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Sub Sahara Africa automotive sector: potential to boost manufacturing and create decent jobs

8 September, 2020Multinational vehicle manufacturers currently setting up production plants in Angola, Ethiopia, Ghana, Kenya, Namibia, Nigeria, Rwanda, South Africa and other countries, are a clear indicator that there is potential to boost manufacturing for the sector in Sub Saharan Africa (SSA). With demand for vehicles slowing down in developed countries and growing in emerging economies, including SSA, there is an opportunity for the sector to grow to meet domestic demand.


In many cases, the Original Equipment Manufacturers (OEMs) do not plan to set up their own facilities from the beginning but are entering into arrangements with local contract manufacturers who assemble the vehicles in their plants. Moreover, the OEMs rarely introduce full-fledged manufacturing but start with semi-knocked down kits (SKD) and eventually have plans to move to completely knocked down kits (CKD) in the mid-term. Manufacturing value addition in SKD and CKD is rather low, and the small volumes at the plants often make investments in components manufacturing unlikely. Arguably, governments are overprotecting these small low-tech assembly plants. Some of the vehicles assembled in these plants would have been de-assembled to meet policy requirements for SKDs. The manufacturing value addition, in this instance, is small. 

SKDs are almost finished vehicles (completely build units) that are knocked down into a limited number of parts in the country of origin which will then be exported and reassembled in another country. A knock-down kit contains all the parts needed to make a car.

CKD refers to completely knocked down vehicles – about 40 per cent or higher of the equivalent of a complete vehicle. This means more parts will be assembled when compared to SKDs where there is minimal assembling.

Critics say SKDs and CKDs are not really manufacturing but “screw-driver” assembly plants that have little value addition.

In Kenya, for example, contract manufacturing is done through companies that have franchises to manufacture for the OEMs. For instance, Kenya Vehicle Manufacturers, where the government has shares hold franchises for Mercedes-Benz, Volkswagen and Chrysler. Another local company, AVA, assembles medium and heavy commercial vehicles for Mitsubishi and Fuso and Scania, Toyota, Hino and Tata.

There are also efforts to produce “homegrown” cars with several startups coming up with prototypes. In Kenya, Mobious Motors, started in 2009 by British entrepreneur Joel Jackson, plans to launch an all-terrain vehicle with an entry-level car that will cost US$12,500, which will be expensive for most people in the country. 

In South Africa, a joint venture between Mureza and Iran's SAIPA Group will see the production of a car that will retail for US$12,434. According to reports, the vehicle made from SKD and CKD kits will be manufactured in Zimbabwe and Botswana at ex-Mazda and ex-Hyundai factories. 

Kiira Motors also intends to launch a hybrid car in Uganda, while the Innoson Brand is another indigenous brand in Nigeria that started selling vehicles at US$9,555. Hopefully, when production begins, the jobs created will be decent.  

In SSA, one of the least developed regions in the world, most governments and policymakers see automotive manufacturing as critical to sustainable industrialization and economic development. Some African governments, for example in Ethiopia, Ghana, Kenya, Nigeria and South Africa are aware of the evidence from automotive manufacturing countries like Germany, the United States of America and Japan, South Korea, China and India, that the sector promotes industrialization. Processes like metal fabrication, plastics and electronics, and others contribute to this. Additionally, the global automotive sector value chain of vehicle manufacturers, importers, truck and bus assemblers, automotive parts makers and distributors, component manufacturers and suppliers, and retailers, can create thousands of much-needed decent jobs. These are essential in a region where unemployment is high and wages low.

Although technology is leading towards the development of electric vehicles (EVs) and autonomous vehicles (AVs), there is limited infrastructure to support these developments in SSA. However, the technological convergence between automotive, electrical and information technology companies can also create new jobs. SSA countries are seeing this as an opportunity to invest in research and development to tap into these emerging industries. This research and development can focus on components manufacturing and value addition to the locally available raw materials.

The automotive sector in SSA constitutes less than one per cent of global production. The industry is relatively small when compared to other parts of the globe and expected to produce only 2.3 per cent of the 82 million vehicles estimated to be built globally in 2020, when compared to China’s 30 per cent, Europe’s 22 per cent and North America’s 17 per cent. 

Considering this, the potential to increase production and create more decent jobs in SSA is vast. There is potential in SSA to build over 10 million passenger cars by 2030 to transport the growing population.

Unions on the organizing gear

IndustriALL affiliates organizing in the automotive sector are the Associated Union of Kenya Metalworkers (AUKMW), the Industrial & Commercial Workers Union (ICU) Ghana, Metal and Allied Namibian Workers Union (MANWU), the National Union of Metalworkers of South Africa (NUMSA), Steel and Engineering Workers Union of Nigeria, and Syndicat des Travailleurs de l’Industrie (Strigecomi) Rwanda. 

With the predicted expansion of the automotive sector in SSA, unions are already involved in recruitment and organizing. The union strategies are taking shape in different initiatives that include recruiting and organizing at the workplaces and factories and in the informal sector, collective bargaining workshops between unions across borders, and through IndustriALL global networks like the Volkswagen and Lear Networks. 

Global framework agreements (GFA) exist between IndustriALL and automotive companies Bosch, BMW, Ford, Daimler, Leoni, MAN, PSA Peugeot Citroen, Renault, Volkswagen and ZF, are essential for the unions. GFAs protect workers’ interests across a multinational company’s operations and are negotiated at the global level between trade unions and the company and include best standards of trade union rights, health, safety and environmental practices.

Recently, the AUKMW signed a collective bargaining agreement with Scania East Africa and a memorandum of understanding with informal mechanics and roadside workshops known as Jua Kali. Unions are using traditional organizing methods at factories while trying out new models of organizing the informal artisans who often work under precarious conditions. The unions want the informal workers to enjoy the same rights and benefits as other workers and for labour standards to protect them.

For example, the IndustriALL VW Network, supported by the Friedrich Ebert Stiftung Trade Union Competence Centre for Sub Saharan Africa, met in November 2019 to discuss trends on the expansion of VW in SSA. The meeting also discussed how to build the capacity of the network to promote social dialogue, collective bargaining and organizing and recruitment strategies, building solidarity and bilateral union support, building union power, and the implications of Industry 4.0 on the sector. IndustriALL affiliates from Ethiopia, Germany, Kenya, Rwanda, and South Africa attended the meeting.

The VW Network is also a platform for SSA unions to network with IG Metall and the European Works Council. The Lear network between the German union IG Metall and NUMSA is an example of a successful network in which European and African workers exchange ideas and strategies.

The Lear Network, started by the European Works Council in Lear and IG Metall, aims to establish a joint employee representative structure for Europe and Africa. This approach is strategic because the company treats Europe and Africa as a single entity. Further, strong company networks are useful in confronting global capital. Such networks also deal with the dominance of OEMs who undercut suppliers by dictating prices. The suppliers, in turn, reduce wages and sign precarious contracts with workers. For example, more than half the workers at Lear plants in South Africa are employed via temporary agencies and the network is campaigning for the workers to be given permanent jobs.

Georg Leutert, IndustriALL automotive director says: 

“In these times where more and more investments go into the auto sector in SSA, IndustriALL wants to cooperate even more closely with its African affiliates. We want to bring the relevant trade union actors together and make maximum use of our instruments of transnational cooperation and solidarity such as trade union networks, global framework agreements, workshops and global supply chain strategies.” 

Unions are building solidarity in different countries because they face similar problems in collective bargaining.For example, the AUKMW and NUMSA partnership focus on how the unions should carry out collective bargaining. At a recent meeting, the focus was on the mandate and report backs to given to union members during negotiations. Further, it highlights were on wage benchmarks, inflation adjustments, and promoting living wages. It was emphasized that unions also had to address economic issues like industrial growth, job opportunities and prospects for the automotive sector as part of collective bargaining negotiations. Ensuring that labour laws advanced job security and dispute resolution, and campaigns to end precarious work in the industry in Kenya and South Africa were also crucial.

Rose Omamo, AUKMW general secretary, says: 

“Investment in the automotive sector creates jobs and as unions we want those jobs to be decent jobs that pay living wages. The growth of the sector is an opportunity for unions to recruit more members and increase membership. Most of the precarious workers in the informal sector are unorganized and we are exploring how they can become union members. To improve our public and private transportation systems we need investment in the automotive sector as well as in infrastructure development. Even fleets for our local taxis – matatus – needs upgrading, and more buses should be put on the road to transport Kenyan workers.” 

Vusimuzi Mkhungo, NUMSA automotive sector coordinator, says: 

“Despite the challenges that we are facing we will continue to fight for better living and working conditions for our members. The standards that we have created through collective bargaining agreements signed with employers should be maintained, and this has been our message to our comrades in Kenya that they should persist in their fight to improve conditions. The exploitation of workers in other African countries should be confronted, and therefore we meet regularly to build our capacities.”

Government support crucial

Global experiences show that government industrial policies play a leading role in the success of the automotive sector. It should be the same in SSA where governments are playing a catalyst role to attract investment in the industry. The recently developed auto manufacturing zone with Ford in South Africa and the Peugeot and government agreement in Namibia are important. Automotive clusters like the Durban Automotive cluster in South Africa brings together private businesses, municipalities and automotive manufacturers to promote growth and competitiveness in local supply chains. The country clusters can be regional linked to form clusters for the development of the regional automotive supply chain. 

Further, SSA is rich in resources used to make vehicles. However, to get more out of the raw materials, governments are urged by unions, civil society organizations and communities to develop policies that promote value addition through the introduction of local content policies in the manufacturing of vehicles. 

Raw materials relevant for vehicle manufacturing have been described more like a curse than an advantage. The region is rich in raw materials, such as steel and aluminium. Over a dozen countries in SSA have vast reserves and can produce steel. For instance, in Mozambique, Mozal produces aluminium products and alloys. Liberia has provided natural rubber for decades at its Firestone rubber plantations. Regrettably, these raw materials are exported with no value addition resulting in the countries losing out on the revenue unlike if they were exported as finished products. The region also has platinum group metals and other base metals which are essential for vehicle manufacturing.

Recently, the increasing demand for electrical vehicles accelerated by the moving away from fossil fuels to renewable energy sees high demand for cobalt, a significant component in the manufacturing of batteries. The Democratic Republic of Congo has over 60 per cent of the world’s cobalt deposits. There is potential to produce battery cells in SSA. The challenge is that evidently, most African countries have no infrastructure for electric vehicles. 

Where the automotive sector succeeded, it was due to government support through favourable policies and subsidies. For example, in South Africa, where there is the Industrial Policy Action Plan from which the Automotive Production Development Programme is derived, both policy instruments are supported by the Department of Trade and Industry. Unions are involved in the policy processes through social dialogue. As a result, the automotive sector contributes 7.5 per cent to the country’s GDP, and South African vehicles are exported to over 140 countries. Unlike other African countries, South Africa has also banned used car imports to protect the local automotive industries. 

South Africa is an example of the potential of the automotive sector to create jobs. Despite the current decline, the industry still employs over 112,000 workers from component manufacturing to vehicle assembly while over 320,000 are employed on the value chain. However, the figures in other countries are low. South Africa has seven original OEMs which are BMW, Ford, Isuzu, Mercedes Benz, Nissan, Toyota and VW and other independent importers and distributors of passenger and heavy commercial vehicles. Government provides incentives such as tax rebates, reduced customs and excise duty.

Some of the challenges to African trade are from the many scattered small economies. With the signing of the African Continental Free Trade Area (AfCFTA) it is hoped that this will likely change. When fully operational the AfCFTA will integrate the regional economic communities into a single bloc. While the cooperation between Isuzu operations in Kenya and South Africa is an example of how regional integration can benefit the automotive sector, this can well be that Isuzu is evading high wages in South Africa to pay low wages in Kenya. In this case, over 3,000 light trucks are produced in South Africa with the final assembly of the SKD kits being done in Kenya where the vehicles are sold.

The success of the automotive sector is also dependent on controlling the influx of used cars from Europe, Japan, the United States and other countries. In countries such as Ghana, used car imports are causing stiff competition as most people opt for them because they are cheaper. To control this, the government is being requested to develop vehicle finance schemes for new cars. However, used cars come with risks that include not being suitable for the local conditions and are expensive to repair as most of the cars would have reached their lifespans.

Kenya, which also faces the same problem of used cars, has developed the National Automotive Policy that aims to curb the imports. In Kenya, like most SSA countries, 8 out of 10 vehicles are used cars.

In Nigeria, the National Automotive Industry Development Plan aims to revive the automotive sector by promoting the buying of locally produced vehicles. The plan also incentivizes global vehicle manufacturers through levy exemptions and charging high duty for imported used cars.

Further, rapid urbanization will lead to increased demand for transportation. Rising economic levels, asset ownership and educational levels that are leading to a growing middle-class of over 300 million are increasing the purchasing power of the continent’s populations making it possible for them to buy cars. However, the motorization rate for Sub Saharan Africa is currently low at 42 cars per 1,000 people, as compared to the US’s 837 and China’s 173. The global average is 180 per 1,000 people. More vehicles then are needed to transport the growing population and transform the mobility from animal-drawn carts and other traditional methods to modern forms of transportation.

Another demographic factor in the automotive industry favour is the growing population of the region, which has a current labour force of 500 million. According to the International Labour Organization, this labour force will grow to 676 million or about 20 per cent of the world’s workforce by 2030. There is enough labour for the automotive sector when more jobs become available.

With rising incomes through the payment of living wages and the increasing local demand for vehicles, there is a huge potential for the growth of the automotive sector in Sub Saharan Africa especially for passenger vehicles. Unions will gain new members as a result of job creation. But more jobs in the automotive industry and rapid industrialization in SSA will need strong industrial policies that promote automotive clusters to deal with, for instance, the influx of used cars often associated with corruption and smuggling.

IndustriALL’s regional automotive meeting will take place on a date and place to be announced because of the postponements that have been caused by the coronavirus disease pandemic. Trade unions representing auto workers from around the world will meet for the first time to exchange information and strategies on networks and GFAs and to finalize a related mapping exercise --where are all the plants, who is organized, who is not etc.