
It has been half a decade (5 years) since the government announced the Ghana Auto Development Policy (GADP) in the year 2019. Your name kept coming up during our search to find a suitable person to interview. Thank you for agreeing to sit down with us to share your expertise and insights which will provide valuable perspectives on the policy's effectiveness.
Policy Overview
1. What were the primary objectives of the Ghana Auto Development Policy when it was initiated five years ago?
Thank you for the question. In order not to misquote the government, I would like to read to you verbatim what was stated in the GADP. According to the document, the strategic objectives of the Ghana Automotive Development Policy are:
- To establish a fully integrated and competitive industrial hub for automotive manufacturing in collaboration with the private sector – global, regional and domestic;
- To generate highly skilled jobs in automotive assembly and the manufacture of components and parts, with spill over effects into other sectors of the economy;
- To establish an asset-based vehicle financing scheme for locally manufactured vehicles to ensure affordability for vehicle buyers;
- To improve balance of payments through competitive import substitution and export market development;
- To improve vehicle safety and environmental standards; and
- To transform the quality of the national road transport fleet and safeguard the natural environment.
2. How did you envision the policy impacting the local auto industry?
I was expecting the policy to lead to significant improvement in the automotive sector and its surrounding ecosystem. Moreover, I was hoping that it will create employment more employment opportunities for the youth.
Progress and Challenges
1. Five years on, what progress has been made in achieving the policy's objectives?
The country can now boast of a significant number of vehicle assembly plants. A few years ago, Kantanka Automobile was the only company assembling vehicles. Today we have many companies assembling vehiclesin the country including Rana Motors, Volkswagen Ghana, Toyota Tsusho Manufacturing Ghana Co. Limited (TTMG), Automobiles Industries Limited (AIL), and Japan Motos Trading Company Limited (JMTC). I must also state that there were vehicleassembly plants in the country in the 1950s and 1960s. Unfortunately, they all collapsed due to many reasons including economic and political hurdles in the country after the overthrow of the first president of the country (Osagyefo Dr. Kwame Nkrumah).
Apart from the establishment of vehicle assembly plants in the country, I do not see much progress. The average Ghanaian cannot accessaffordable financing tobuy the locally assembled cars. Appetite for foreign vehicles is still very high in the country.
2. What challenges have hindered the policy's success, in your opinion?
As we say in Ghana, we are good at drafting policies, but implementation is always a challenge. There are many challenges that have hindered the policy’s success but key among them are:
- lack of political will. Key provisions in the policy are yet to be implemented. Many prospective investors have become quite sceptical about Ghana’s auto programme.
- prevalence of used cars in the market. Over 90% of all cars purchased in the country are used or second-hand and the importers of these cars have a lot of political influence.
- lack of patronage of locally assembled vehicles. Although the government has encouraged state agencies and institutions to buy Made in Ghana vehicles; there is no deterrent so many cars are still being imported from overseas for government-related work.
3. Have there been any notable successes or milestones achieved by local auto developers and manufacturers?
The local assemblers have increased the number of vehicle models that they assemble in their plants giving consumers more options. The approach of assembling many models has its disadvantages too. It is well documented that economies of scale in the automobile industry continues to be a significant factor for many companies.
Regulatory Framework
1. How effective has the regulatory framework been in supporting localauto development?
As a country that wants to developinto an automotive hub in West Africa, assembling vehicles is not enough. We need proper regulatory framework to ensure that the local industry is protected to some extent. I do not understand why our leaders think that cars that are not fit to be on the roads in Europe, Asia, and North America despite their good roads are perfectly fine to be imported into Ghana.
Not too long ago, the Ghana Standards Authority attempted to initiate a processto ensure that all used vehicles imported into Ghana were accompanied by a valid Certificate of Conformance (CoC) from an approved body. The politicians quickly quashed it due to pressure from used car importers.
How on earth is automotive homologation compulsory for new cars imported into Ghana but salvaged vehiclescan freely be imported into the country? Some of these salvaged vehicles are not even fit to carry animals let alone human beings. We need to seriously take a second look at the regulatory framework in the country. The government must not allow just a few people tostifle the development of the automotive sector just for their parochial interests. Indeed, I doadmit that used car dealers are important stakeholders too. However, we should have a system where the used car dealers get their cars locally.
2. Are there any gaps or inconsistencies in the policy that need addressing?
The GADP is not bad at all. I believe we can still tweak certain aspects with time. In the meantime, what is needed is the full implementation of the policy. Two key legislative measures that are stated in the policy are yet to be implemented which are:
- 35% of CIF value as Import Duty on New and Used Vehicles.
- Ban on the importation of overaged vehicles, salvaged and flooded vehicles, and new vehicles without destination certificate certifying that the vehicles are produced for the Ghana market.
Industry Capacity Building
1. To what extent has the policy enhanced the capacity of local stakeholders in the automotive sector?
Indeed, the advent of the policy has led to significant investments in automotive skills development in the country. Although many institutions have been running mechanical engineering, auto electrical engineering, and other automotive-related programmes in Ghana for many years, local investorshad to invest significantly into skills development toensure that they had people with the appropriate skills to work in the vehicle assembly plants.
The West African Vehicle Academy (WAVA) which was initially started by Rana Motors with support from Bosch and GIZ are training hundreds of young people in Ghana and across West Africa to properly diagnose vehicles and service them professionally. The Toyota Ghana - UG School of Engineering Training Centre – Legon is also another institution that is aiming to help to train the next generation of engineers for the emerging automotive industry in the country. I KNUST and other Technical Universities are all developing courses to train professionals for the automotive sector. There are a few companies in allied industries that are also exploring opportunities in automotive component manufacturing.
2. What skills or knowledge gaps remain in the industry?
Skills development is a major part of the automotive industry. We currently have a serious shortage of people with automotive industry expertise. To run the simple vehicle assembly plants in the country, experts hadtobe brought from other countries to train the locals. Some companies also took some of their staff to South Africa and other countries to train. They then returned to train the local people.
Technical institutions, Universities, TVET, Ghana Automotive Development Centre, Ghana Automotive Industry Development Council, and all stakeholders must collaborate to develop curriculums that will help the country to develop enough talent for the emerging automotive industry.
Efforts must be made toenhance the skills of roadside mechanics so that they can professionally fix cars. Apart from the big cities, it is difficult to find certified mechanics who can properly perform vehicle diagnostics and repair them. If we are encouraging people to buy more Made in Ghana vehicles then we should be able to also have certified people with the requisite skills to professionally service those vehicles.
Market Demand and Competition
1. How has the policy impacted market demand for locally assembled vehicles?
Demand for new vehicles in Ghana is quite low. Over 90,000 used vehicles are purchased in Ghana every year compared to new vehicles which is less than 7,000. Of course, economic conditions in the country have not been very good in the last few years. The purchasing power of people have reduced drastically.
Government must introduce policies that will help to drive demand. Financial institutions must also support by providing affordable vehicle financing to individuals and organisations that want to purchase vehicles.
Stakeholders must also help to create more awareness about Made in Ghana vehicles. It is amazing that so many Ghanaians are still not aware that some of their favourite vehicle brands are locally assembled in the country and are just as good as the ones imported.
2. Has the policy effectively protected local manufacturers from foreign competition?
Not at all. The biggest competition of local manufacturers is the second-hand cars. As we all know, salvaged vehicles are still being imported into the country. Most buyers of these salvaged vehicles would have preferred new vehicles if they had access to affordable vehicle financing.
Review and Revision
1. What key revisions or amendments would you recommend to improve the policy's effectiveness?
A future amendment should include a provision on end-of-life vehicles considering their impact on the environment. Climate change is real, and the automotive industry must also stake steps to reduce its negative impact on the environment. When these end-of-life vehicles(ELVs) are not properly managed, they cause environmental challenges for both the current and future generations.
I also think the zero rate of VAT on locally assembled vehicles is not the panacea to the challenges that stakeholders are facing in the industry. Government will generate more revenue if the outstanding provisions in the policy are implemented.
2. Should the policy focus more on incentivizing local production or addressing industry challenges?
It should be both. If local production is incentivised but industry challenges are not addressed, it would not make much difference.
Future Prospects
1. What are your expectations for the policy's impact on the local auto industry in the next five years?
Based on the way the first 5 years have been handled, I am cautiously optimistic about the next 5 years. If government can fully implement the policy, this will help to attract global players in the automotive industry into the country.
The automotive industry is not just about assembling vehicles. There is a large value chain around that needs to be developed in the upstream, midstream, and downstream. The upstream of the automobile industry focuses on theproduction of auto parts; the midstream is vehicle assembly, repair and technical services; whiles the downstream deals with sales, import and export businesses.
We also need to make the country attractive for automotive component manufacturers.
2. How can stakeholders (government, private sector, and civil society) collaborate to ensure the policy's success?
All stakeholders are important as far as the automotive industry is concerned. Government alone cannot develop the industry. It needs to collaborate with all stakeholders for the policy to be successful.
The private sector will bring in the needed investment if they see clear commitment from the government. In other parts of the world where their automotive industries are more advanced, governments did not just develop policies, they also ensured that they were fully implemented. In some cases, governments even invested in the industry through public-private partnerships (PPPs) to set up training schools, body and paint shops, etc.
Conclusion
1. What message would you convey to policymakers and stakeholders regarding the Ghana Auto Development Policy?
I would like to urge policymakers and stakeholders to collaborate to ensure that the auto programme is not derailed. We currently have only Semi-Knocked Down (SKD) vehicle assembly plants in the country which at best could be described as ‘screwdriver plants’. These facilities create very few real jobs and contribute very little to the economy. We must work towards transforming these SKD plans to Completely Knocked Down(CKD) plants which will create more jobs and contribute more meaningfully to the economy. Localisation of some of the vehicle parts will become more feasible when we are able to upgrade from SKD plants to CKD plants.
2. Any final thoughts or recommendations?
The politicians must know that Ghana isnot the only country in West Africa that has an automotive policy. Just developing an automotive policy is not enough to entice global players in the automotive industry toestablish operations in the country. The policy must be implemented. Ivory Coast, Nigeria, Senegal and other countries in West Africa are all working very hard to attract the same investors. If the needed environment isnot created toenable investors to thrive, Ghana will lose out on critical investment needed to develop the automotive industry.
Government must also put in place measures to protect local businesses in the automotive sector. Private investors who have pumped millions of dollars into the construction of vehicle assembly plants must benefit from their investments.
Finally, stakeholders must collaborate to create demand for new vehicles especially those assembled in the country.
Bio
Issaka Lawerh Tetteh holds a PhD. in Management & Organization. He has worked with many key stakeholders in the automotive industry including the German Association of the Automotive Industry (VDA) and the African Association Automotive Manufacturers (AAAM). As an independent consultant, Dr. Tettehhas also collaborated with several organisations to carry out automotive-related studies in various countries across Africa.
Email: [email protected]