Ghana positions to become auto hub in AfCFTA era

Finance Minister Ken Ofori-Atta has announced the planned establishment of an Automobile Industry Development Centre to coordinate licensing of vehicle assemblers and manufacturers, and monitor their compliance with industry regulations.

With the expected implementation of the African Continental Free Trade Area (AfCFTA) once the COVID-19 pandemic is brought under control, Mr. Ofori-Atta said the establishment of the centre, together with other policy decisions to facilitate the assembly of automobiles in the country, will lead to the export of vehicles from Ghana to the rest of the continent.

The AfCFTA had been expected to come into force on July 1, but the impact of the pandemic on participating countries has led to the postponement of the start date. A new date is yet to be communicated.

Based on the number of participating countries, the AfCFTA is the largest trade agreement since the formation of the World Trade Organisation. Its implementation will form a US$3.4tn economic bloc with 1.3bn people across the continent.

Presenting the mid-year budget review to Parliament last week, Mr. Ofori-Atta said the automobile development centre “will also coordinate the implementation of a Vehicle Financing Scheme which will link financial institutions to individuals and groups interested in purchasing newly assembled vehicles in Ghana. Furthermore, it will manage an Automotive Skills and Technology Upgrading Programme to provide requisite skills for the industry.”

He added: “It is envisaged that the development of the automobile industry in Ghana, which is one of the new Strategic Anchor Initiatives being promoted under the Ministry of Trade and Industry’s Industrial Transformation Agenda, will constitute a significant step towards import substitution and enhancing exports, particularly within the context of the African Continental Free Trade Area (AfCFTA).”

Following the government’s introduction of the Ghana Automotive Development Policy, which provides incentives to promote automobile manufacturing in Ghana, a number of global vehicle manufacturers have signed agreements with the state to establish vehicle assembly plants in the country.

The companies include VW, Nissan, Toyota, and Sinotruck. VW has already begun production of five Volkswagen models—Tiguan, Amarok Pickup, Passat, Polo, and Teramont—at its Accra plant. Nissan and Toyota are expected to open their own plants this year.

To support demand for locally-assembled vehicles and save hard-earned foreign exchange, the government is seeking to reduce the country’s car imports. Ghana’s top five imports by value are vehicles, industrial machinery, electronic machinery, cereals, and plastics.

Of the vehicles imported, used and salvaged automobiles constitute a significant proportion and are quite popular since most people cannot afford new vehicles. Currently, importers of used cars which are at least 10 years old are made to pay a fine in addition to the applicable import duties. However, a new Customs Bill passed in March banned the importation of certain specified used vehicles that are older than 10 years.

In a bid to further the implementation of the automotive development policy, government and government-related institutions have been ordered to prioritise locally-assembled vehicles as their first option when procuring new vehicles for their operations.