Business News

Ghana Can Become an Auto Hub

The Country Director of Stallion Group, Mr Mahesh Mahtani, says Ghana has the potential to become West Africa’s auto manufacturing hub. He, therefore, urged the government to put in incentives that would attract auto manufacturing companies into the country, which was West Africa’s third biggest economy.

In an interview with the Daily Graphic, Mr Mahtani said the country’s business environment and its thriving democracy put it ahead of other countries in the sub-region, on the scale of doing business.

“Ghana’s democracy is celebrated and the business environment is not as cumbersome as in some other countries on the continent. The judiciary are also doing a good job. The energy situation has also improved. Those are important benchmarks for investors,” he said.

While admitting that the country’s auto market was not as big as that of Nigeria, he said the West African auto market was big enough, with almost 250 million people.

Ghana’s automobile industry has been contracting since 2012, according to statistics from the industry.

Ghana’s situation

Total vehicle sales in 2015 among Franchise holders stood at 8,201, representing a 38.02 per cent fall from the 13,231 it recorded in 2012.

The shrinking fortunes of the industry began in 2012 and industry players believe several factors, including high import duty, depreciation of the cedi, thriving grey and second markets, have accounted for the development.

Apart from its market size and tax regime, some experts believe that Ghana’s inability to attract auto manufacturing companies was also because of inadequate skilled workers in the sector.

Nonetheless, Mr Mahtani said that could easily be overcome by equipping the country’s polytechnics and engineering faculties in the universities to train students for the sector.

Mr Mahtani, who was the winner of the 2016 Ghana Auto Awards and the Chief Executive Officer of the Year Award, believed that the future of the auto industry looked bright as the industry awaited the new government’s promised tax cuts.

The promise

The New Patriotic Party’s (NPP’s) promises, as captured in its 2016 Manifesto, included the reduction of corporate tax from 25 to 20 per cent, and the abolition of the Special Import Levy introduced in July 2013 to help increase government revenue and close the budget deficit.

The government introduced the Special Import Levy as a temporary measure, but it has remained in force.

Mr Mahtani commended the Founder of the Kristo Asafo church and the Great KOSA Group of companies, Apostle Kwadwo Safo, for not giving up on his decision to manufacture vehicles in Ghana.

“If he receives government support, he will go places. I have seen some of his cars in town and they are not bad at all,” he added.

Nigerian takes the lead

Prior to the introduction of Nigeria’s National Automotive Industry Development Plan in 2013, the country had 14 existing plants at different locations.

However, the provision of incentives and protection to the industry under the new auto policy persuaded 16 fresh companies to establish assembly plants in that country.

Some of the assembly plants that were operational in Nigeria but were forced to shut down due to the influx of imported fairly used vehicles include Peugeot Automobile Nigeria Limited, Leyland, Fiat, Volkswagen and Mercedes.

To give some stability to the power sector, the Nigerian government in 2014 approved $3.7 billion to improve power transmission across the country. This was expected to, among other things, cushion the sector against the extra pressure from the auto industry.

Will West Africa benefit?

Statistics from the Nigerian National Automotive Council (NAC) shows that the country has the capacity to produce 108,000 cars, 56,000 commercial vehicles, 10,000 tractors, 1,000,000 motor cycles and 1,000,000 bicycles annually.

Even though data on car imports throughout West Africa is hard to come by, more than a million vehicles are cleared in West African ports annually.

An increased production in Nigeria will mean a possible reduction in import bills from Korea, Japan, the United States, and United Kingdom – the main source of vehicle imports in West Africa.

A reduced import bill also means more people could afford newer cars. This would ultimately reduce the number of second-hand cars in West Africa.