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|Multinational Car Companies Eye Opportunities In Ghana by careytommy37(m): 12:17pm On Nov 27, 2019|
In his 2016 election campaign, President Nana Afuko-Addo of Ghana memorably promised “One district, one factory, one village, one dam,” a hint that industrialisation would dominate his investment agenda.
As he seeks to deliver on that promise, his government is offering 10-year tax breaks to the automotive manufacturing industry in a bid to make Ghana the regional hub for car assembly.
This autumn, Toyota became the latest global player to sign a memorandum of understanding (MoU) with the government as it pledged to start assembling vehicles in Ghana by the end of 2020. The Japanese giant joins Volkswagen and Nissan in planning to set up bases in the country. Last year, Volkswagen pledged to build an assembly plant, develop a sales and service network in Ghana and establish a training academy for production and after sales, while Nissan are planning a plant producing up to 60,000 vehicles a year by 2022.
With the potential tearing down of trade barriers under the prospective African Continental Free Trade Area (AfCFTA), Ghana is seeking to steal an upper hand on regional rival Nigeria by becoming a gateway to the rest of West Africa, and a market leader in new car sales.
Richard Bielle, Toyota’s Africa division CEO, has stated that he wants the continent to provide up to 30% of the corporation’s total annual revenue, currently at $60bn, within the next 20 years, a goal based on forecasts that Africa will account for one-third of the world’s population by 2050, up from 17% now. Africa currently accounts for less than 1% of global annual new car sales. But retail and consumer spending is expected to strengthen in Ghana, which is benefiting from two decades of stable democratic government, one of the fastest growing economies in the world this year, and a pro-business regime proactively attracting foreign investment.
“I think you’re going to see movement into Ghana pretty quickly,” says Martyn Davies, managing director of emerging markets and Africa at Deloitte. “Ghana has a lot of work to do, and heavy lifting on the human resources front is required. But manufacturers and original equipment manufacturers have got the resources, and they can invest heavily. So this is not insurmountable.”
The importance of boosting industrial skills is a view echoed by Andrew Akoto, a partner at KPMG Ghana, who says that tertiary education institutions throughout the country will likely revisit the curriculums they offer alongside polytechnics which already produce skilled manpower for the car servicing and maintenance industries.
“The country has had a history of manufacturing and assembling cars in the past, and it’s also noteworthy that there is a large congregation of local artisans, particularly in the middle belt in the country, that are part of the whole value chain of importation of cars and car parts,” says Akoto.
Kumasi, the capital of the Ashanti region, has long been a base for the automotive trade, serving the markets of landlocked neighbouring countries to the north and as an access point for Mali and Burkina Faso.
A risk worth taking
While automotive manufacturing is now a key pillar in Ghana’s industrialisation drive, accounting for about 7% of GDP, foreign investors will be taking on a significant element of risk, according to a report published by Fitch Solutions.
The country remains overly dependent on raw materials and agriculture, with low levels of GDP per capita at $1,642, according to the World Bank. The importation of cheaper pre-owned vehicles from abroad remains the biggest impediment to a domestic auto manufacturing industry in sub-Saharan Africa. Toyota and other manufacturers will find it tough to immediately find a large enough consumer base in Ghana given the dominance of the used vehicle market, according to Fitch, which forecasts that new vehicle registrations in Ghana will expand at an average annual rate of just 1.5% from 2019-28.
Much will depend on the government’s ability to stem the flow of used car imports and offer incentives to an expanding middle class to buy locally assembled new cars.
“You can’t import cheap pre-owned vehicles from wherever and at the same time seek to industrialise,” says Martyn Davies. “There will have to be a happy medium down the line”.
Trade minister Alan Kyerematen has said that import duties on new and used vehicles will be increased to 35% from 5%-20%, while cars that are older than 10 years will face import bans.
For Toyota, Volkswagen and Nissan, the risks may be worth taking given Ghana’s relative political and economic stability and the promising future offered by the AfCFTA.
“Don’t forget the recent AfCFTA has come into force. Of course it will take some time for the true mechanical modalities to be realised, but it holds prospects for a bigger market than just focusing on a few countries. Coupled with all the incentives and attractions, these companies will clearly have an eye to a bigger market out there than just the Ghanaian market,” says KPMG’s Akoto.
Once assembly plants have been firmly established, the country could have the capability to manage the entire production chain, although much will depend on infrastructure and power grid developments in the coming years. Ghana’s oil production is set to double over the next four years – with new fields coming on stream – which will help boost government spending.
Local companies show promise
Given the promise in the market, it is not just international giants that are looking to gain a foothold. Local electric car manufacturer Kantanka is hoping to capitalise on changing consumer patterns amid growing international concern over carbon emissions. CEO Kwadwo Safo Jnr has said the firm will build electric cars that can travel between Accra and Kumasi without recharging. The business has already received orders from the trade and agricultural ministries. With moves to encourage electric vehicles in Europe and North America, and sales in China growing to 1.2m in 2018, the market could develop in tandem with a demand for traditional vehicles.
But for now, the internal combustion engine remains king, and is likely to underpin the country’s automotive strategy as the foreign multinationals plan their entrance.
|Re: Multinational Car Companies Eye Opportunities In Ghana by Dreal1247: 12:37pm On Nov 27, 2019|
Ghana, though small but is ahead of Nigeria in good leadership, strategic development. May we not just be daydreaming of the good things that are happening in Ghan.
|Re: Multinational Car Companies Eye Opportunities In Ghana by jahsharon: 12:54pm On Nov 27, 2019|
Yes, they should build he cars in Ghana and sell them in Ghana because Nigeria won't allow Ghana made cars in Nigeria.
|Re: Multinational Car Companies Eye Opportunities In Ghana by careytommy37(m): 3:56pm On Jan 02|
Bros, can I get the name and location of dis joint?
|Re: Multinational Car Companies Eye Opportunities In Ghana by ViktorCash: 7:02am On Jan 03|
E dey off sars road
|Re: Multinational Car Companies Eye Opportunities In Ghana by careytommy37(m): 8:12am On Jan 04|
I know sars rd. Give me the direction from happy bite
|Re: Multinational Car Companies Eye Opportunities In Ghana by ViktorCash: 2:57pm On Jan 04|
Eliwelibo road opposite sars office. Just take the road,the guest house is not far from the junction.The guest house shines at night. You will see it clearly .
|Re: Multinational Car Companies Eye Opportunities In Ghana by careytommy37(m): 5:08pm On Jan 04|
|Re: Multinational Car Companies Eye Opportunities In Ghana by careytommy37(m): 11:58pm On Jan 12|
|Re: Multinational Car Companies Eye Opportunities In Ghana by naijadrivablog: 10:52am On Jan 13|
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