The automotive sector is core to the continent’s industrialisation and manufacturing output. It is also starting to play a more significant role in the global new energy vehicle (NEV) value chain, with many countries starting to adopt policies around electrification and sustainable mobility.

This is according to the African Continental Free Trade Area (AfCFTA) secretary general Wamkele Mene. AfCFTA has 54 signatories of the agreement to free trade – only Eritrea has yet to sign. Mene spoke at the inaugural South African Auto Week at the end of October, which was co-hosted by Naamsa and the Automotive Business Council in Johannesburg.

Formex Industries is a major manufacturer and supplier of automotive components, welded assemblies and tubular products for the local sector. We supply various original equipment manufacturers (OEMs) and Tier 1 suppliers throughout the country. Our products are used on various vehicles and brands, including those manufactured in South Africa.

Formex CEO Hennie Venter and President Cyril RamaphosaPresident Cyril Ramaphosa with Formex CEO, Hennie Venter.

African automotive sector overview
During Mene’s talk, he stated that without the automotive sector, Africa will not be able to reach its R127-trillion gross domestic product (GDP) goal by the end of 2023. He argues that the continent currently has the chance to boost industrialisation and contribute more to global output and trade.

As it stands, Africa manufactures around one million cars every year. However, through AfCFTA, this could increase to five million units per annum. While it’s certainly not possible for all African countries to start manufacturing vehicles, those that already have output, such as Morocco and South Africa, should start to focus on electric vehicles (EVs) and NEVs, as this is where the global market is heading.

Other African countries still have manufacturing potential within the automotive sector; vehicles do not have to be produced but other components certainly can be made, such as tyres, leather and upholstery, plastic components, copper wiring and glass windows. These materials have high value for both traditional vehicles and NEVs.

Africa must position itself as a key supplier of these materials, components and whole assemblies to the global market. Mene states that this is where free trade agreements, like AfCFTA, become critical. These agreements enable the transit of goods across African borders with no duties or import fees.

Local automotive industry resilientAutomotive manufacturing robot at Formex Industries in Gqeberha, South Africa

AfCFTA’s plan for growth
The AfCFTA board has identified four areas of growth for the African economy as a whole. These are automotive, logistics, pharmaceuticals and agro-processing. Through investment in these sectors, they believe that a further R201-billion can be added to Africa’s GDP every year, as well as the creation of millions of new jobs.

“For every job created in the assembly of vehicles, about four are required to be created on the components side. This ratio presents an opportunity and the AfCFTA’s single objective is to unleash the opportunities that can industrialise the continent and help it become globally competitive,” says Mene.

“We will only achieve global competitiveness if we become a single market,” he adds. Africa is now at the stage where the European Union (EU) was over 70 years ago when it established the first agreement between six member states. Today, the EU has 27 member states which use the same official currency and act as a cohesive market.

Mene is confident that Africa can achieve similar results, especially through a single continental value chain within the automotive sector. Part of the AfCFTA agreement is a dispute resolution scheme that requires governments to implement rules of free trade and support this independent set of regulations.

“Rules of trade, and free trade overall, allow for more innovation and investment, which will enable Africa to move beyond the production of one million vehicles a year and become competitive with the likes of India and China,” concludes Mene.

As a key stakeholder in the automotive industry, Formex believes that Africa has the potential to become a global force in terms of vehicle production and component output. International car brands are likely to take note of the significant growth on the continent if trade agreements are successful. For more information about our components and products, please contact us today.

Formex Industries is a metal forming and assembly company that supplies a variety of complex products to the local automotive industry and the export market. The company is based in the Nelson Mandela Bay metropole, South Africa’s foremost region for automotive manufacturing and export.