This week, the UN published a report about the impact of used vehicles on the environment in Africa. According to this report, Africa is the destination of 40% of used light duty vehicles from Europe, Asia and the USA. This trend contributes to the astonishing low GDP-high emissions paradigm, whereby African cities have the same pollution levels such as industrialised ones.
The failure to absorb internal demand of mobility products will be exacerbated with the rising middle class in Africa. The said report details how global fleet of light duty vehicles will double by 2050 and how 90% of this growth will take place in low and middle-income countries. Against this background, an urgent action plan is needed to transform the demand of mobility into an engine of growth for Africa.
There are three important factors shaping the future of mobility in Africa today: green technology, digitalisation and the African Continental Free Trade Agreement.
If there is, however, one important insight I would like to emphasize on, it is the need to see mobility not as a product but as a unit of economic measurement. Mobility is just another way to measure a country’s productivity. Just like other units of economy measurement, it is the result of an ecosystem requiring a macro-economic approach. Let me illustrate with three points how the big picture focus has helped us make some progress at Volkswagen.
First, mobility is a problem of energy supply. For a country like Rwanda, fuel products account for 12% of the trade deficit. Even oil producing countries like Nigeria import most of their gasoline. In Ethiopia, the Government is looking at increased car sales a problem of increased forex deficit. Avoiding higher consumption of fuel is one of the reasons why Ethiopia has the highest import taxes on vehicles.
Energy is therefore a big foundation for the supply of mobility products. China and the European Union, the world’s number one and two markets respectively, have both directed the global automotive industry towards emissions free vehicles. Currently, electric vehicles are leading as alternative to fuel combustion engines, while synthetic fuels or hydrogen powered vehicles are yet to gain momentum. Solving the problem of energy supply while respecting the Paris Climate Change Agreement will require the adoption of green energy sources of electricity. The good news is that African generally has an oversupply of green energy. For example, Ghana has to pay between US$550 and US$850 million yearly of gas generated electricity, that is not being used, and is looking at how Electric Vehicles can create the needed demand.
Second, mobility has always been an issue of technology. In Rwanda, we are testing the future of mobility in Africa by using the latest vehicle technology with app-enabled solutions. This may raise scepticism at first and many people have questioned why we are not focusing on older and therefore cheaper technology. However, a closer look reveals a big problem ahead.
The car is no longer about horsepower but also about processing power. Horsepower has had a linear growth while processing power is growing exponentially, thereby threatening to widen the digital gap for decades to come. In short, Africa may no longer be able to import cars from Europe or Asia because of a technology gap. While a car manufactured in Germany in the 1950s could be driven in Africa in the same year, an electric connected car manufactured in 2021 may not be driven in Africa for the near future, as it requires a smart city ecosystem.
Third, mobility is about market size. According to many studies conducted, a unified African automotive market today would represent a higher potential as the Indian automotive market. Indeed, the deindustrialisation witnessed in the African automotive sector during the 1970s and 1980s had one major cause, which is about to be addressed by the African Continental Free Trade Area: fragmented markets.
The benefit of a sizeable market that would allow Made in Africa cars range from bringing the cost of a new car down, to reduced air pollution and job creation.
With AfCFTA, very soon, a car manufactured in South Africa could be sold in East Africa at zero import taxes based on the AfCFTA. However, Automotive Manufacturers understand the need for a win-win solution for the AfCFTA to work. Overtime, East Africa should also sell cars to South Africa. The road towards more Made in Africa cars is long and requires both corporate bravery and political will. Volkswagen in Africa has a long-term vision starting from light house projects such as the presence of Volkswagen in Rwanda, Kenya and Ghana transitioning towards regional hubs and finally ending with a continental automotive market whereby each region can trade with each other vehicle models at no import taxes.
This will require an Automotive Policy outlining interventions such as the limitation of age for used cars, improving fuel quality to reduce air pollution and allow modern engines as well as a transition towards green technology with local value addition.
Volkswagen’s ambition is to shape mobility for generations to come, there is no better place than Africa where shaping mobility immediately translates into shaping the economy and therefore changing people’s lives.
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