Opinion & Analysis

Accelerating Ghana’s economy: A look at the Ghana Automotive Development Policy

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At the heart of Ghana’s strategic vision for the future is an initiative capable of driving the nation forward, both figuratively and literally – the Ghana Automotive Development Policy.

This ambitious program, designed to solidify Ghana’s position as a formidable player in the automotive industry within the West African sub-region, is poised to shift gears on the economic outlook of the nation and its broader region.

This comprehensive policy isn’t simply a roadmap to vehicle manufacturing. It is a robust engine for job creation, establishing an asset-based vehicle financing scheme, and bolstering the balance of payments through competitive import substitution and export market development. It embraces a panoramic approach, spanning the manufacturing of passenger cars, SUVs, light commercial vehicles, as well as medium and heavy-duty commercial vehicles and buses.

At the core of the policy’s structure is the innovative classification of auto assembly. The divisions of Semi-Knocked-Down (SKD), Enhanced SKD, Completely-Knocked-Down (CKD), and Fully-Built-Units (FBUs) provide a clear direction for the industry’s growth. This is reinforced by a novel two-Tier Registration System by the Ministry of Trade and Industry (MOTI), which incentivizes companies at different stages of assembly plant setup and production.

Financially, the policy offers a plethora of lucrative opportunities. It comes with a 5-year Corporate Tax holiday for Enhanced SKD Registered Assemblers and a 10-year Corporate Tax holiday for Registered CKD Assemblers and Component Manufacturers. Complementing this are exemptions on import duties and related charges on plant machinery, equipment for SKD, Enhanced SKD, and CKD Auto Assembly, creating an attractive investment environment.

A standout feature is the Value-based Duty Rebate Scheme, offering a 35% Import Duty Rebate for FBUs imported from global OEMs based on the value of their imported SKD/CKD kits. Alongside this, a multiplier of 1:1, 2:1, and 2:1 for SKD, Enhanced SKD, and CKD kits respectively provides a significant stimulus to the industry.

Financial institutions are well-positioned to fuel this transformative journey. From offering financial support to companies establishing plants, opening trade avenues for the importation of parts, to providing advisory support to local manufacturers seeking partnerships with Original Equipment Manufacturers (OEMs), their involvement is vital.

Furthermore, this policy presents opportunities to align with green energy companies for cost-saving and robust Environmental, Social, and Governance (ESG) practices. This syncs perfectly with the banking sector’s commitment to sustainable development and responsible business operations.

As Ghana gears up, it’s instructive to look at success stories within the continent. South Africa’s automotive industry, with its global vehicle production ranking at 21st, stands as an ideal blueprint. The South African Automotive Masterplan (SAAM) 2021-2035, with its focus on increased foreign direct investment and trade, sets a clear target: producing 1% of global vehicle production, or 1.4 million vehicles, annually by 2035.

This projection is backed by substantial foreign direct investment, with OEMs investing R8.8 billion in 2021, the second-highest annual figure on record, while the component sector invested a considerable R5.7 billion in the same year.

South Africa’s success underlines the significance of the automotive industry in bolstering economic policy goals such as GDP contribution, employment, skills development, economic linkages, technology, and innovation. It is a symbiotic system where OEMs, dealers, and repair specialists collaborate to deliver on warranties, driver safety, environmental protection, spare parts availability, and information on technical improvements.

Already, several significant players, both local and international, are taking part in this transformative journey.

Among them is the home-grown Kantanka Automobile Company Limited. This Ghanaian company, founded in 1994 by Kwadwo Safo Kantanka, assembles a variety of vehicles, from sedans and SUVs to buses, and is known for its unique designs and use of locally-sourced materials.

In terms of international involvement, the presence of Volkswagen Ghana and Toyota Ghana is evidence of the attractiveness of this policy. Volkswagen, the German automaker, operates an assembly plant in Accra, producing a variety of models, including the Golf, Polo, and Tiguan. Toyota Ghana, a subsidiary of the Japanese giant, has been in operation since 1998 with an assembly plant in Tema. It assembles popular Toyota models, such as the Corolla, Camry, and Hilux.

Other recent entrants to Ghana’s budding automotive sector include Suzuki Ghana and Peugeot Ghana. Both Japanese and French companies, respectively, have assembly plants in Tema and started production in 2022. Suzuki models, such as the Swift, Dzire, and Ertiga, and Peugeot models, including the 3008, 5008, and 2008, are being assembled locally.

Anticipation is building as other major automakers have also announced plans to establish assembly plants in Ghana. These include Chery Automobile from China, MG Motor from the UK, Bajaj Auto from India, and Great Wall Motors also from China. These new entrants plan to start production from 2023 onwards, further solidifying Ghana’s position as an automotive hub in the region.

Kantanka, has shown significant progress since 2017, producing over a thousand cars, including notable electric vehicle models such as the Odeneho 111, K71, and Amoanimaa. This growth has led to the creation of over 400 jobs within the company.

In comparison, Volkswagen (VW) has positioned itself as a strong contender in the market, producing around 5,000 units per year and creating 80 jobs since its inception. Its sales figures reflect a positive market response with approximately 1,300 units sold to date.

Similarly, Japan Motors, with its robust infrastructure, has an impressive installed capacity to produce 11,593 units per shift annually. However, it has decided to initiate its journey more modestly, with the production target set at 1,800 units per year to start with.

The worth of the industry is estimated at 4.6 billion dollars

In conclusion, the Ghana Automotive Development Policy isn’t just a blueprint for manufacturing vehicles; it’s a master plan to transform the nation’s economic landscape. With the banking sector acting as the financial fuel, this ambitious policy is poised to create a thriving industry, invigorate the economy, and offer tangible benefits to the people of Ghana. It’s more than an investment in the automotive industry; it’s an investment in Ghana’s future.

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