EAC borrows leaf from Japan, Vietnam for automotive industry

East African Community experts have concluded consultative missions in Vietnam and Japan, a benchmarking exercise aimed at borrowing a leaf on how the Asian nations developed their automotive industries. According to Jean-Baptiste Havugimana, the East African Community (EAC) director for productive sectors, experts from partner states and the Secretariat travelled to Tanzania, Kenya and Uganda “to compile baseline information on the status of automotive industry,” and to Vietnam and Japan for a benchmarking exercise. “These missions took place from September 20 to October 7. Thereafter, the team will visit other countries in East Africa (Burundi, Rwanda) for in-depth analysis, and to others in Africa such as Ethiopia, Nigeria and South Africa for benchmarking,” Havugimana told The New Times at the weekend. In October, a three-day meeting of a broad spectrum of stakeholders and experts from the automotive industry, finance, customs and trade sectors as well as vehicle manufacturers from EAC was held in Nairobi, Kenya. It was aimed at reviewing and validating progress report on the comprehensive study on automotive industry. The stakeholders would then provide inputs toward its finalisation and inform the EAC and potential investors on policy options and modalities to promote and develop the motor vehicle industry. The initial benchmarking study missions revealed that usage of local content was one of the drivers for the growth of the automotive sector. “This is an area that EAC needs to explore further and adopt appropriate measures that will consequently spur the development of the sector,” reads part of an EAC statement. The experts also noted the need for policy coherence within different sectors for the progress of the automobile sector. ‘Need for volumes’ It was observed that for the industry to grow, there is need for volumes that can lead to economies of scale and, therefore, a regional approach to develop the sector and leverage on the EAC, Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Community (SADC) tripartite free trade area. The EAC industrialisation policy and strategy (2012-2032), now under implementation, aims at transforming the bloc’s manufacturing sector through higher value addition and product diversification based on comparative and competitive advantages of the region. In 2015, the 16th Ordinary EAC Summit directed the Council to study modalities for promotion of motor vehicle assembly in the region and to reduce importation of used motor vehicles from outside the Community. The 17th Ordinary Summit, in March, took note of progress and the roadmap towards finalisation of the comprehensive study on EAC’s automotive industry. It directed the Secretariat to expedite the process and report to the 18th Ordinary Summit, which is expected next month. In line with the policy directives, the EAC Secretariat, with financing from Japan International Cooperation Agency (JICA), commissioned a study to be finalised in April next year. A draft progress report outlining the initial policy issues emerging from the benchmarking missions was prepared. During the benchmarking missions, Japanese academicians shared their global best practices of promoting the automotive industry in the region, while the EAC delegation made presentations on the status and challenges facing the automotive industry in their countries. Accordingly, it was observed that the motorcycle sector is growing rapidly in across EAC. With the rise in number, it was noted, the sale price drops due to economies of scale. The EAC Secretariat and JICA say, along with the increase of production volumes, local production is gradually initiated for parts and materials that meet the effective minimum production scale. In addition to complete build-up unit sales itself, they say, demands are increased for repair services. The motorcycle sector is, thus believed to offer opportunity for rapid development of the region’s automotive industry. According to Richard Ndahiro, a regional financial services professional, for an EAC auto industry to take off, a regional approach to the manufacturing sector is the right way to go so as to reach the economies of scale that allow competition with established global manufacturers. “On the demand side, key drivers for uptake will be: quality of the automotives. The perception that local products are of lower quality remains a barrier,” Ndahiro told The New Times. “Access to asset financing is key to unlock affordability for a larger segment of EAC population to acquire these automotives.” Potential boost to agriculture The Rwandan economist added that the bloc’s automotive industry would be “a big boost in the mechanisation of agriculture and other productive sectors in the EAC. For example, he said, by providing automotive tools and equipment that are well customised to the “realities of our rural setting” and farmers. He said the ability to move people, goods and services across the region, remains a big huddle partly due to poor infrastructure, “which is now being tackled,” but also because vehicles remain a luxury. After noting the potential since Kenya and Uganda already have promising motor vehicle assembly plants, it is said that EAC leaders decided to nurture the automotive industry in the Community. Their objective is to phase out imported old vehicles so that new ones are assembled in the region thus creating jobs and cutting on pollution from the imported used vehicles. The automotive industry, one of the world’s most lucrative economic sectors by revenue, is a wide range of companies involved in design, development, manufacturing, marketing, and selling of motor vehicles. Kenya, the region’s leader in motor vehicle assembly, boasts three plants: Kenya Vehicle Manufactures, Association Vehicle Assemblers, and General Motors East Africa Limited, which focus on assembly of pick-ups and heavy commercial vehicles. Uganda’s Kiira Motors Corporation this year unveiled its Kayoola prototype electric bus. editorial@newtimes.co.rw

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EAC borrows leaf from Japan, Vietnam for automotive industry