be soaring high. While speaking in George, South Africa, at the launch of the Ford Ranger 2.2 automatic, Jeff Nemeth, the chairperson of the African Association of Automotive Manufacturer’s (AAAM) noted that among the challenges facing the Sub-Saharan Africa is the skills gap.
According to the department of Trade and Industry of the Republic of South Africa, the industry got a major shot in the arm when in 1995, the South African government launched the Automotive Industry Development Program.
Approximately 567,000 vehicles were produced in SA 2014 which brought in approximately R115.7bn (Sh809bn). The industry, which employs over 100,000, both directly and indirectly, has been identified as an important growth sector contributing 7.6 percent of the GDP. In 2015, South Africa exported a record 333,802 vehicles, and the total value of exported vehicles and parts increased by nearly 31 percent to R151.5 billion (Sh1 trn).
However, Ethiopia is also eyeing a piece of the automotive pie. Deloitte Africa’s reports notes that the Ethiopian charm offensive gives investors in the manufacturing sector, including automotive, an exemption from paying income tax for a period of five years if more than 50 percent of their products or services are exported or if more than 75 percent of their product is supplied to an exporter as a production input.
According to the survey, Ethiopia’s automotive potential is underpinned by the state-driven economy and a government that is geared toward industrialization, which makes it the African economy that is most similar and arguably likely to replicate the development successes of China of the mid-1980s onwards.
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