Ghana – The New Backdoor Into Nigeria For Foreign Vehicle Manufacturers

As The African Continental Free Trade Area (AfCFTA) edges closer, Ghana is offering 10-year tax breaks to the automotive manufacturing industry.

With the imminent abolishment of trade barriers under the African Continental Free Trade Area (AfCFTA), Ghana is poised to overtake Nigeria by becoming a gateway to the rest of West Africa, and a market leader in new car sales. The government of Ghana is also offering 10-year tax breaks to the automotive manufacturing industry in a bid to make Ghana the regional hub for car assembly and boost car sales in the local and regional markets.

And a lot of international car makers are considering Ghana government’s invitation very seriously. Toyota, for instance, is aiming to collect 30% of the corporation’s total annual revenue, currently at $60 billion from Africa in coming 20 years. Industry experts forecast that Africa will account for one-third of the world’s population by 2050, up from 17% now.

Whether AfCFTA actually becomes a reality on ground remains to be seen. The West African Regional Economic Community ECOWAS is just a little bit bigger than the European Union. It has countries of much closer proximity than the expanse of all Africa, with many of the peoples having tribal or cultural commonality with each other, and direct dealings going back centuries.

While ECOWAS has a common market in theory, non-compliance and summary suspensions have happened from time to time at official level between individual countries in response to tensions over unrelated matters. These actions have never incurred economic penalties for nations in violation levied by ECOWAS as a collective afterwards.

Informally, there has always been some form of levy or tariff action happening on ground at entry points, for example, Nigeria’s land borders. The status of ECOWAS as an FTZ has always been fairly fluid since conception. With AfCFTA expected to include 55 countries, then by comparison, the instinct would be to consider it an insurmountable task to make work.

However, there does seem to be some optimism in Ghana that AfCFTA  WILL become a reality.

German Manufacturer Volkswagen, who also own Audi, Seat, Bentley, Bugatti, Lamborghini, Skoda, Porsche,  SCANIA and MAN, came to assemble in Ghana in April this year.

The models intended to be produced in Ghana are ICE versions of the Tiguan and Tremont SUVs ,the Passat, Polo, and the Amarok pickup.

Since Ghana has an extremely mature second hand automotive import industry, its domestic market is not enough to make such an enterprise viable, so they need AfCFTA to convert.

The latest to announce commencement of manufacturing in Ghana has been Nissan, today.

They intend to initially focus on the new model Navara, but should Nigerians be concerned about the future of the Nissan plant in the country?

Both Volkswagen and Nissan have different manufacturing/assembly activities positioned across disparate parts of Africa as a whole, so it’s clear activities in Ghana are intended to serve the regional market.

Should AfCFTA  become a working reality, it may be that FRN will need to come up with some stimulation packages in order to support indigenous companies such as INNOSON MOTORS.