While the African Continental Free Trade Agreement (AfCFTA) is expected to boost the automotive industry in Africa, experts argue that poor fuel quality and lack of auto policies remain an impediment to the ambitious goal.
Many African countries run on bad fuel quality for multiple reasons, which makes it difficult to introduce any new vehicle on the market because it would not only damage the car but also people's health and environment, according to Martina Biene, Chairperson and Managing Director of Volkswagen Group South Africa.
"As soon as countries move to higher emission standards, many of them are currently at Euro 3 level, stepping to Euro 4 helps to reduce carbon emission. With higher emission standards comes better technology...that comes down to better fuel quality," she said.
According to Biene, countries that have their own oil refineries, it requires costly investment to improve their fuel quality, and another alternative would be for countries that import their fuel to decide where and which type of fuel they want to purchase.
For instance, the four Volkswagen models assembled in Rwanda, namely, Virtus, Tiguan, T-cross, and Teramont, get a fuel level of EU3, yet the market needs to move to the EU4 fuel level to tap into greater product availability.
Biene said that she recently discussed with President Paul Kagame ways to address this issue in a country that is so keen on advancing its automotive capacities, given that having cleaner fuels is mainly for the people and the environment.
With the progression of AfCFTA, experts argue that it's important for the auto sector to develop through country-specific auto policies such as auto pacts or bilateral agreements between specific countries.
Dave Coffey, CEO of the African Association of Automotive Manufacturers (AAAM), a pan-African private sector automotive association, said they are working towards the realisation of the AfCFTA that would create a market for nearly five million vehicles produced on the continent per year by 2035.
"We see growth coming out of North Africa and sub-Saharan Africa up to 2027. But when we start talking about 2035, the highest percentage of growth will be coming from these regions. So, we have to work with those markets that have an interest in developing and being part of the value chain," he noted.
Negotiations for the auto sector under the AfCFTA require for 40 per cent of rules of origin, meaning vehicles produced on the continent will have 40 per cent local value addition.
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Rwanda being an SKD (Semi-Knock Down) assembly plant of VW vehicles, allows it to progressively develop its own auto industry by acquiring first-hand technologies and necessary skills.
It is predicted that the assembly will produce 534 passenger cars in 2023, 581 in 2024, and 637 in 2025.
In Rwanda, VW Mobility Solutions offers three services including; app-based ride-hailing, corporate car sharing, and airport shuttle services with 400 cars. Biene also announced that they are tendering to offer shuttle services at the new airport under construction in Bugesera District.
Besides that, VW and Rwanda's agriculture ministry recently signed an MoU to start a Green Farm project that will use electric tractors and scooters to boost agricultural production in a sustainable manner while improving the livelihoods of communities with mobility solutions.
Once successful, the project will be scaled to other countries across the continent.
Used vehicles on the continent
The importation of used vehicles reduces the potential for new vehicle sales and a loss of opportunity for self-generated used vehicles on the African continent. At least 77 per cent of light vehicles imported into East Africa Community are used cars.
Biene noted that to have a developed auto industry on the continent requires an increased demand for new cars which would be favoured by a ban on the importation of new cars. And from there, create Africa's own used car market because if one starts producing new cars or selling new cars, they'll become used cars for consumers. This is the same as what VW is doing in Rwanda, whereby it sells its cars at half the price after two years of usage across its mobility services.
