Ghana seems to have cooked a really nice playbook on how to become the hub for foreign car assembly for the West African market. Recall my initial opposition to AfCFTA, the African trade agreement, until the “rule of origin”  clause was strengthened.  Yes, under AfCFTA, nothing stops Nissan or other foreign brands to operate in Ghana and target Nigerian customers since running factories in Nigeria is harder. 

The Manufacturers Association of Nigeria (MAN) has suggested to President Buhari not to sign the agreement establishing the African Continental Free Trade Area (AfCFTA).  The major concern is that with Nigeria’s largely subpar infrastructural capacities [mainly electricity], most Nigerian factories could relocate to other African countries to produce items they sell in Nigeria. The implication would be massive manufacturing unemployment in the land.  Also, the risk of dumping goods in Nigeria is also high.

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Nigeria should SIGN but must make sure the “rule of origin” clause is strong. We cannot afford goods produced outside Africa to be repackaged in a treaty member state and then shipped to Nigeria at a low tariff that is exclusive to member states.

Nigeria’s poor infrastructure makes it a slam dunk for these firms to make Ghana home. It was on a similar concern that India did not join other countries in the recently signed Regional Comprehensive Economic Partnership (RCEP). Nigeria needs to watch carefully as John MC Keown notes in this piece.

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.

This is not a simple matter – the National Assembly needs to look into this matter.

Kenya’s Safaricom is exceedingly dominant.  It holds at least 60% of the voice & messaging market. It also rules the data market with at least 60% of the market share. It’s one oasis, mobile money product, MPESA, controls 99% of the local money market. My questions are these: does Kenya have a problem in Safaricom? And should this company be broken into two, as the Kenyan Senate is pushing for?

Kenya is simply a Safaricom nation.

Some years ago, the CA sought the services of Analysys Mason to determine if the carrier business needed some form of adjustments to level the playing field for everybody. The British consultancy firm revealed its findings and recommendations, such as the separation of M-PESA from Safaricom.

‘The two businesses would be required to operate in separate offices, with separate staff below board level, separate branding, separate accounting and separate business operations and support system, customer support systems and management information systems,’ read a report from the firm.

While the recommendations were never really implemented, the discussion appears to have come up again following a Senators meet that maintains Safaricom is a dominant player.

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Comment #1: Is the company experiencing governance issues as presently constituted? What kind of splitting, down the middle, or creating another entity and migrating assets? Or they just want to break the monopoly of Safaricom? A lot of things you have to share with us, prof.

My Response: I think it is the monopoly at play here. 99% is absolute market dominance!

Comment #2: This is an interesting topic here in Kenya, and many feel with its dominance, it needs to be split and let MPesa scale out and expand beyond Kenya.

My Response: I agree also. MPESA alone would be a fintech. Today, MPESA is mobile money which is not a phrase many care about in the Western World. Breaking MPESA from Safaricom will make Safaricom suffer locally but it would open MPESA to an unbounded global future.

Comment #3: Safaricom doesnt need to be split. It would be a blow to innovation ingenuity hardwork and business savvy. Safaricom started of as a minion but has grown its way up.

The market cap of Safaricom is so low that if MPESA is a separate company, it would be worth all of the current number. While Senate of Kenya is concerned on monopoly, I think a separate MPESA would serve Kenya and Africa better. Think of PayPal under ebay and the new separate PayPal. The current one has outperformed and eclipsed the total worth of old eBay before the split.

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.