The Auto Industry in Sub Saharan Africa: Investment, Sustainability and Decent Jobs
www.industriall-union.org/affiliates/south-africa All activities in the Sub-Saharan Africa region are organised through the regional office located in Johannesburg, South Africa. Project commissioned by:
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[email protected] Introduction
Research team
Lead Researcher: Lorenza Monaco, University of Johannesburg
Country Researchers: Kwabena Nyarko Otoo (Ghana), Sisay Tulu (Ethiopia), Paul Omondi (Kenya), Michael Uusiku Akuupa, Kudzai Chireka, Sophia Isala (Namibia), Ismail Bello, Lai Brown (Nigeria), Remy Ruberambuga (Rwanda), Mario Jacobs, Shane Godfrey (South Africa)
Research Coordinators: Georg Leutert, Kenneth Mogane, Paule Ndessomin (IndustriALL), Iris Nothofer, Bastian Schultz (FES South Africa)
Partners:
FES Trade Union Competence Centre for Sub-Saharan Africa (FES TUCC) Johannesburg and National Offices in the respective countries IndustriALL Global Union, Sub-Saharan Regional Office Johannesburg CETU & Industrial Federation of Construction, Wood, Metal, Cement & Other Trade Unions Ethiopia Industrial & Commercial Workers’ Union (ICU) Ghana Amalgamated Union of Kenya Metalworkers (AUKMW) Kenya Metal and Allied Namibian Workers' Union (MANWU) Namibia SEWUN, AUTOBATE Nigeria National Union of Metalworkers’ of South Africa (NUMSA) South Africa CESTRAR, COTRAF Rwanda
www.industriall-union.org 1 Section 1 Summary While much attention has been paid to the lack of structural transformation or to processes of premature deindustrialisation, a number of Sub Saharan African countries have actually made important steps in the development of a manufacturing sector, and have attracted increasing investment towards an emerging auto industry.
The present report specifically fo- electric vehicles and the promotion persist in Namibia; poverty wages cuses on seven countries that have of greener mobility. are still used as a competitive either experienced a flourishing au- advantage in Ethiopia; and social tomotive sector or that show prom- Overall, the auto industries in these protection is scant and anti-union ising prospects of future expansion: seven countries reveal significant behaviours are frequent in Namibia Ghana, Ethiopia, Kenya, Namibia, potential to attract future invest- and Nigeria. It is therefore urgent Nigeria, Rwanda and South Africa. ment and to further expand. For to intervene in order to expand em- sustainable growth, however, ployment opportunities and secure Although structural weaknesses important policy challenges must be quality occupations. This is where persist (poor infrastructure, uneven addressed. From an industrial devel- unions are called in, to embrace distribution of skills, lack of real mar- opment perspective, the large inflow challenges, build capacity among ket integration, etc.) these seven of used vehicles and the prevalence workers and leaders, and to ulti- countries have all demonstrated a of SKDs/CKDs assembly still weigh mately make sure that investment commitment to grow the industry by against the establishment of a local plans translate into decent oppor- implementing targeted policies and manufacturing base. This should tunities for the most vulnerable and establishing partnerships with big be promoted more proactively, by less protected workers. auto players. Countries like Ghana focusing on increasing localisation (Ghana Automotive Development and deepening the local supply Indeed, an effective union interven- Policy, GADP), Kenya (National chain. Measures to support domes- tion will have to entail: Automotive Policy, NAP), Nigeria tic demand for new vehicles, like • the promotion of social dialogue (Nigerian Automotive Industry incentives and financing schemes, where this is not sufficient Development Plan, NAIDP) and should also be developed or South Africa (current South African enhanced. Issues related to urban • the development of stronger Auto Masterplan, SAAM) formulat- mobility and environmental sustain- systems of collective bargaining ed targeted auto plans to develop ability also emerge as increasingly and of minimum wage agree- their industries. Kenya, Rwanda, pressing matters. ments where they are missing Ethiopia, Ghana and Nigeria signed • the extension of social protec- memorandums of understanding The most compelling objective, tion and OSH policies to all. (MOU) with Volkswagen, Toyota, however, remains the creation of Nissan, BMW and other big auto more decent jobs. This is especially • All this, while keeping a vigilant companies to establish vehicle pressing considering how vulner- eye on the impact of the current assembly facilities, assess future able and informal employment COVID-19 pandemic to ensure mobility concepts and launch train- remain the norm in Ghana, Rwanda that the crisis does not evolve ing centres for production and after and Kenya; casual and precarious into further losses for workers, sales. Ethiopia and Rwanda are ex- forms of work continue to increase precarity and violations of the ploring paths for the production of in Nigeria; gender and race divides rights of workers and unions.
2 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Introduction
Abbreviations
AAAM African Association of Automotive DTIC Department of Trade, Industry and Manufacturers Competition ACFTA African Continental Free Trade ECOWAS Economic Community of West Area African State AGI Association of Ghana Industries EDPRS Economic Development and Poverty Reduction Strategy AGOA African Growth and Opportunities Act EEF Ethiopian Employers Federation AITF Automotive Industry EEP Ethiopian Electric Power Transformation Fund EIC Ethiopian Investment Commission AMCE Automotive Manufacturing FBU Fully Built Units Company of Ethiopia FC, T&PIWTU Federation of Commerce, AMEO Automobile Manufacturers Technique and Printing Industry Employers’ Organisation Workers’ Trade Union AMH Associated Motor Holding FDI Foreign Direct Investment ASCCI Automotive Supply Chain FDRE Federal Democratic Republic Competitiveness Initiative Ethiopia AUKMW Amalgamated Union of Kenya FES Friedrich Ebert Stiftung Metal Workers FKE Federation of Kenya Employers AVA Associated Vehicle Assemblers FRA Fiscal Responsibility Act BAI Bishoftu Automotive Industry GADP Ghana Automobile Development BSC Bachelor of Science Policy CBA Collective Bargaining Agreement GDP Gross Domestic Product CESTRAR Rwanda Trade Unions GIPC Ghana Investment Promotion Confederation Centre CETU Confederation of Ethiopian Trade GRIPS Graduate Institute for Policy Union Studies CKD Complete Knock Down GSS Ghana Statistical Services COMESA Common Market of Eastern and GTP Growth and Transformation Plan Southern Africa ICU The Industrial and Commercial COTRAF Congress of Labour and Workers’ Union Brotherhood ILO International Labour Organisation COTU Central Organisation of Trade Unions
www.industriall-union.org 3 Section 1
Abbreviations
IPRC Integrated Polytechnic Regional NEASA National Employers’ Association College of South Africa ITUC International Trade Union NEF Namibia’s Employers Federation Confederation NIC National Investment Corporation KVM Kenya Vehicle Manufacturers NSA Namibia Statistics Agency LRA Labour Relations Act NUMSA National Union of Metalworkers of M & Z Metje and Zigler South Africa MANWU Metal and Allied Namibian OEM Original Equipment Manufacturers Workers Union OICA International Organisation of MEIBC Metal and Engineering Industries Motor Vehicle Manufacturers Bargaining Council OSH Occupational Safety and Health MetEC Metal and Engineering POAN Peugeot Opel Plant Assembly Corporations PSF Private Sector Federation MIBCO Motor Industry Bargaining Council RDB Rwanda Development Board MIDP Motor Industry Development Plan RFA Regional Framework Agreement MIFOTRA Ministry of Public Service and Labour REM Rwanda Electric Mobility MINEDUC Ministry of Education RMC Rwanda Motorcycle Company MITSMED Ministry of Industrialisation, Trade RMI Retail Motor Industry and SME Development RSSB Rwanda Social Security Board MLIREC Ministry of Labour Industrial SAAM South African Automotive Relations and Employment Masterplan Creation SHC State Housing Company MNC Multinational Corporations SKD Semi Knock Down MoF Ministry of Finance SSA Sub Saharan Africa MOLSA Ministry of Labour and Social Affairs UN United Nations MOTR Ministry of Transport USD United States Dollar MOU Memorandum of Understanding VMIATSA Vehicles, Machinery Importers and Assemblers Trade Sector National Association of NAACAM Association Automotive Component and Allied Manufacturers VW Volkswagen NAAMSA National Association of WHO World Health Organisation Automobile Manufacturers of WMF Windhoeker Maschinenfabrik South Africa (Pty) Ltd NBF National Bargaining Forum
4 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Introduction
Tables
Table 1. Ghana’s macroeconomic performance before the COVID-19 outbreak 12 (2016-2019)
Table 2.: Total Imports and Import of Vehicles 15
Table 3. The SA auto industry on a continent scale 56
Table 4. Investment plans of SA OEMs 60
Table 5. Investment plans, SA component manufacturers 61
Table 6. Ghana’s workforce per employment status, 1999-2017 62
Table 7. ICU Membership in Major Automobile Companies in Ghana 64
Table 8. Statistics on Wholesale and Retail Trade in Namibia 76
Table 9. SA employment by OEM 92
Table 10. Employment conditions negotiated at the NBF and MIBCO 95
Figures
Figure 1. Economic growth in Ghana (2016-2019) 13
Figure 2. Economic growth by industrial sector (2016-2017) – percent 13
Figure 3. Ghana’s 2020 macroeconomic projections: pre-COVID-19 and after partial 13 lockdown
Figure 4. Sale of new vehicles in Ghana (2010-2019) – numbers per year 16
Figure 5. New vehicle registration in Ghana (2010-2018) 16
Figure 6. Namibia new vehicle sales 39
Figure 7. South African auto assemblers with new vehicle market shares 54
Figure 8. SA vehicle sales, 2015-2019 57
Figure 9. Unemployment rate in Ghana, 1999-2017 (%) 62
www.industriall-union.org 5 Section 1 Contents
1. Introduction: the Sub Saharan African Auto Industry in a global context 8 1.1 The auto industry in Sub Saharan Africa: potential and challenges 10 2. Industry development, investment and sustainability: country views 12 2.1 Ghana 12 2.1.1 The Ghanaian auto industry 2.1.2 Current state of investments and production/assembly 2.1.3 Investment sustainability and local development 2.2 Ethiopia 23 2.2.1 The Ethiopian auto industry: profile and investment plans 2.2.2 Policy directives, investment incentives, tax issues 2.2.3 Supportive institutions and key stakeholders 2.2.4 International vehicle brands in the country 2.2.5 Infrastructure building in light of automotive industry development 2.2.6 The industry and the COVID-19 crisis 2.3 Kenya 30 2.3.1 Investment plans and location decisions 2.3.2 Investments and decent work 2.3.3 Policy and institutional capacity 2.3.4 Sustainability of investment plans 2.3.5 Employment creation and decent work 2.3.6 Global value chains and backward and forward integration 2.3.7 Environmental impact and sustainability 2.3.8 Impact of COVID-19 2.4 Namibia 36 2.4.1 Investment, COVID-19 and future prospects 2.4.2 Current investment plans 2.4.3 Trade union and stakeholder engagement 2.4.4 Government efforts to create a conducive environment for investment 2.5 Nigeria 42 2.5.1 The automotive industry in Nigeria 2.5.2 New investment and sustainability in the Nigerian automotive sector 2.6 Rwanda 49 2.6.1 The Rwandan auto industry 2.6.2 The industry and COVID-19 2.6.3 Current investment plans 2.6.4 Investment, sustainability and local development 2.7 South Africa 53 2.7.1 The SA Auto Industry 2.7.2 A snapshot of the local auto industry 2.7.3 The industry in a global context 2.7.4 Domestic vehicle manufacturing 2.7.5 Vehicle imports
6 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Introduction
2.7.6 Exporting volumes and destinations 2.7.7 The South African auto industry policy framework 2.7.8 Investment plans, local development and sustainability 3. The labour issue: decent jobs and gaps to fill 62 3.1 Ghana 62 3.1.1 Decent employment in Ghana 3.1.2 The automobile industry and decent jobs 3.1.3 The role of unions 3.2 Ethiopia 65 3.2.1 Trade unions and the auto sector in Ethiopia 3.2.2 Freedom of association, social dialogue and collective bargaining 3.2.3 Wage and working conditions 3.2.4 COVID-19 and OSH 3.2.5 Conclusion and recommendations 3.3 Kenya 70 3.3.1 Current workforce 3.3.2 Unionisation and labour relations 3.3.3 The role of trade unions 3.3.4 Moving forward 3.4 Namibia 76 3.4.1 Trade unions in the sector and main challenges 3.4.2 Building capacity for union members 3.4.3 Recommendations 3.5 Nigeria 80 3.5.1 The challenge of decent work in the automotive sector 3.5.2 Automotive sector, structural adjustment programme and employment conditions 3.5.3 Impact of labour market deregulation in the automotive sector 3.5.4 Privatisation, new investments and growing precarious work 3.5.5 Current challenges 3.5.6 Recommendations 3.6 Rwanda 86 3.6.1 Background on current trade unions and their role in Rwanda 3.6.2 Auto-workers: current situation and reasons not to be unionised 3.6.3 Building capacity and challenges 3.6.4 Recommendations 3.7 South Africa 92 3.7.1 Decent jobs and the role of trade unions 3.7.2 Employment in the auto assembly and auto component sectors 3.7.3 Employment categories in the auto and component industries 3.7.4 Trade union organisation, collective bargaining and social dialogue in the auto and component industries 3.7.5 Minimum wages and employment conditions 3.7.6 Key recommendations 4. Conclusions and recommendations 96 References 99 Appendix 1: List of interviews 104
www.industriall-union.org 7 Section 1 1. Introduction: the SSA auto industry in a global context The research project reported here responds to ambitious intentions and tries to serve multiple purposes.
Firstly, it covers a largely investigated indus- did not take place in an easy period. Fully trial sector, the automotive industry, while unfolded during the highest peaks of the shedding light on still relatively unexplored COVID-19 crisis, it also seeks to provide a markets. In particular, it seeks to highlight preliminary assessment of how the pan- the potential of a number of Sub-Saharan demic has affected and will be affecting countries that have not received sufficient investment decisions and industrial devel- attention compared to more advanced opment paths in the seven countries ana North African auto industries like Algeria, lysed. In addition, it must be stated that the Tunisia, Morocco or Egypt. Beyond the pandemic imposed some predictable lim- long established South African industry, itations on the research itself – the present this report thus includes a focus on Ghana, report represents the outcome of brilliant Ethiopia, Kenya, Namibia, Nigeria, and efforts made by the ground researchers to Rwanda. overcome them.
While being at different stages, the auto Ultimately, the report considers both industries in all of these seven countries promised investments and investments that have attracted new investments or have seem to be still in place. Of course, how the some potential to expand in the near future. world economy and the single countries In this regard, the present research tried to will eventually get out of the crisis, and the explore investment plans of the major au- overall economic and social impact this will to-players present in the country, together have, is yet to be clearly seen. In this regard, with governments’ intentions to support the given the significant degree of uncertainty, development of the industry and existing a follow-up study might be needed in the policy frameworks. Such an investigation years to come. was driven by various factors: the idea of sustainability, the scope, the objectives Secondly, within an assessment of the and the potential impact (in terms of local expected impact of the new investments, development on the labour market and on the present project covers a crucial as- the broader economic environment) of the pect, especially important in the light of the proposed investments. countries considered – the employment issue. It not only seeks to address whether Indeed, as far as investment plans, and the promised investment will respond to the research per se, are concerned, this project pressing need of generating employment
8 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Introductionintroduction
– which is extremely urgent across the Afri- creation. This is not only a call for the unions can continent – but it specifically questions already involved in the project and for Indus- whether the awaited jobs will be decent. For triALL members or FES partners. This is a this purpose, it engages with some of the broader call for unions to critically reflect on The auto main issues emerging across the different issues of bargaining and representation, on industries in contexts: issues of poverty and vulnerability, the changing world of work, on evolving em- the presence of a fixed minimum wage, the ployment categories and on how to respond all of these increasing employment of precarious types to detrimental labour laws or to aggressive seven coun- of work, issues related to skills development corporate strategies. In this regard, the re- and education, equality (per gender and port tries to voice all the recommendations tries have race, among others) and political represen- advanced by the seven country reports and attracted tation. to collate them together, hoping to provide new invest- a platform for collective reflection and for Even in this case, the way the pandemic will a strong, hopefully regional or continental, ments or affect employment strategies and labour political strategy ahead. have some market dynamics cannot be fully predict- ed yet. While some corporate decisions As many other African countries not repre- potential already determined partial restructurings sented in this report, the cases collected to expand or temporary halts, the actual and overall here represent economies extremely rich in in the near impact of the COVID-19 crisis will probably resources, skills and capabilities, with huge be more visible only on a mid to long term potential for economic and social develop- future. basis. ment, which deserve new and sustainable investments. Indeed, these will not be sus- Finally, and most importantly, the present tainable if they will not generate more and report discusses what trade unions can do quality jobs. in order to secure decent jobs in the sector and to make sure that the promised invest- We want investment and industry develop- ments will translate into quality employment ment, but not without decent jobs!
www.industriall-union.org 9 Section 1
1.1 The auto industry in Sub Saharan Africa: potential and challenges
Besides the most developed auto industries like the still high importation of second-hand in North Africa (Morocco, Algeria, Tunisia, vehicles, the scarce localisation in the man- Egypt) and the long established South ufacture of components (still subject to fre- African industry, the automotive sector in quent global sourcing), and the excessive the rest of the continent is characterised assemblage of CKDs and SDKs as opposed by relatively small, isolated markets at their to proper manufacturing, frequently weigh infant stage (eg. Rwanda) or still obstructed on the growth and the expansion of the by severe structural weaknesses. infant African industries (Black et al, 2018; Barnes, et al. 2020). Many countries are land-locked and still poorly connected to the neighbours on The SSA region, however, also shows the continent or to large buyers/advanced positive signs of growth and steps towards auto hubs (Barnes et al, 2020). This adds to regional integration, which will increasing- high transactional cost as transportation of ly attract new investments and hopefully goods and services are time consuming and determine more intense trade flows. In this expensive.1 In financial terms, setting-up regard, the launch of the AfCFTA in 2018, a large-scale vehicle manufacturing plant bringing together 55 economies from the requires a massive initial investment, still continent, represents a visible attempt to- inaccessible to many small African econo- wards the creation of a common exchange mies.2 The level of existing infrastructure is area (Barnes et al. 2020). At the same time, 1 Godfrey, S. Jacobs, M. (2020), report re- often very low with insufficient road cover- moderate growth coupled with an emerging cently completed for the age – a pattern still serving the extractive middle class undoubtedly constitute an International Transport industries and interrupted provision of attractive factor for foreign investors. In this Workers’ Federation (ITF) on the two major water and electricity. regard, increasing domestic demand plus transport corridors in the positive steps in the direction of regional in- Southern African region. As Markowitz and Black (2019) note, tegration are a promise of potential expan- Without exception, inter- “Sub-Saharan Africa has the lowest density sion and future growth. viewees (truck drivers, transport operators and of infrastructure of any world region. The government officials) existing infrastructure is primarily geared Taken individually, several SSA economies noted lengthy delays at to supporting extractive industries, at the have started investing and supporting either border crossings as a major challenge to trade expense of stimulating growth in sectors with the revitalisation (eg. Nigeria) or the early within the region. value upgrading potential.” establishment of their automotive industries 2 In Morocco, for exam- (eg. Rwanda). The seven countries selected ple, the Renault plant in The availability of adequate skills to meet for this study, albeit at different stages in the Tangier (the biggest on the needs of the industry is often limited, development of their auto sectors, all show the African continent, with a manufacturing ca- and these are unevenly distributed across some promising indicators of future ex- pacity of 400 000 cars a the working population. Besides the lack of pansion, and important challenges for both year and a workforce of 6 access to quality education, the distribution policy makers and organised labour. 747) was built at a cost of of skills is often worsened by persistent 1 billion Euro. See https:// middle-east-online.com/ gender and racial inequalities (see Namib- For example, Kenya, Rwanda, Ethiopia, en/renault-inaugurate-gi- ian or South African cases). In addition to Ghana and Nigeria all signed MOUs with ant-tangier-plant. structural weaknesses, market ‘distortions’ Volkswagen to establish vehicle assembly
10 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Introduction
facilities, assess future mobility concepts and willing to grow, with strong potential and launch training academies for produc- to expand and attract new and significant tion and after-sales. Policy-wise, countries investment – all reasons to pay increasing like Ghana (Ghana Automotive Develop- attention and possibly conduct further The Sub ment Policy, GADP), Kenya (National Auto- research. On the other hand, the challeng- Saharan motive Policy, NAP), Nigeria (Nigerian Auto- es highlighted also serve as a reminder of motive Industry Development Plan, NAIDP) how investments will not be enough without region is and South Africa (current South African a serious and coordinated policy effort – lively and Auto Masterplan, SAAM) have all demon- some industrial policy recommendations strated commitment to the development of are also included in the following sections. willing to their auto industries through the formulation grow, with of targeted industrial plans. These plans While shedding light on the potential of strong include a mix of generous incentives aimed the SSA automotive industry through the at attracting future investment, and will be country cases analysed, this report also potential discussed in the following sections. focuses on weaknesses and challenges to expand that still need to be addressed. In particular, Likewise, countries like Ethiopia, Rwan- within broader issues related to persistent and attract da and South Africa have attempted to poverty and inequality, the study focuses new and establish Special Economic Zones offering on the compelling need to associate new significant favourable conditions for the installation of investment with the creation of more and new industrial plants and manufacturing fa- quality jobs – decent jobs. investment. cilities. Sometimes such zones are not fully operational, and their labour implications Firstly, the country reports underline what is are frequently questionable, but their design currently not decent in the labour markets certainly shows a firm intention to attract and in the industrial sector analysed. They investment and expand industrial capacity. point at problems like underemployment, Aiming to increase their participation into increasing casualisation that most often fol- global value chains while promoting greener lowed the privatisation and the deregulation growth, companies in both Ghana (Kantan- of the sector, gender and race disparities, ka Motors) and Rwanda (Ampersand, Safi the lack of agreed minimum wages, sectoral and REM) are exploring or already testing bargaining and low union representation. the production of electric vehicles (electric In this sense, the seven country reports motorbikes, in Rwanda’s case). Attempts to highlight areas for intervention and gaps to increasingly localise production in the auto- fill. How such gaps can be filled and what motive industry are also visible in countries role the existing trade unions can actually where a local manufacturer is actively sup- play in the process, is discussed in the final ported, like in the case of Kantanka Motors chapter. The chapter collates and combines in Ghana or of Bishoftu Automotive Industry the suggestions and recommendations (BAI) in Ethiopia. forwarded at country level, to ultimately indicate a common ground for a proper, Together, these steps show that the auto collective debate on the matter. industry in the Sub Saharan region is lively
www.industriall-union.org 11 Section 2 2. Industry development, investment & sustainability: country views
3 Ghana’s economy has traditionally been 2.1 Ghana associated with high rate of inflation. Taming Prior to the outbreak of the COVID-19 The fiscal deficit – an excess of expendi- inflation has been a key pandemic, Ghana’s economy appeared to ture over revenues – declined from about macroeconomic objec- be doing well on a number of indicators. The 8.7 percent of GDP in 2016 to less than 5 tive since the adoption of macroeconomic outlook seemed stable percent in 2019. Structural Adjustment in the mid-1980s. with an inflation rate entering the Bank of Ghana’s medium-term target of 6 to 10 The primary balance was also in surplus for percent. At the end of 2019, inflation was the last three years, reflecting a slowdown 7.9 percent, the lowest in almost a decade.3 in the rate of debt accumulation.
Ghana’s macroeconomic performance before the COVID-19 outbreak Table 1 (2016-2019)
External Variables 2016 2017 2018 2019 Trade account as percent of GDP -4.0 2.3 3.4 Current account as percentage of GDP -5.2 -3.4 -3.1 -2.8 Gross International Reserves (months of import cover) 2.8 4.3 3.6 4.0
Source: GSS; MoF, 2020
In terms of external trade, the country ap- by increased activity in the oil and mining peared to be turning the corner on the high subsectors. Gold outputs and oil production deficit that characterised its trade with the has expanded significantly in the last few rest of the world. Export was rising faster years. than imports. The negative trade balance recorded in 2016 (-4.0) was reversed with a Significant was also the expansion of positive balance of 3.4 percent of GDP. The manufacturing following the implementation current account deficit narrowed from 5.2 of the government’s flagship Industrial percent of GDP to 2.8 percent. Development Programme, dubbed One- District-One-Factory. This programme GDP grew at an average of 7 percent in the seeks to install a factory in all the past 3 years and it was projected to grow administrative districts of the country. The at 6.8 percent in 2020. Overall, econom- programme also aims to support the revival ic growth has been led principally by the of existing but struggling manufacturing growth of industry, which has recorded firms. The manufacturing sector has an average growth of 10.9 percent since achieved a growth rate averaging 6.6 2017. Industry growth has been fuelled percent since 2017.
12 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industryindustry development, investment and sustainability: country views
Figure 1 Economic growth in Ghana (2016-2019) – at constant 2013 prices
9 8 7 6 5 4 3 2 1 0 2016 2017 2018 2019
GDP growth Non-oil growth Source: GSS, 2020; MoF, 2020
Figure 2 Economic growth by industrial sector (2016-2017) – percent 18 Source: MoF, 2020 16 14 12 10 8 6 4 2 0 2016 2017 2018 2019 Agriculture Industry Service Manufacturing
The outbreak of COVID-19 and the restric- ed to significantly breach the mandatory tions imposed to contain it have changed threshold of 5 percent of GDP imposed by the macroeconomic situation. Growth the Fiscal Responsibility Act. The primary projections for 2020 and beyond have been balance will hit a deficit for the first time reviewed downward. GDP growth for 2020 since 2016 and inflation is expected to rise. has been revised to 0.9 percent from an The resulting decline in real incomes will initial projection of 6.8 percent. The fiscal affect demand, particularly the demand for debit (11.4 percent of GDP) is now expect- durable consumer items including vehicles.
Figure 3 Ghana’s 2020 macroeconomic projections: pre-COVID-19 and after partial lockdown 10 5 0 -5 -10 -15 Growth Rate (Percent) Primary Balance (% of GDP) Fiscal Balance (% of GDP)
Pre-COVID projections COVID-19 projections
www.industriall-union.org 13 Section 2
2.1.1 The Ghanaian auto industry
An important component of the govern- The fiscal incentives are supported by an ment’s Industrial Development Programme array of other incentives that are aimed is the ambitious attempt to attract major at securing the domestic market for the automobile companies to Ghana and to companies that assemble or manufacture assemble or manufacture automobiles. In locally. These include a ban on imports of 2019, the government put forward the Gha- overaged vehicles, salvaged and flooded na Automobile Development Policy (GADP). vehicles. There is also an assurance that the Among other objectives the automobile government’s procurement of vehicles will development policy seeks to make Ghana be done specifically to favour domestically a fully integrated and competitive industrial assembled or manufactured cars. hub for automotive manufacturing in West Africa. This is to be achieved in collabora- In response to these incentives, and even tion with the private sector – global, regional before the GADP was launched, a num- and domestic. The policy also seeks to ber of significant global automobile firms generate highly skilled jobs in automobile indicated their intention to locate assembly assembly and manufacture of components plants in Ghana. and parts. On August 30, 2018, the Ghanaian gov- The GADP offers attractive and generous ernment signed a historical MOU with the fiscal incentives to companies that locate German carmaker Volkswagen (VW) for the assembly plants in Ghana. Incentives in- establishment of an assembly plant in the clude fiscal and market guarantee schemes. country. The signing of the MOU coincided Among the fiscal incentives are five-year with the visit of the German Chancellor An- corporate tax holidays for companies/as- gela Merkel. Two years after the signing of semblers that undertake Enhanced Semi the MOU, the President of Ghana joined VW Knock Down (SKD) assembling of vehicles, on August 3, 2020 to launch the company’s and companies that engage in car assembly first ever range of locally assembled fleets at the level of Complete Knock Down (CKD) of cars. This has been hailed as a success are offered a ten year corporate tax holi- story and a harbinger for the revival of the 4 See https:// allafrica.com/sto- day. While companies that are engaged in auto industry in particular and manufactur- ries/201908300577.htm- basic SKD are not eligible for corporate tax ing in Ghana. l#:~:text=Ghana%3A%20 exemptions under the GADP, they never- First%20Ghana%- 2DAssembled%20 theless may be qualified for tax exemptions Since the signing of the MOU with VW, sev- Toyota%20Vehicle%20 under the Ghana Investment Promotion eral other global auto manufacturers have Outdoors%20Au- Centre Act. In addition to the corporate tax signaled their intention to locate assembly gust%202020,-30%20 plants in Ghana. On August 29, 2019, Ghana August%202019&tex- exemptions, imports of plant, machinery t=The%20President%20 and equipment intended for building As- signed another landmark MOU with Toyota, and%20Chief%20Exec- sembly Plants for SKD, Enhanced SKD and one of the world’s biggest carmakers, for utive,in%20Ghana%20 CKD are exempted from import duties and the establishment of Toyota and Suzuki by%20August%202020. related charges. Assembly Plants.4 According to the Chief
14 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
Executive Officer of Ghana Investment These developments come on the heels of Promotion Centre (GIPC), significant global a booming and diverse automobile industry automakers such as Renault, Nissan, Chan- dominated by imports of mostly used cars gan, Honda and Hyundai have all indicated and parts. Vehicle import is among Ghana’s The vast their readiness to install plants for the top three imports. In 2018, vehicle imports majority assembly of their brands in Ghana. accounted for 12.5 percent of total imports to Ghana, making it the highest imports of vehicles The Ghanaian auto industry also has a local item by value. In 2019, vehicle imports as imported assembler. The Kantanka Group was the a proportion of total imports increased first to assemble a “made in Ghana” car in slightly, reaching 14 percent (UN Comtrade). into the 1998. In 2013, the Group installed a full- country scale automobile assembly facility Annual import of vehicles has averaged are used or producing eight vehicles per month and, by about USD 1.8 billion since 2016. The vast 2016, it was producing 100 cars per month. majority of vehicles imported into the pre-owned The group appears energised by the gov- country are used or pre-owned vehicles. vehicles. ernment’s increased focus on the automo- The estimate is that between 70 to 80 bile assembly and the entry of the global percent of the vehicles imported and automobile giants into the country. registered in Ghana are used cars.
Table 2 Total imports and import of vehicles
Year Total Imports (USD billion) Vehicle Imports (USD billion) 2019 10.4 1.69 2018 11.9 1.85 2017 12.7 1.87 2016 11.3 1.78 Source: UN Comtrade
The market for new cars is relatively 1.8 million vehicles have been registered in small and appears to be on the decline. Ghana. New vehicles represent just about 5 From a peak of nearly 7000 in 2014, sales percent of that number with the remaining of new passenger cars have dropped to 95 percent being used vehicles. But these below 4000, a decrease of more than 50 are not just used vehicles; they are also percent. The rising demand for vehicles is very old vehicles. According to the Ministry met through imports of cheap and often of Transport the average age of vehicles in overused vehicles. In the last decade about Ghana is 14.2 years.
www.industriall-union.org 15 Section 2
Figure 4 Sale of new vehicles in Ghana (2010-2019) – numbers per year
9000 Source: Ministry of Transport, 2016; Africa Automotive Directory (2020) 8000 7000 6000 5000 4000 3000 2000 1000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 New commercial vehicle sales New passenger car sales
The growth in demand for vehicles reflects and unaffordable for the majority of the rising incomes and an expanding middle population. class. It is an answer to the poor public transport system that forces the relatively The Ghana Automobile Development Policy affluent middle class to do whatever it takes seeks to change such dynamics. By encour- to own a car. aging domestic manufacturing of vehicles, restricting imports particularly of used cars, The recourse to second-hand or used and introducing an assets-based vehicle fi- cars reflects the absence of a vehicle- nancing scheme, the policy aims to replace financing scheme towards the purchase the ageing fleets of vehicles on Ghana’s of new vehicles, which remains expensive roads with newer and affordable fleets.
Figure 5 New vehicle registration in Ghana (2010-2018)
350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2010 2011 2013 2014 2015 2016 2017 2018 Source: Ministry of Transport (2015); Author’s calculations
16 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industryindustry development, investment and sustainability: country views
ABOVE: A neighbourhood 2.1.2 Current state of investments of Accra in Ghana. and production/assembly Photo by Etornam Ahiator on Unsplash The automotive industry in Ghana is struc- the early years of Ghana’s independence tured around the following main players. included the idea of assembling vehicles The dealership companies, which started in the domestic economy. A number of the importation of automobiles into the vehicle assembly plants were set up as country a long time ago. Companies such as State-Owned Enterprises. These includ- Mac Ghana, Mahindra, Mechanical Lloyd, ed GHAMOT Ghana Limited, the National Toyota Ghana, Auto Parts, Nissan, Mitsubi- Investment Corporation (NIC) Vehicle As- shi and Universal Motors among others are sembly Plants and Workshop and Neoplan household names in car dealerships. These Assembly Plants. companies deal mostly in new vehicles and parts and they serve the relatively wealthy The first vehicle assembly plant opened in segment of the Ghanaian society. They also Accra in 1969. Auto Parts Vehicle Assembly provide after sales service. There are also Plant had the capacity to assemble 600 a plethora of garages that deal in both new Nissan cars, 600 buses, pickups and trucks and used vehicles. per year. Eventually, the plant assembled only an unspecified number of Nissan vehi- Another noticeable feature of Ghana’s auto cles using semi knock down components industry is the massive trade in spare parts. from its original equipment manufacturers The dealership companies provide new and in Japan. UAC Motors, SCOA, RT Briscoe/ genuine parts. This is often expensive for ATS/KOWUS, GHAMOT and Neoplan Gha- most Ghanaians. Therefore a flourishing na Limited operated other vehicle assembly Auto Parts trade in used spare parts exists across the plants. The rugged Bedford trucks were Vehicle country. The domestic demand for engines, also assembled in Ghana. Assembly tyres, batteries, ball bearings, headlights was the and lubricants among others is on the rise. These early attempts to assemble and first vehicle Spare parts dealerships are among the manufacture vehicles locally, and indeed most lucrative businesses in Ghana. Like the entire industrialisation programme, assembly the vehicles, the bulk of imported parts are fizzled out in the 1970s and 1980s when plant opened used parts. the economy was hit by the global in Accra in economic crisis. As part of the imple- 1969. In terms of vehicle assembly or manufac- mentation of Structural Adjustment the ture, the industry remains at an infant stage state-owned manufacturing entities even though Ghana has had a long histo- were privatised and refocused. GHAMOT ry of wanting to assemble/manufacture became Toyota Ghana and turned away vehicles domestically. Kwame Nkrumah’s from Vehicle Assembly Company to a ambitious industrialisation programme in dealer in Toyota vehicles.
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2.1.2.1 Kantanka Motors In the 1990s the local Kantanka Motors drives. The company has a contract with a revived the idea of automobile assembly foreign original equipment manufacturer in Ghana. The company produced its first from whom it procures components for its assembled vehicle in Ghana in 1998. The vehicle assemblies. At the same time, the company established a reasonably mod- company claims it produces its own engine ern automobile assembly infrastructure in blocks. The company is currently assem- 2013. It was producing eight (8) vehicles per bling vehicles using enhanced SKD kits. month at the time. In 2016, its production ca- pacity had increased to 100 cars per month. The company now enjoys the fiscal incentives offered by the government Kantanka assembles both conventional to foreign automobile manufacturers. It and electric cars. Its fleet includes elec- has a 10-year tax holiday, and receives tric saloons, electric four-wheels, electric exemptions on the import of equipment pickup trucks and conventional four-wheel meant for assembly of vehicles.
2.1.2.2 Volkswagen As indicated earlier, VW signed an MOU imports these brands as partially disas- with the Ghanaian government in August sembled parts for re-assembly in Ghana. 2018 to commence vehicle assembly in In other words, the company is engaged in Ghana. The company registered its local basic SKD in its local assembly of vehicles. subsidiary VW Ghana, which is 100 percent The company is therefore not eligible for tax owned by VW South Africa. The MOU had holiday as specified under the Ghana Auto- envisaged that the first locally assembled mobile Development Policy. The company VW vehicles will be released in early 2019. can, however, apply for incentives under the For reasons including the delay in the Ghana Investment Promotion Centre Law. launch of the Ghana Automobile Develop- ment Policy and an unclear regulatory and VW Ghana’s current investment in vehicle fiscal regime, this was pushed to 2020. assembly is valued at USD 10.5 million. This Therefore, in August 2020, the company first phase of investment is expected to unveiled the first fleets of VW cars ever see the company assemble up to 2,000 assembled in Ghana. vehicles per year. In the second phase VW Ghana has announced an investment of The company is now assembling six of its up to USD 22 million, which is expected to models in Ghana. These are Tiguan, Tera- turn out an average of between 10,000 and mont, Amarok, Passat, Polo and Caddy. VW 20,000 vehicles per year by 2022.
2.1.2.3 Nissan In November 2018, Nissan signed an MOU new car sales in Ghana, with 32 percent of with the Ghanaian government to establish the market. a vehicle assembly plant in Ghana. Thereby, Nissan has become the second major auto- The assembly plant will be located in the mobile manufacturer to signal its intention Tema Industrial enclave for proximity to the to manufacture or assemble vehicles in the country’s largest seaport. The company had country. Nissan has the biggest share of planned to begin its assembly of vehicles in
18 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
2.1.2.3 Nissan (continued) the first quarter of 2020 with plans to put its Trade and Industry Ministry, Nissan is yet to first locally assembled vehicle on the road commence its vehicle assembly operations. before the end of the year. In preparation for this, in 2019 the company had established It is unclear when the company will unveil its West African Regional office in Accra its locally assembled vehicles. However, and began to train sales and after-sales according to Nikkei Asian Review, Nissan technicians to serve the West Africa sub-re- plans to install a vehicle assembly plant with gion. These plans appear to have been capacity to produce 60,000 vehicles a year delayed and, according to sources from the by 2022.
2.1.2.4 Toyota In November 2018, Nissan signed an MOU before the end of the year. In preparation for with the Ghanaian government to establish this, in 2019 the company had established a vehicle assembly plant in Ghana. Thereby, its West African Regional office in Accra Nissan has become the second major auto- and began to train sales and after-sales mobile manufacturer to signal its intention technicians to serve the West Africa sub-re- to manufacture or assemble vehicles in the gion. These plans appear to have been country. Nissan has the biggest share of delayed and, according to sources from the new car sales in Ghana, with 32 percent of Trade and Industry Ministry, Nissan is yet to the market. commence its vehicle assembly operations.
The assembly plant will be located in the It is unclear when the company will unveil Tema Industrial enclave for proximity to the its locally assembled vehicles. However, country’s largest seaport. The company had according to Nikkei Asian Review, Nissan planned to begin its assembly of vehicles in plans to install a vehicle assembly plant with the first quarter of 2020 with plans to put its capacity to produce 60,000 vehicles a year first locally assembled vehicle on the road by 2022.
2.1.2.5 Sinotruk Sinotruk, a Chinese company that expected to employ about 250 technicians manufactures heavy-duty trucks, mini- and engineers. In addition to creating jobs, buses and other vehicles, including lifting the plant will also offer training and technol- and earth-moving machinery, signed an ogy transfers in car assembly and related agreement with the government of Ghana manufacturing activities. Information about during the Ghana-Shandong business the state of the Sinotruk assembly plant is conference in September 2018 to develop sparse. However, according to information an assembly plant in Ghana. The assembly from Ghana’s Presidency and from the plant is expected to initially produce some Information Ministry, Sinotruk has com- 1,500 trucks a year for sale in Ghana and menced its local manufacture or assembly West Africa. At full capacity the company is of its trucks.
www.industriall-union.org 19 Section 2
ABOVE: A drone shot of the 2.1.3 Investment sustainability vast landscape of Ghana, Accra. and local development
Photo by Virgyl The large number of global automobile on its own is a small market both in terms Sowah on Unsplash manufacturers that are either assembling of population and income levels. And as we vehicles in Ghana or have signaled inten- have indicated, the demand for new vehi- tions to do so, is being celebrated as a boom cles is small. The larger demand for vehi- for the country’s industrial ambitions. The cles is met through imports of pre-owned development fits well into the current gov- or used vehicles, since such vehicles are ernment’s policy of One-District-One-Fac- cheaper and more affordable for most Gha- tory, which aims to plant a factory in each of naians. The higher demand for used and the administrative districts of the country. often older cars results from the absence of The policy is seeking to relaunch Ghana’s a financing scheme. Prospective buyers of industrialisation programme that was more vehicles have to finance it directly from their or less curtailed by the implementation of savings or investments. Structural Adjustment in the 1980s. Banks in Ghana hardly give car/vehicle The Ghana Automotive Development Policy loans. They are generally excessively risk- (GADP) seeks to build an industrial hub for averse. The high borrowing cost – interest automotive assembling, thereby generating rates – deters people from borrowing to highly skilled jobs, improving the balance buy cars. The Ghana Automobile Dealers of payment and transforming the quality Association estimates that bank-financed of the national transportation fleet. These car loans are just about 5 percent of new are extremely high ambitions. At the same car sales. time, the interest in the Ghana automotive industry shown by the global giants illus- The limited information available on the trates the feasibility of the programme and a investment plans of the automobile man- possible realisation of its objectives. There ufacturers suggest that these challenges are, however, challenges ahead. have been factored into their plans. The companies are not building factories. They The sustainability of the nascent auto are renting buildings or using facilities investments remains a challenge. Ghana owned by their dealership companies. In
20 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
other words, there are no legacy produc- feasibility study for an integrated mobility tion, industry or sunk costs that these com- solution, which will incorporate the viabil- panies would need to protect in the future. ity of introducing car sharing, ride hailing This is consistent with investment patterns and shuttle services. The companies are observed elsewhere with the assembly of also demonstrating sustainability of their SKD kits. There is no real investment for investments and commitments by seeking legacy production. Also, it is most likely that to join the various industry associations in the COVID-19 pandemic will play a role in the country. The Association of Ghana In- the future investment decisions of these dustries (AGI, interview) indicated that VW companies. Toyota has been explicit about Ghana has applied to join the association. the impact of the pandemic in delaying the start of its production. Going forward, In addition, the government is offering the expansion plans of the companies will preferential procurement for locally as- depend on how the pandemic plays out in sembled vehicles. It has already directed the coming months and years and how it all agencies, ministries and departments to affects economic activities in Ghana and first consider procuring locally assembled the African region as a whole. vehicles when using public funds. In an interview with the AGI, it emerged that the Nonetheless, the Ministry of Trade and government has procured more than 500 Industry insists that this is but the very first vehicles from Kantanka Motors. Recently, Banks in initial step towards the building of a robust the State Housing Company (SHC) bought automobile industry. The Ministry fully five locally assembled cars from VW. Ghana recognises the challenges. It is aware that hardly give real manufacture of vehicles with backward The government is also implementing a and forward linkages with the rest of the special vehicle purchase/financing and car/vehicle Ghanaian economy will be realised when ownership scheme for public sector work- loans. the government manages to address the ers. In its mid-year review of the 2020 bud- They are challenges in financing, and large scale get statement, the government indicated imports of used cars and eventually incen- that it was going to establish the Automotive generally tivise the companies to move to enhanced Development Industry Support Centre. The excessively SKD or CKD. The government is already centre will coordinate the establishment of risk-averse. implementing a number of initiatives to the Vehicle Financing Scheme, linking finan- address some of these challenges. cial institutions to individuals and groups for the purchase of newly-assembled vehicles. The recent amendment to the Customs Act These are some of the measures to switch (Act 1014, 2020) – which bans the import of vehicle demand away from imported used salvaged vehicles and overaged vehicles vehicles to new and locally assembled ones. – seeks to address the perennial problem of excessive imports of used cars. The mea- It is also important to emphasise that the sure seeks to guarantee the local market for entire automotive development initiative the companies that are undertaking assem- in Ghana has the regional and sub-re- bly of vehicles locally. In addition, the gov- gional markets in mind. The companies ernment is working with the companies and are not only attracted by the prospect of the local banks to establish an asset-based an expanding middle class and market in vehicle-financing scheme for locally assem- Ghana, but also by the expanding market bled vehicles to ensure affordability. in West Africa in particular, and Africa in general. Some of the companies are also introducing schemes to boost the sale of new vehi- In AGI’s view, Ghana is leveraging the cles. Volkswagen is already undertaking a ECOWAS market and the creation of a sin-
www.industriall-union.org 21 Section 2
gle African market under the aegis of the Af- industry and technological capacity for the rican Continental Free Trade Area (ACFTA) supply of parts and components. for its industrialisation programme. Ghana is the second largest economy in West Africa The other binding constraint relates to There are and plays a significant role in the affairs of domestic politics and the power of the plans to the Economic Community of West African import lobby. Vehicle importers have States (ECOWAS). The country is also the already mounted strong opposition against resuscitate host of the ACFTA Secretariat. attempts to restrict or ban imports of used the and overaged vehicles, and the main oppo- Furthermore, the incentives regime for the sition party in Ghana is backing them. Given abandoned automotive industry is calibrated to ensure that the country is getting closer to a major glass the sustainability of investments and the election in December, the government and tyre industry. The government recognises the appears to be backpedalling on some of the heavy investment outlays required for the key policy pillars of the Ghana Automotive factories to companies to move from SKD to CKD. It Development Policy. The promise to ban im- support the has therefore structured the incentives in a ports of salvage vehicles and vehicles that manner that gives more benefits to com- are over 10 years old, which was already automobile panies as they upgrade from basic SKD to cast into law, has been suspended following assembly CKD. All the participating companies in the agitations by importers and dealers. as the Ghana auto programme have submitted to the ministry an assembly and invest- Overall, the developmental impact of the companies ment plan indicating when they intend to recent investments is small and limited giv- progress commence production and how they plan en the limited scale of production activities from SKD to to move from SKD kits assembly to CKD involved in SKD assembly. The Ministry assembly. expects this to change as the companies CKD. move to CKD assembly and begin to source Some binding constraints remain, with sig- parts and components domestically. The nificant impact on sustainability of the new government is taking steps to develop an- investments. The first constraint is the huge cillary industries that will facilitate linkages gap in skills and expertise. The government between automobile assembly and the rest intends to use the automotive industry to of the economy. drive the creation of highly skilled jobs. But the industry itself will require a minimal level There are plans to resuscitate the aban- of skilled manpower in order to progress doned glass and tyre factories to support from basic SKD assembly to CKD. At the the automobile assembly as the companies moment such skills are limited. No more progress from SKD to CKD. The AGI is also than one-fifth of adult Ghanaians have optimistic about the future developmental secondary or post-secondary educa- impact of the investments in the automobile tion. The bulk of the educated population industry given government plans to develop has a general education in non-technical an integrated aluminium industry. According subjects and Ghanaians with automotive to the AGI, local firms have begun asking specific skills and knowledge are few. The about opportunities available for them to automotive industry policy recognises this participate in the automotive value chain. It challenge, and it proposes Skills Training is acknowledged that it will take a while for and Technological Capacity Upgrading as local firms and the domestic economy to a major thematic area. The objective is to benefit from the new investments, but the expand the skills base for the automotive journey is worthwhile.
22 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
ABOVE: A daytime aerial 2.2 Ethiopia view of Addis Ababa in Ethiopia. Ethiopia has been one of the Sub-Saharan Photo by Gift African countries that succeeded in gain- Habeshaw on ing considerable economic growth over Unsplash the past decade, averaging 10.9% annual growth between 2004 and 2014, with a GDP of USD 63 billion in 2015 that makes it the ninth largest economy in Africa and the third largest in Eastern Africa (Deloitte, Africa Automotive Insight, 2017).
The Ethiopian government has adopted an Industrial Development Policy to transform Within GTP II, manufacturing in general the currently agricultural-led economy into and the metal and engineering-automotive an industry-based one, with the aim of lifting industry are considered key sectors on the the population out of poverty and becom- path to industrialisation, with the potential ing a middle-income country by 2025. For to create job opportunities for engineers, this purpose, the country implemented a technicians and related trained profession- Growth and Transformation Plan (GTP I) als in the years to come (FDRE Ministry of and is now on its second plan (GTP II). Industry, 2018).
www.industriall-union.org 23 Section 2
5 South Africa has a new vehicle market of 2.2.1 The Ethiopian auto industry: 550,000 units per year, Vietnam 300,000. profile and investment plans
According to the Ministry of Transport, venture basis between local and foreign Ethiopia is among the least motorised coun- investors (FDRE MIDI interview). tries in the world and is situated at the very bottom of the list of nations in terms of car Today, the Ethiopian automotive industry is ownership, estimated close to 975,000, up not significantly labour-absorbing and can to 1.3 vehicles and 2 cars per 1,000 (Ministry be considered at its early stage, with new of transport and Herald, weekly newspaper, vehicle assembly ranging between 8,000 2020). In terms of production or assembly, and 12,000 (numbers easily fluctuate) the country still ranks very low. It ranges vehicles per year.5 However, the number of between 8,500 and 12,000 assemblies of assembled new vehicles has recently been new vehicles per year, with all parts of the increasing. vehicles imported as CBU, SKD or CKD seat Due to the or kit, without any significant production of Most vehicle assemblies are SKD, while components or creation of backward and companies with CKD are struggling to com- shortage forward linkages (FDRE MIDI interview). pete with SKD and new imported and used of foreign vehicles, given the absence of a national currency The automotive industry in Ethiopia is tax law or of a clear policy to encourage dominated by vehicle sale and after-sale CKD and similar value addition assembly reserves, services with little vehicle assembly, which processes or manufacturing (Interview with almost all instead is dominated by Chinese brands Li-Fan and MIDI). For example, sometimes (both passenger and business vehicles). So it is much easier to simply engage in new or assembly far, no vehicle production, including spare used vehicle sales because of the absence compa parts in full scale (original vehicle compo- of a clear policy requiring the engagement nies are nents or spare parts) by local or MNCs has in full scale complete knockdown process- taken place. Only a few local factories that es. CKDs have their own overhead costs operating mould and forge parts (eg. Akaki metal engi- like establishing the plant, hiring and training in under- neering) or produce batteries and machin- human resources, brand promotion etc. ery, along with one local, long-established (Interview with Li-Fan representatives). production. tyre factory, can be mentioned as vehicle Overall, the demand for vehicles is still accessory producers (desk review and growing steadily (vehicle use grew by 2% interview with FDRE MIDI). annually between 2005 and 2014 according to Deloitte, Africa Automotive Insight, 2017). Based on the data obtained from the FDRE Metal Industry Development Institute Currently, an estimate of the annual car (MIDI), there are 58 companies that assem- sales range between 10,000 to 12,000 new ble passenger and commercial vehicles vehicles, including locally assembled and (trucks for dry, wet cargo and public trans- more than 30,000 (up to 40,000) used vehi- port), including three-wheeled vehicles and cles. Experts comment that volume matters motorcycles, registered in the country. Out in order to attract significant FDI – an annual of these companies, only one is a govern- sale of 200,000 new vehicles would attract ment-owned enterprise – the Bishoftu global vehicle manufacturers, including Automotive Industry (BAI), which is part producers of components and spare parts. of the Metal and Engineering Technology Unfortunately, due to the high price, the Corporation (METC) – the rest are private majority of the vehicle demand is covered companies mostly established on a joint by used vehicles, and out of these above
24 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
84% are passenger cars, with business is due to the government’s multiple high vehicles in second place (Interview with restrictive tax levies on imported new MIDI). However, due to the shortage of for- vehicles, which push people to opt for used eign currency reserves, almost all assembly cars. The tax (Surtax, VAT, withholding companies are operating in under-pro- etc.) on imported vehicles is one of the duction. The famous multinational vehicle highest in the world, 120 to 300 percent, manufacturers are present in the Ethiopian together with the highest tax imposed market, but there are substantial challeng- on passenger vehicles based on their 85% es hindering the sector, which, as a result, engine size. These high tax structures and does not move forward as expected. These tariff levies on imported vehicles will reduce challenges include severe foreign currency the domestic demand and hamper the Up to 85% of shortage (unique to Ethiopia in comparison development of a local automotive industry the vehicle to other African countries), weaknesses in (Kiniche Ohno, GRIPS, 2019). market in the incentive structure, the inflow of used Ethiopia is vehicles and parallel imports (Kenichi Ohno, The local passenger vehicle market dominated by GRIPS, 2019). is determined by many factors. These used vehicles. include: Like other Sub-Saharan African coun- • price or affordability tries, the vehicle market in Ethiopia is also dominated by used vehicles, estimated to • vehicle brand or brand reputation be up to 85%. Ethiopia is one of the coun- • aftersale value % tries in the world that does not put an age 70 limit on the import of vehicles, although • easy maintenance this is changing. The age of the used cars • availability of spare parts (ranges of currently being imported ranges from 15 options, availability of genuine spare More than 70% to 20 years old (since production).6 These parts and considerable price variations) of imported vehicles are imported from the Gulf, Europe – an area in which the Japanese brand fuel and spare and America, either through the main transit Toyota is the leader. parts are or through the used vehicle business hub, consumed by Dubai (VMIATSA, 2019). In addition to these factors, the local vehicle used vehicles dealers and commission agents have annually. Used vehicles consume more fuels and some power in manipulating the market of need frequent maintenance and spare passenger vehicles, especially the used parts compared to new vehicles (VMIATSA, vehicles market. For example, a 2015 Toy- 2019). According to the FDRE Ministry of ota used vehicle (Toyota Yaris, 1300-1400 6 Far from the inter- national standard that Transport, more than 70% of imported fuel cc) can be sold for about USD 26,742 and is between two to four and spare parts are consumed by used ve- above but other brands, locally assembled years old. hicles annually, which drain the hard-earned with similar engine sizes, can be purchased foreign exchange. In addition, this has a at about 20,056 up to USD 22,730. This is negative environmental impact and contrib- still very expensive for the majority of Ethi- utes to the raise in vehicle accidents in the opians, who on average want to have an or- country (www.motr.gov.et) dinary vehicle for personal mobility costing around USD 9,359 to 12,034 – the average Indeed, the high price for new vehicles in price until some years ago (interview with comparison with other African countries local vehicle dealer).
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2.2.2 Policy directives, investment incentives, tax issues The industry Since 2018, the latest change in govern- building rents (low land lease for 50 to 80 is complex, ment executives, there have been some years, the cheapest in the world). The gov- involving developments in terms of industrial policy, ernment also highlights low cost electricity, high and where the private sector has attracted availability of water and an abundant and increasing focus. Unlike other Sub-Saharan inexpensive labour force adding to the integrated African countries like South Africa – and presence of industrial parks and zones with technology even by contrast to neighbouring Kenya all infrastructures, where it is much easier – Ethiopia doesn’t have any clear national to establish a plant (FDRE Industry Minister, that can be policy guide to develop the automotive Investment opportunities in Manufacturing transferred, industry. For example, South Africa, Kenya Industry, 2017). and can and Nigeria have national automotive indus- try development policy plans in place, with In addition to the relatively favourable drive the various incentives specific to the sector business environment and the strong gov- whole in- (VMIATSA, 2019). ernment support for both foreign and local investors, the country also offers special dustrialisa- Following discussions with FDRE MIDI, geographical and preferential trade ar- tion process it is clear that the automotive industry in rangements aimed to create opportunities by creating Ethiopia is still treated under the general for integration within the global market or investment or FDI incentive package. This global value chains. Geographically Ethi- quality jobs shows a lack of understanding of the unique opia is located at the crossroad between for engi- nature of the industry from the government Europe, Middle East and Far East markets, neers and side, with the industry only lately being with the near, convenient access to the Red given special attention under the metal and Sea through the port of Djibouti. technicians engineering key priority sectors. The indus- try is complex, involving high and integrated Furthermore, the country has access to technology that can be transferred, and can global markets via the African Growth and drive the whole industrialisation process Opportunity Act (AGOA), a preferential by creating quality jobs for engineers and trade agreement between the USA and 37 technicians (FDRE MIDI interview). So far, Sub-Saharan African countries in place only the SOE BAI (Bishoftu Automotive until 2025 which covers a wide range Industry) has plans to, in the next five years, of exports. Ethiopia also benefits from localise 60% of the imported components COMESA (Common Market of Eastern by redesigning, designing and producing lo- and Southern Africa) and the many cally, aiming at manufacturing a local brand bilateral trade agreements concluded vehicle (Interview with BAI representatives). with Western countries, including the Netherlands, Belgium and Luxembourg. In order to facilitate and attract FDI, there Ethiopia is also part of the “Everything are a number of competitive fiscal and but Arms” programme that has been set non-fiscal incentive packages for investors. up to provide access to the EU market for Incentives include corporate tax breaks, Lesser Developed Beneficiary Countries, customs duty exemption on imported free of duty and without quota restrictions, equipment, no income tax for foreign work- for all export products except arms (EIC, ers, access to loans, low land and factory Investment guide to Ethiopia, 2017).
26 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
2.2.3 Supportive institutions and key stakeholders
In order to facilitate, license, and promote Sector Association (VMIATSA). VMIATSA FDIs, the government established various was established in 2014 and is composed institutions. These include the Ethiopian of eleven leading brand vehicle companies Investment Commission (EIC), the Industry to represent and facilitate its members’ Ministry, the FDRE Metal Industry Devel- interest. Other organisations like Friedrich opment Institute and the Industrial Park Ebert Stiftung (FES) and ILO-Ethiopia Development Corporation. In addition to the country offices are also present. FES has above governmental institutions, there are been working with CETU for many years also non-governmental institutions related on labour issues. IndustriALL Global Union to the automotive industry and working on has also been working with the Industrial labour and related issues. Among these, Federation of Textile, Leather and Garment there is only one association to mention Workers Trade Unions and the National representing major vehicle sales and Federation of Energy, Chemical and Mining assemblers in the country: the Vehicle, Ma- Workers Trade Unions for decades, running chinery Importers, and Assemblers Trade various union building projects.
2.2.4 International vehicle brands in the country
Currently, there are multinational vehicle be hydrogen-powered fuel cell passenger By 2030, brands partnering with local companies and commercial vehicles. Furthermore, it is Marathon including Li-Fan and other Chinese forecasted that the country’s demand for motors group brands, KIA assembled by Belayab Motor, passenger cars will reach 2 million annually plans to boost Peugeot, Geely and BUD by Mesfin and preparation to meet the future demand production with Industrial Engineering, Hyundai by and exploit the market is underway (Ethiopi- a 5.5 billion euro Marathon motors group and other multiple an News Agency, Addis Ababa, 29 January, Chinese brand vehicle assemblers. In 2019). The Chinese government-owned investment to terms of assembly, the above-mentioned brand JAC recently restarted its assembly reach vehicle as- companies claim they have the capacity to plant and is assembling truck and passen- sembly of up to produce a range from 5,000 up to 10,000 ger vehicles in partnership with the local 700,000 annual vehicles each, annually, but currently they Tamrin International Plc and Li-Fan, for units, of which are each only producing in the hundreds – modern taxi cabs and for other business 500,000 will below 500 vehicles – annually (Ethiopian (www. addisinformer.wordpress.com). be hydrogen- News Agency, Addis Ababa). powered fuel In 2019, Volkswagen also signed an MOU cell passenger Marathon motors group, in addition to with the Ethiopian government to join the and commercial currently assembling Hyundai vehicles with auto industry. The company is carefully vehicles. an annual production of up to 5,000, has seeking to enter the market and soon will recently introduced the Hyundai IONIQ kick off or start up with a gradual step-by- electric car into the market and plans to im- step plan to invest a worth of USD 700 mil- port hydrogen fuel cell vehicles in the next lion. According to the VW representatives few years. By 2030, the company plans briefed on the local news, training facilities to boost production with a 5.5 billion euro in- and other preparation (a starting point) is vestment to reach vehicle assembly of up to expected to launch soon (www.cnbcafrica. 700,000 annual units, of which 500,000 will com/videos/).
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ABOVE: A lookout point 2.2.5 Infrastructure building in light at Blue Nile Gorge, which of automotive industry development is downriver from the Grand The automotive and related industries The Grand Ethiopian Renaissance Dam Ethiopian require sustainable and reliable energy – the largest hydroelectric power dam in Renaissance Dam in Ethiopia. sources. According to the Ethiopian Elec- Africa – is under construction on the Nile tric Power Authority, the government of River (76% completed), with an additional Ethiopia strongly believes that the energy capacity of 6,450 MW electricity (www.eep. sector plays a key role for the overall so- org). According to EIC, Ethiopia offers the cio-economic development of the country, most globally competitive electric power thereby building a green economy resilient rate estimated at USD 0.03/kWh for FDI to climate change by 2025. The country is as an incentive (EIC, Investment directives, determined to develop abundant untapped 2017). renewable energy resources that can be used to generate electricity. Road and traffic infrastructure develop- ment is also one of the prerequisites for Hydropower is a major source of electricity the development of the automotive sector. with a generating capacity of about 45,000 The country has an area of around 1.1 million MW. In addition to this, there is an ongo- square kilometres, which therefore requires ing project on wind energy (some already huge investment to connect the major parts operational), solar and geothermal power of the country through road networks. One plants with the capacity of generating key indicator regarding the road infra- 10,000 to 15,000 MW (Plan Commission structure is the total length of all-weather GTP II midterm review, 2018). The country roads at regional and federal levels, which is now generating 4,315 MW, whereby it was passed from 110,000 to 121,196 km and aims planned to reach 17,208 by the end of GTP II to reach 220,000 km at the end of GTP II with the completion of some of the ongoing (GTP II, 2016). In addition to government hydropower mega projects, including the initiatives connecting the major parts of the GRE. country through road networks, emphasis
28 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
was also given in connecting major indus- sion plan to reach 5,000 km at the end trial centres through modern express ways. of GTP II. Moreover, the government and The first of its kind was a modern six-lane private sectors so far have built 10 industrial 80 km expressway from Addis Ababa to parks in the country and most of them are The Grand Adama started in 2010, with its all-modern now operational, with the aim of facilitating Ethiopian digital traffic management system com- an easy establishment of enterprises with pleted and operational in 2014. The second all infrastructures in one window service Renaissance phase, Modjo-Hawas, reached about 60% across major parts of the country. Accord- Dam – the and preparation is underway to start the ing to sources, so far only Li-Fan motors third phase of an expressway that connects has a vehicle assembly plant in the Eastern largest Addis Ababa to the port in Djibouti, the main Industry Zone (about 30 km East of Addis hydroelectric Red Sea outlet of the country (FDRE Minis- Ababa). However, the country didn’t devel- power dam try of Transport). op automotive cluster development areas like textiles and garments, for which most in Africa – is In addition to road infrastructure devel- industrial parks and facilities are allocated under con- opment, there is also promising growth in to labour intensive activities (like textile, terms of railway line development, given the garment, shoe and leather apparels, etc). In struction on fact that the country owns one of the best terms of developing an automotive cluster, the Nile airlines in Africa (Star Alliance). Recently the country should learn from South Africa River. the country completed a 756 km modern and Nigeria, where there are various policy electric railway that runs from Djibouti port incentives instruments aimed at building to Addis Ababa, also providing strategic automotive specific and related industrial logistic transport services with an expan- clusters and zones (VMIATSA, 2019).
2.2.6 The industry and the COVID-19 crisis
Since the outbreak of the COVID-19 crisis, For the vehicle assemblers, this is one of it was found out that those companies that the most difficult times ever, due to the are engaged in vehicle sales and after-sale shortage and the lack of access to foreign services have not been much affected in exchange to import vehicle components terms of the business. Except for a lack of as SKD or CKD kits. Some companies are some imported spare parts (interviews), operating partially, using kits imported be- the business for sales and after-sale fore the pandemic, while others had to shut services is going well as usual. Some even down for the time being (interviews with claim that business is at a peak, since the certain companies and Federation). need for new vehicles and maintenance services increased as a result of the Some vehicle assembly companies pandemic and of the state of emergency, explained that, with the limited foreign during which public transport was only al- exchange reserves currently, they are lowed to carry passengers at 50% of their competing for the limited foreign currency capacity. Unfortunately, this resulted in with other essential public goods like drugs exacerbating the already inefficient public (medicine), while used vehicle dealers still transport facilities. manage to import.
www.industriall-union.org 29 Section 2
7 The third sub-sector under automotive 2.3 Kenya industry is motorcycles production and Kenya’s automotive industry has come a assembly long way since the 1960s, ultimately gaining a leading position in Eastern Africa’s motor vehicle assembly region. The automotive industry in Kenya is characterised by Fully Built Units (FBU) and Completely Knocked Down (CKD) production. The activities in this industry comprise both vehicle produc- tion and assembly – including passenger cars, light commercial vehicles and pick- of Kenya, 2019). How the local players in ups, heavy commercial vehicles (buses and the sector can share in this growing market trucks) and automotive parts and compo- has been a central question in the industry. nent manufacture.7 Looking back three years, the number of new vehicle registrations has showed an Currently, vehicle production is done upward trend, increasing by 5.2 percent through contract manufacturing at three from 282,672 units in 2017 to 297,289 in assembly plants, namely: 2018 (Kenya National Bureau of Statis- tics, 2019) – and in 2019 increasing by 10.1 • Isuzu East Africa Limited (formerly percent, recording 327,176 units (Kenya General Motors EA Ltd), National Bureau of Statistics, 2020), and thereby indicating a higher level of vehicle • Associated Vehicle Assemblers (AVA) ownership. • Kenya Vehicle Manufacturers (KVM). Turning now to market demand, Kenya’s AVA and KVM undertake assembly work automotive market is highly dominated by on behalf of other dealers. Collectively, the used imported vehicles. It is noted that, of three assemblers have installed a capacity the imports, a very large variety comprises of 34,000 units per year, which is sufficient secondhand brands, which account for to meet the East African region’s annual over 85 percent of imported Fully Built Units demand of 15,000 units (Kenya Association (FBUs) (government of Kenya, 2019). The of Manufacturers, 2018). secondhand market is where most people buy their passenger cars, the driving factor Vehicle production has been fluctuat- being affordability. In an interview with a ing widely over the last two decades, with Kenya Motor Industry Association repre- production levels occurring in the range of sentative, taxation was cited as a factor just above 5,000 to well over 9,000 units. which compounds the existing affordability Data on the economic surveys for the challenges: currently there is import duty, previous two years, however, show that the excise duty and VAT. industry has registered increases in output in the previous three years. In 2019, the local Accordingly, at present, the industry is vehicle assemblers produced 7,802 units. running at just 16 percent of its installed This represents 38 and 60 percent increas- productive capacity (Kenya Association of es relative to the 5,653 and 4,877 units Manufacturers, 2018). Available statistics produced in 2018 and 2017 respectively. from the Kenya Motor Industry Association show that total new vehicle sales (combined Kenya’s vehicle population was placed FBU & CKD) has been tapering in the last at over 2 million in 2019, comprising both two years, dropping from 14,003 to 12,981 imports and local assembly (Government units in 2018 and 2019 respectively. In a time
30 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
of continued economic uncertainty caused being driven by demand for transportation by the COVID-19 pandemic, the automotive in the construction, mining, agri-business, industry is staring at a potentially rough tourism, energy and retail sectors (Davies 2020. Sales are expected to register a sig- and Schiller, 2018). nificant drop, with the year’s figures current- Sales are ly standing at 5,467 units. Amid this down- From an economic standpoint, nearly all expected turn, growing demand for locally assembled assembling is focused on the commercial to register vehicles over the last three years reflects vehicle segment. According to the inter- a ray of optimism. This is evidenced by the viewed representative from Kenya Motor a signifi- progressive increase in CDK sales, from Industry Association, production of passen- cant drop, 4,607 units in 2017 to 6,894 units in 2019. A ger vehicles is deemed very uneconomical closer scrutiny of the sales data gathered in the assembly plants. Capacity in the with the by the Kenya Motor Industry Association assembly plants is constrained by the lack year’s show that commercial vehicles account for of raw natural resources and raw materials figures principally all the CDK sales between 2013 needed for automotive parts and compo- and 2020. By and large, corporate/com- nents production, with levies imposed on currently panies represent the largest market for the raw materials brought into the country rep- standing at new vehicle sales. Based on the sector and resenting a further disincentive to competi- 5,467 units. industry analysis, it appears that sustained tiveness of the local automotive industry. growth of the commercial vehicles market is
2.3.1 Investment plans and location decisions
The interviewed shop stewards pointed ther local input by moving the production of to several new investment plans in their these models from semi-assembled to fully respective assembly plants. These are knocked down. coded under the following three categories: new products, additional labour input, and On product and service quality, the Isuzu product and service quality. East Africa investment plan focuses on further building quality into their products. AVA has recently signed four assembly The assembly plant plans to invest in a qual- agreements for the production of four ity body shop facility, the observation being models, namely: Toyota Hilux new model, that most of the locally built bodies, espe- Mahindra, FIE canter trucks and Proton cially for buses, do not provide a compara- saloon car. ble level of quality to those imported.
KVM, on the other hand, has signed two In the context of location decisions, po- assembly agreements for production of the tential growth in product demand seems Ford Everest Pick model, and the Bajaj to be a factor in the investors’ location four-wheeler mini passenger ‘vehicle’ strategies. With the spotlight on policy sup- (quadricycle), both expected to go into port to promote domestic auto sales, the operation in 2021. Further additional labour motor vehicle assemblers will be seeking to input is also anticipated at KVM. step in to fill up the supply gaps caused by import restrictions. These include mea- The current assemblies of Volkswagen sures around age restriction on vehicle im- Polo Vivo, VW Caddy Van and Peugeot ports (as a start), targeting vehicles that are 5008 and 3008 models do not enable above 5 years with capacity of more than sufficiently high local input. The plans, albeit 1,500 cc, and tax measures to increase the unconfirmed, are looking to underpin fur- cost of imported vehicles.
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2.3.2 Investments and decent work
Beyond achieving job growth, the shop the level of work done. In an apparent stewards interviewed presented differing departure from the views held by the opinions and perspectives on whether other participants, a KVM representative the above investments would produce a had the view that decent work is not likely positive impact on decent work. The to be realised with the ongoing piece- positive views on decent work emerged rate pay system, the contention being from the comments expressed by Isuzu that the employees under this system are East Africa and AVA representatives. For not covered by the CBA, and therefore Isuzu East Africa, investing in a plant for earn wages at a rate of pay less than the vehicle body construction will, through rate paid to permanent and fixed-term subcontractors, transition the workers employees. now engaged on contract basis into the formal labour market. The representative The other pertinent issue is that workers from AVA asserts that this objective can are not eligible for severance pay or another be achieved by the management and trade form of compensation in the event of union working together to determine what termination, irrespective of how long the they believe to be a fair rate of payment for employee had worked for one entity.
8 Centum is 2.3.3 Policy and institutional capacity East Africa’s leading investment company An examination of the Industrial Transfor- focused more on driving an increase in man- listed on the Nairobi Securities Exchange mation Programme (Government of Kenya, ufacturing, production and jobs within the and Uganda 2015), developed by Kenya’s Ministry of In- sector. Early efforts are underway in aiming Securities Exchange, dustrialisation and Enterprise Development to revamp the local assembly of motor and maintains 17.8 8 percent stake in shows that the automotive industry is not vehicles. An excerpt from Centum Capital leading local vehicle listed among the 13 target industry sectors Managing Director Fred Murimi’s interview assembler Isuzu to deliver projects that will achieve results with KTN News, on June 21, 2019, revealed East Africa on the GDP and employment growth in the a set of demand-oriented proposals, an- immediate term. Regardless, the industry chored on these policy measures: does appear to be receiving increasing attention in political discussions, and is • Stop importing commercial vehicles recognised as an important contributor • Reduce the age limit from 8 to 5 years to Kenya’s manufacturing pillar under the for imported passenger vehicles with Big Four agenda, which in 2016/17 identified engine ratings of more than 1500 cc Four Priority initiatives to be implemented over the following five years (2017-2022). • Give exclusive preference to local In his March 13, 2019 speech, President purchases from companies which have Kenyatta underscored the government’s assembly plants in Kenya by all public aim to prioritise motor vehicle assembly entities making a procurement of motor and manufacturing of spare parts as part vehicles and motorcycles in all govern- of the agenda to promote manufacturing ment purchases under the Big 4 Agenda for wealth and employment creation (President’s Strategic The proposed policies are however yet to Communications Unit, 2019). be enacted, having been stayed following the suspension of regular parliamentary sit- Information disclosed by the interviewed tings due to COVID-19. In the meantime, the Kenya Motor Industry Association rep- Car Importers Association is also lobbying resentative indicated that the National in opposition to the proposal that focuses Automotive Policy that has come about is on reducing the age limit from 8 to 5 years.
32 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
RIGHT: The Kenyan union signs collective agreement with Isuzu East Africa
2.3.4 Sustainability of investment plans Comments from industry and sector repre- as noted from the following comment from sentatives (i.e. Kenya Motor Industry Asso- Kenya Motor Industry Association repre- ciation and Kenya Private Sector Alliance) sentative: point to one key concern: the challenge of sustaining demand for vehicles that are “Kenya is a relatively small market; the assembled locally in the long run. vehicle population, currently stand- ing at about 2.5 million is not likely to The overarching challenges being faced are grow too much bigger in the next 10 to prices and market factors. Looking at the 12 years. Even then, there is potential aspect of price, typically, it is more costly to for sustainability. In order to increase buy a vehicle assembled in Kenya com- sales volumes, the manufacturing can pared, for example, to one assembled in be expanded and do local assemblies South Africa. For the long-term sustainabil- export as well. Overall, commercial ity of the sector, the vehicle prices need to vehicles are expected to drive the vehi- be reduced on account of lower tax rates. cle assembly sub-sector. Furthermore, According to the Kenya Private Sector the plan to develop the bus rapid transit Alliance representative, particular consid- system is expected to drive the growth eration should be given to adjusting the of the commercial vehicles market. The parameters of the tax system. assembly plants in turn, are expected to help to develop the local manufacturing When it comes to market size as a factor of parts and components, like brake accounting for the growth of the automotive linings. With new technologies trans- industry, it is noted that given the level of forming the industry, this has to be done demand it is unlikely that this process will in such a way that everybody is keeping ever grow much beyond its current level, up with modern technology.”
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ABOVE: Workers 2.3.5 Employment creation and at an auto manufacturing decent work plant in Kenya. The key informants’ responses indicate “knock-down,” this being the key factor higher expectations about job growth determining the number of available jobs. through the development of new product For example, the VW assembly that was re- lines. One question for which it was difficult cently launched accounts for only a handful to receive a straightforward answer, was of jobs, with most of the work performed with regards to the number of jobs that in South Africa. Isuzu East Africa’s antici- these new investments are expected to pated new investment in a plant for vehicle generate, specifically in relation to the area body construction is expected to accrue of ‘knock-down’ assembly. At that point in to a sizeable number of new jobs – in the the study the participants were uncertain range of 15 to 20 percent of the unionisable about the degree of awareness of the employees.
2.3.6 Global value chains and backward and forward integration
Integration into global value chains occurs up to date with current technology in terms through the production and management of local component manufacture that must systems set by the principal company be line with global standards. that provides the franchise. The principal company provides the key investment in Backward and forward linkages have, how- addition to assisting the local dealers to get ever, not occurred without hitches. From
34 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
Kenya Motor Industry Association’s per- tubes, glass, welding metal, bolts and nuts, spective, the production linkages have been metal brackets and vehicle bodies (Kenya marked by ups and downs, due to a regular Association of Manufacturers, 2018). Ac- stream of new regulations with which the cording to the Kenya Private Sector Alliance industry players have to figure out how to representative interviewed, forward linkage deal. in the production process is largely reflect- ed in outsourcing the construction for body The major local content in the assembly sub-assemblies. The most relevant in this plants, among other components, include case is Isuzu East Africa, which has out- the arterials batteries, leaf springs for sus- sourcing arrangements with automobile pension systems, wiring harnesses, seats body builders (original equipment manu- and trimming materials, lubricants, paints facturers) for manufacturing truck and bus and other process materials, tyres and bodies.
9 Isuzu, ‘Production 2.3.7 Environmental impact and of Cleaner Vehicles in Kenya’, wedocs. unep.org, UNEP, sustainability 2018, https://wedocs. unep.org/bitstream/ Our analysis of the interviews makes it use- informants brings to the fore the question handle/20.500.11822 ful to consider the issue of environmental of how current industry standards relate to /25233/Production CleanerVehicles. impact and sustainability from two per- the engine technologies, in view of accept- pdf?sequence= spectives. The first perspective considers able limits for exhaust emissions of new 7&isAllowed=y the issue of environmental compliance. Key vehicles. The following comment illustrates informants expressed the view that vehicle these concerns: “Most of the assembled ve- manufacturers are generally inclined to- hicles have the type of engine that cannot be wards ensuring the manufacturing process- allowed in some other places. They do Euro 2 es meet with and integrate with the environ- or 3, but currently we are at Euro 7.” mental laws and regulations. Data and statistical information held by Isu- The second, and rather curious angle, zu East Africa indicate that new vehicles in considers the issue of emission standards. Kenya are currently at EURO 0-4 emission An observation flagged by one of the key level.9
2.3.8 Impact of COVID-19
The general findings show that the automo- ing those that remain temporarily closed tive industry has had to scale back pro- and those that may have closed forever. duction primarily due to disruptions in the Since the industry is fully dependent on the supply of parts and the inability of produc- transport sector, the challenges are further tion line trainers to travel into the country. compounded by changes in transport Overall, assembly plants scaled down their behaviours which include pandemic- operations by roughly 30 to 40 percent. related transport restrictions. According The industry has so far seen purchase to the Kenya Private Sector Alliance, so far, order cancellations and postponements the disruptions have not resulted in perma- resulting from business closures, includ- nent job losses.
www.industriall-union.org 35 Section 2
ABOVE: Metje and Ziegler’s 2.4 Namibia MAN sales and servicing Namibia’s auto industry is also at a very dealership in Windhoek. incipient stage, but it definitely presents potential for further expansion. Indeed, the country’s geographical location makes it an attractive destination for investment. New auto manufacturers and investors can be attracted by the proximity of regional net- works and Original Equipment Manufactur- ers (OEM) as well as by the export process- es happening through the Port of Walvis 10 Namibian Com- Bay. This port is located in such a way that petition Commission the link to strategic markets is supported by (2017) study on the The automotive industry in general has Automotive Industry fast transit to the European, American and Southern African markets. According to the three segments: vehicle and parts man- 11 Ibid Ministry of Trade, the Investment Centre ufacturing, vehicle retail and or vehicle “automotive companies will find optimal con- distribution, and the aftermarket services. ditions not only for testing, but also as a new At present, Namibia mainly operates under platform for manufacturing and exporting” vehicle retail and aftermarket services. The (Nam Investment Centre, 2015). sector has a few players that dominate the market – including Toyota, Nissan and The Competition Commission of Namibia Volkswagen. These companies have been in 201710 defined the automotive industry involved in retail only. The Competition in Namibia as being responsible for the Commission11 revealed that there were 10 distribution and retailing of vehicles, for franchise dealerships distributing brand the servicing and maintenance of motor new vehicles, with the majority operating in vehicles, and for the sales of vehicles and Windhoek. Metje and Ziegler (M&Z) have automotive-related components. However, the franchise rights of about 11 brands, it further posited that the Namibian Auto- followed by Associated Motor Holding motive Industry is still under-developed, (AMH) with seven brands, and Pupkewitz with active market players only in automo- Motors with six brands. Furthermore, there tive retail and the automotive aftermarket are over 50 registered dealers across the services such as panel-beating and motor country and over 30 companies selling car repair service centres. parts and accessories. Most of the compa-
36 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
nies are located in Windhoek, Swakopmund aspect, but when it comes to manufactur- 12 Any business and very few in the northern towns of the ing, some of the policies have to be amend- that is not registered with the Ministry of country. ed to address the new manufacturing Finance, Ministry of investments. The rest of the sector is purely Trade, Social Security The set-up of the industry also allows for import based, as all vehicles are imported Commission or any 12 other trading author- informal businesses that are operating mainly from South Africa. ity, and does not pay and providing motor and mechanic ser- tax is considered vices to customers. There is currently no Therefore, new investments will be wel- informal. record as to how many informal automotive come in the country. However, there are 13 This data is not businesses are in operation. However, the strategies that need to be employed to disaggregated. 2018 report by the Ministry of Labour on ensure that sustainable industrial structures the informal sector highlighted that those are formed, and most importantly, that de- 14 Ministry of Labour & Social operating under Wholesale and Retail trade cent jobs are created. For instance there is Security Commission accounted for 2,452 jobs, which is 54.4%13 a Pilot Investment Promotion Strategy that (2016/17) Namibia of the industry economic activities in the was drafted by MITSMED for the automo- Informal Economy 14 Case Study Report informal sector. tive sector in 2015. The strategy identified five areas with a potential to attract in- 15 The Namibian Namibia at the moment does not manu- vestment: automotive testing (permanent Government owns facture or assemble passenger vehicles test track and corresponding facilities), 49% of the plant. except for the manufacture of military aftermarket (e.g. off-road equipment), metal 16 Ministry of Indus- vehicles and agricultural machinery by the component suppliers (Tier 2 and 3 suppli- trialisation, Trade Windhoeker Maschinenfabrik (Pty) Ltd ers), wiring systems and components, and and SME Develop- ment. (2015/16) An- (WMF). There was, however, a company OEM assembly of commercial vehicles nual Report, Growth called Barden International that set up shop (Siddiqui, n.d.). at Home Strategy. in Namibia just after independence. The firm http://www.mti.gov. na/downloads/ closed in 2004 shortly after General Motors The strategy also identified the investment MITSMED%20An- breached their contract. Barden Interna- promotion instruments and the activities nual%20Report%20 tional was responsible for bringing Chevro- needed to achieve its objectives. The aim 201516...final.pdf let to Namibia. Thus, the market for vehicle of the strategy is “to achieve an increase manufacturing to date does not exist. in number, value and nature of domestic The industry itself is almost entirely retail. and foreign direct investment in Namibia. There were no car-making companies until This activity is to be achieved by, among December 2018, when the first assembly others, creating an enabling environment plant was opened in Namibia – a joint-ven- for investment, which involves having in ture agreement between Groupe PSA and place an appropriate legal and regulatory Namibia Development Corporation (NDC)15 framework; a proper plan and strategy for to assemble OPEL and PEUGEOT vehicles marketing Namibia as a preferred investment in Walvis Bay. According to the Ministry destination and enhancing Namibia’s positive of Trade, the plant produces 1 vehicle per competitiveness ranking”16 which highlights hour, with a capacity of up to 5,000 a year. some possible focus areas on the industry. The plant assembles approximately 30 However there are no policies that target car parts, models of Peugeot and Opel. the automotive industry specifically. According to industry players, this cannot be considered a manufacturing plant since It is not easy to determine the actual GDP Opel and Peugeot assemble SKDs. contribution of the sector as national data such as the NSA only provide aggregated The assembly plant and the sector are data on Wholesale and Retail Trade. still undergoing final policy and regulatory Also considering that the WMF products perfection, for example on the endorse- are for military vehicles, the figures are not ment of a manufacturing certificate. State publicly reported as they are shrouded in regulations are in line and address the retail military secrecy.
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2.4.1 Investment, COVID-19 and future prospects
This year, the COVID-19 pandemic has had However, due to the negative impact the a quick and serious effect on the globally health crisis will have on the Namibian econ- integrated automotive industry. This has omy, the demand for non-essential items probably already set a heavy weight on such as vehicles is expected to remain well an industry already adapting because of a below the number of vehicles sold in 2019. downshift in global demand. For example, China, Europe and the United States are The Risk team expects the Namibian econ- markets for vehicles and motor parts for the omy to contract by 6.2% in 2020 owing to country, hence the impact on these markets the negative consequences of the ongoing was also felt in Namibia. Companies up and COVID-19 outbreak. This was supported by down the value chain in Namibia experi- the findings of the current study in which enced the weight of supply and demand dis- the informants shared that there was a 60% turbance, and public concern for health and decline in sales volume which led to expen- financial well-being has also slowed the lo- sive stock. It was added that since the tour- cal economy. Cost-cutting and operational ism sector is a major customer for automo- China, fitness programmes that started well before tive dealers, the pandemic has significantly Europe and the pandemic remain key, but the retailers slowed the business income. the United ought to secure critical investments. According to Nghinomenwa, (2020), a States are Fitch Solutions Country Risk and Industry Simonis Storm Securities (SSS) analysis of markets for Research show that new vehicle sales in Namibia’s new vehicle sales data compiled Namibia will contract sharply in 2020 as by the National Association of Automobile vehicles the implementation of a lockdown to stem Manufacturers of South Africa (NAAM- and motor the COVID-19 spread in the country and SA) for April 2020, only 50 new vehicles parts for the subsequent economic fallout will result were sold countrywide compared to 759 in a much weaker demand for vehicles, in March 2020. A car is the second most the country, which will mark six consecutive years of a expensive purchase the average person hence the declining automotive market (Fitch Solu- makes in their life after a house. According impact on tions, 2020). The implementation of strict to an SSS analysis, on a monthly basis, movement restrictions between mid-March Namibians reduced expenditure on new these mar- and April 2020 also resulted in a notable vehicles, leading to a monthly decline of kets was reduction in sales. An example of reduction 93,4% in sales. New vehicle sales declined is in small vehicles (like the H120), which by 94,6% on an annual basis. The findings also felt in saw the total new vehicle sales contract by further explained that the Khomas and Namibia. 33.9% year-over-year to reach 3,517 units Erongo regions were in lockdown from 27 (Fitch Solutions, 2020). Therefore, the total March to 5 May 2020, which would have re- vehicle sales forecast for the country was stricted vehicle sales in these two regions. revised to be much lower and sales are However, sales would have continued in the expected to contract by a further 17.0% in remaining regions (during the first lockdown 2020 to reach a total of 8,633 units. This is period from 28 March to 14 April 2020) and in contrast to a previous forecast of a 0.5% commercial banks were declared essential increase prior to the COVID-19 outbreak, services, ensuring continued vehicle financ- when a low base effect resulted in a sales ing. The results of the SSS research on car recovery in 2020 (a contraction in sales sales from January to April are depicted in every year since 2015 was expected). Figure 6.
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Figure 6 Namibia new vehicle sales
1000
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0 January February March April
2019 2020 Source: NAAMSA 2020
Historic data show that April 2020 marks fleet due to multiple years of contractions the highest drop in vehicle sales in Namibia that leads to favourable low base effects, since 2,000 on a month-to-month and year- the sales in 2021 is forecasted to increase on-year basis (Nghinomenwa, 2020). Sales by 3% to reach a total of 8,892 units. are expected to remain in deep negative territory as forecasted by Fitch Solutions Additionally, economic growth is expected due to the extent of the decline in H120, with to return to a positive territory in 2021 along- sales only regaining positive growth trends side an improvement in the global economic from 2021 onwards. As an ageing vehicle environment (Fitch Solutions, 2020).
2.4.2 Current investment plans The government of Namibia has identified draw some lessons on how to promote and the automotive industry as a priority sector develop its growing automotive industry in the Growth at Home strategy. Currently, successfully. The country’s regional integra- one company has been involved in the man- tion agenda and existing policies on trade ufacturing of vehicles for security services and development are being reviewed by (Windhoeker Maschinenfabrik), while a the Ministry of Industrialisation, Trade and number of companies have produced parts SME Development (MITSMED) to incorpo- for the automobile industry. Most of these rate manufacturing as a necessity for the companies have produced parts for the automotive industry. MITSMED has cur- domestic market on a small scale, driven rently commissioned work to identify niche by consumer demand, while one company markets for the development of a growth has assembled vehicles exclusively for the strategy in this industry. export market. There are currently no pol- icies which are targeted to the automotive The government has over the past years industry specifically, but from the regional played a crucial role in building and sustain- comparison, Namibia could be able to ing the country’s manufacturing base, which
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may have a positive impact on the auto- ed (Siddiqui, n.d.). Given the state of market motive industry. This is mainly through the integration in the region, it is envisaged that intervention of introducing policies, which the Namibian automotive industry has the influenced the evolution and momentum of potential to manufacture for and integrate the Namibian manufacturing base. The Na- with the regional value chains and create mibian automotive industry is closely linked economic and social opportunities for Na- to the South African automotive industry, mibia in the area of diversification, product from where most vehicles are being import- development and technology transfers.
2.4.2.1 Peugeot-Opel Assembly Namibia (POAN) In Namibia, investments in the automotive together as a unit and created sustainable industry are competitive in grey areas employment as in the case of Peugeot. The geo- (retail) as opposed to manufacturing. The graphical sector is dominated by retail of grey in- The key stakeholders in the industry are puts including pre-owned vehicles, while convinced that Namibia is a hotspot for new location, within the retail industry panel beaters are investments. The geographical location, the the Port of dominant mainly in the informal economy. Port of Walvis Bay and the strategic market Walvis Bay The market for vehicle manufacturing engagement are qualities that can boost in- is therefore non-existent but poses an vestment. However, one of the companies and the opening for new investment. At the moment that operates in the retail sector opined strategic Peugeot-Opel Assembly Namibia (POAN), that it would be a challenge to set up man- along with the Ministry of Industrialisation, is ufacturing plants in the country due to a market en- focused on finalising all policy and regulato- variety of reasons, including: ry matters to ensure full production by 2021. gagement 1. the policies at the moment are not at- The government currently owns 49% of are qual- tractive enough for investments, and POAN. The percentage divide and involve- ities that ment of government is to ensure that there 2. it would require billions of USD to estab- can boost is consideration of Black Empowerment as lish a full-fledged manufacturing plant.17 part of local development. investment. Still, the concept of sustainable investment Furthermore, the situation of Peugeot has needs to be explored and made key when put pressure on government spending since considering new investments. One of the policy makers, the Ministry of Labour stat- 17 Namibia Employ- inception, since the cash flow has not met er’s Federation Rep, expectations due to low sales. Nonetheless, ed, “Sustainable investments mean diversi- interview extract. the firm has not laid the workers off, nor fication of economy, growth, expansion, job has it cut their salaries. The assembly plant creation and job security that offer decent 18 Ministry of Labour Interview extract continues to operate under these condi- conditions of employment. This presup- tions as a contribution towards sustainable poses good labour relations anchored on 19 Ministry of Trade livelihood for workers, despite the sustain- meaningful collective bargaining and social Interview extract ability of the company being on the line. The dialogue”.18 Namibia Employment Federation represen- tative shared that the standard of living can On the other hand, the Ministry of Trade be uplifted through decent salaries and by looks at it as an investment that “must be encouraging citizens to move their earned congruent with the Sustainable Develop- money, because if more money is earned, ment Goals (SDG) criteria, whether on ma- more money will be spent in the economy terials, production process, human capital hence the decision to increase the gov- and deployment of capital.”19 The ministry ernment tax. The imbalance of wages and further states that, in order to achieve such working conditions is due to discrepancies sustainability, Corporations should have between employers. The race challenge Sustainability Policies and a Reporting could be curbed if the players worked Framework.
40 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
20 Competition Commission inter- 2.4.3 Trade union and view extract stakeholder engagement 21 The process is still ongoing and hence The sentiments of the trade union are that the industry can handle new investments as long the Ministry could not give out detailed as they are legal and credible, including manufacturing and plants for cars. The challenges information come in when investors want to impose unacceptable conditions on the state vis-à-vis the higher rate of unemployment and the shortage of skills in some sections of the economy. 22 Ministry of Trade, Ministry of Labour, MANWU, NEF The unions are in support of new investments, on the condition that the following three issues are taken into account: 1. the involvement of unions at invest- Furthermore, the Competition Commis- ment discussions, sion20 indicated that a feasibility study to determine readiness is required if the 2. the prioritisation of local development government wants to develop the industry. (citizen benefits), and They also highlighted that the success of 3. the upholding of employment stan- the investments will depend on the prod- dards (workers’ rights are not violated). ucts to be manufactured and imported.
2.4.4 Government efforts to create a conducive environment for investment
There are incentives that the Ministry of Trade is busy finalising when it comes to new investments (new incentive regime).21 This is coupled with policy reviews to ensure invest- ments can be sustainable. The key stakeholders22 proposed that, in order to achieve local development and sus- tainable investments, there needs to be:
1. a policy/legislation review (Trade and 4. advocacy for workers to gain more Investment Acts and documents to knowledge on a policy level, speak to local development for the cit- 5. capacity building for the unions as they izens, incorporate skills transfers, and represent workers, VAT for government), 6. an education system to make sure 2. conditions on expected investments students continue to get quality educa- with regards to timelines, tax, tion and employment and locally sourced materials, 7. a portion of new investments that invest in skills transfer. 3. tripartite engagement before invest- ments are set up,
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2.5 Nigeria
The post- 2.5.1 The automotive independence industry in Nigeria era was a period of The first assembly plant in Nigeria was established in 1959 with the assemblage of state led SKD Bedford truck components by United investment Africa Company, a private multinational in critical enterprise. This was consolidated with the ambitious import substitution industrial areas of the expansion strategy covering broad seg- economy and ments of manufacturing in textile, chemical, car accessories like bumpers, car uphol- household items, and automobiles. stery, auto batteries and plastic inputs. the Federal These industries contributed to as much as Government The post-independence era was a period 40 percent of the components of vehicle of Nigeria of state led-investment in critical areas of assembly. the economy and the Federal Government established of Nigeria established six assembly plants The automotive sector experienced growth six assembly (two for cars and four for trucks). The two in terms of production between the 1970s plants. car plants were Peugeot Automobile Nige- and 1980s, partly due to shared investment ria in Kaduna and the Volkswagen assembly with the government and due to other man- plant in Lagos. The truck plants were in Enu- ufacturing sectors that provided raw ma- gu, Kano, Bauchi and Ibadan. All of these terials and parts to the automotive sector plants were established between 1975 and (such as petrochemical and iron and steel 1983. During this period both the Federal sectors), which was functioning and largely Government and state governments such state owned. as Kaduna and Lagos had shares in the automobile companies. At the time, the total In 1982, the Federal Government had fur- sum of government shares in an assembly ther signed fresh pacts with other OEMS in- plant amounted to about 70 percent. cluding Suzuki, Mazda, Nissan and Peugeot to set up new plants across the country. But With an overall developmental effort, the the onset of economic recession stalled the focus of the government was to ensure implementation and establishment of new the utilisation of local contents, transfer of auto plants. Prior to the collapse of the auto technology and employment for Nigerians. sector, local assembly plants had installed To some extent, these objectives were capacity for 108,000 cars, 56,000 commer- achieved with the development of auxiliary cial vehicles, 10,000 tractors and 1 million industries like tyre and glass manufacturing bicycles annually (Source, Guardian 31st and small-scale industries manufacturing January, 2010).
42 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
ABOVE: There are three fundamental tiers in the Following the implementation of the neolib- A worker washes automotive supply chain, which generally eral SAP in 1986 in Nigeria and the atten- a car in Abuja, include OEMs, dealers and n-tier suppliers. dant crisis of foreign exchange and the Nigeria. In the period between the 1960s and late collapse of the middle class the automotive 1970s at least four of the automotive supply sector experienced a significant downturn. Photo by Truman Tyoden tiers were present in Nigeria in one form While it is true that the neoliberal policies, on Unsplash or the other, including Tier 3, 2, OEMs and particularly privatisation, impacted the distributors. The automotive industry at its automotive sector hugely, other manufac- peak in the 1970s absorbed as much as 40 turing sectors such as petrochemical and percent of local content with the growth of mining – the forward linkages to the auto- auxiliary industries manufacturing tyres, motive industry – were negatively impacted furniture, glass and other car accessories. too, which contributed to the overall decline In this period employment in the sector was of the automotive sector in Nigeria. estimated to be over 100,000. Prior to the implementation of the SAP, In 1986 the military regime fully implement- assembly plants in Nigeria relied largely on ed the Structural Adjustment Policies (SAP) locally sourced materials for production. which was part of the International Mone- Aside from the impact of privatisation on the tary Fund’s (IMF) conditionality for granting automotive sector and other linked indus- loans to Nigeria’s government. The SAP tries, there was a large influx of imported policies included privatisation of particularly and relatively cheaper vehicles into the Ni- national industrial assets, deregulations, gerian automotive market. This had a huge currency devaluation and austerity, among impact on the production and sales of local others. These neoliberal policies reversed assembly plants, and several plants were virtually all the gains that had been previ- shut down between the 1980s and 1990s. ously made concerning industrialisation Equally, employment in the automotive and and decent work. linked sectors drastically dropped.
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By the 1990s, the automotive and auxiliary also signed an MOU with Volkswagen for industries like iron, steel and petrochem- the establishment of an assembly plant in icals had almost totally collapsed. By the Nigeria. Under the agreement, Volkswagen end of the decade, used foreign vehicles would implement a phased approach in dominated auto sales in the country, and relation to the assembly of vehicles, initially It is estimated their rise negatively impacted the develop- from assembly kits with a long term view of that there are ment of backward integration in the indus- establishing Nigeria as an automotive hub in 60 vehicles try. Auxiliary industries to the automotive West Africa. for every sector, such as the petrochemical, iron and 1,000 people steel industries, drastically rolled back the In 2014, the Federal Government intro- in Nigeria growth in the use of local content, hence duced the National Automotive Policy local automobile assemblage increasingly administered by the National Automotive relied on importation of spare parts and Design and Development Council (NADDC) other inputs with all vagaries of naira deval- to discourage the importation of used vehi- uation and forex scarcity. cles. While there are prospects for growth and improvement in the automotive sector, The prospect for economic growth soared the national automotive policy did little to after return to democratic governance in address the import-dominated market. 1999. Nigeria benefitted from renewed confidence for investment and a high price The current regime is focused on diversi- of crude oil in the decade between 2005 fication of the economy from oil to critical and 2015 when GDP grew steadily at over 5 productive sectors like agriculture, mining, percent. The Federal Government divest- and manufacturing. There are, therefore, ed its equity stakes in the assembly plants prospects for new investments in the auto- (Volkswagen of Nigeria Limited, Peugeot motive and allied sectors with the planned Automobile Nigeria Ltd, Steyr Nigeria Limit- implementation of the National Automotive ed and Leyland Nigeria Limited). Industrial Development Plan (NAIDP). The focus of the NAIDP 2014-2024 is to revive, The period witnessed a resurgence of the develop and sustain the local automotive middle class and increased activities in industry in terms of vehicles and its compo- general retail and sales of new automobiles. nents in Nigeria. The five key components During this period, the National Automotive of the NAIDP are: investment promotion, Council had developed policies to discour- infrastructure development, improvement age importation of used vehicles through of standards, skills development and market increased tariff applications and incentives development. for new investments in the automotive sector. The National Automotive Design Nigeria, with a population of approximately and Development Council (NADDC) issued 200 million people and a growing middle licenses to over 40 firms to set up vehicle class (estimated to be about 40 million), assembly plants. continues to show huge potential for a vibrant automotive sector. The total ve- A significant step was already taken with hicle population is put at 11,5 million with Honda, Nissan, ANAMMCO and Dangote an estimated ratio of 60 vehicles to 1,000 Trucks, PAN Peugeot and INNOSON, Nigerians, or 0.06 vehicle per person. This setting assembly plants in Lagos, Enugu, indicates that the vehicle market is still Kaduna and Nnewi. Other assembly plants largely untapped and that, given the right include Kia motors, JAC (Elizade Motors) policies and dogged commitment to imple- Hyundai Motor Company, Ford motor mentation, the Nigeria Automotive sector Company and GIC Motors. The NADDC can bounce back.
44 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
ABOVE: A masked man 2.5.2 New investment and sustainability walks past an informal store in the Nigerian automotive sector selling spare auto parts in Ikorodu, The industrial growth experienced by 2014. This provided a cocktail of incentives Nigeria. the automotive sector, largely due to the needed to revitalise the industry for job Photo by Tobi national economy improving between 2004 creation, local value addition and technol- Oshinnaike on and 2014, was consolidated upon with the ogy acquisition. About 54 firms have so far Unsplash National Automotive Policy Act of 2014, been licensed for vehicle assembly and 28 which espoused a roadmap for attracting of those firms are somewhat operational. investment in the auto-sector. According to NADDC the sector attracted over USD 1 billion in investments in 2019. The automotive industry has a vital role to play in the country’s economic develop- PWC, in a study from 2016, had also appro- ment and offers huge potential, including priately highlighted the potential contribu- employment creation of up to 10 percent, tion of ride sharing companies in boosting a contribution to GDP of up to 10 percent, sales of new and used vehicles. It argued the beneficiation of raw materials, and the that the frequent use of these vehicles and encouragement of local industrialisation the related wear and tear would require along the automotive value chain (NAD- replacement of parts to meet the standards DC 2020). The economic essence of the and pass the checks of the car ailing com- automotive sector to industrial and national panies. The report highlighted that the pros- growth presents the motivation needed for pects could hit 6,866,000 units in a rapid the government to invest in the automotive growth scenario, 4,162,000 in a medium supply chain and encourage investment in one or 1,803,000 in a slow growth scenario the sector. (Guardian 21 July, 2019).
In 2012, Nigeria imported 100,000 new cars However, current realities reveal that given and 300,000 used vehicles and the total the huge number of licenses issued, local import was estimated at USD 3.5 billion. vehicle assembly has shown little promise During this period auto imports witnessed for industry development, job creation and rapid growth in tandem with the rising GDP technology transfer as enunciated in the growth. These positive developments automotive development plan. created an enabling environment for the enactment of law to promote investment in The National Automotive Industry Develop- the sector and ensure resurgence of local ment Plan (NAIDP) unarguably is a step by manufacturing (NIRP 2014). the government to encourage investment in the automotive sector. The NAIDP provides There was a noticeable resurgence of ac- a series of incentives to ensure existing tivities in the automotive industries with the assembly plants thrive and to attract new introduction of the Automotive Policy Bill in investors in the sector.
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The fiscal incentives for the initial phase The Director General of NADDC confirmed from 2013 to 2015, as contained in the in January 2020 that automotive manu- plan, are listed below (Deloitte). facturing companies made investments worth a total sum of 360 billion naira into the • Commercial vehicles (HS Headings sector in 2019 only. These new investments 87.01, 87.02, 87.04, 87.05, 87.16) are to have brought Nigeria’s automobile produc- attract 35% duty without levy while cars tion capacity to at least 408,870 units per (HS Heading 87.03) are to attract levy year. An average of 2.8 trillion naira (about of 35% charged on the Fully Built Units USD 8 billion) was being spent annually on (FBU) in addition to the 35% import the importation of vehicles. This points to duty. the potential investment prospect in the automotive sector if policies can be put • Tariff on Completely Knocked Down in place to effectively drive patronage of parts (CKD), Semi Knocked Down parts local assembled vehicles and discourage I (SKDI) and Semi Knocked Down parts importation. II (SKDII) for use by local assembly plants will be 0%, 5%, and 10% respec- The government had banned the importa- tively. tion of vehicles through land borders during • Assembly plans to import FBU for cars the closure of land borders. It was gathered at 35% duty without levy and commer- that this closure has led to a 35% rise in ve- cial vehicles at 20% duty without levy, in hicle importation through the Lagos seaport numbers equal to twice their imported (a major import/export gateway in Nigeria). CKD/SKD kits. While the NAIDP has been approved, the Similarly, a circular released by the Fed- Automobile Policy Bill, which is a legislative eral Ministry of Finance (ref: BD/FP/ instrument to promote investments in the DO/09/1/224) confirmed that the past sector, was passed by the senate in 2017 President approved a number of additional but has been rejected by the President, on This closure incentives to encourage new investments the basis of suspected contradictions in the in the automotive sector beyond those provisions of the bill. For instance, the Auto- [of land bor- contained in the NAIDP. Such incentives mobile Development Bill provides a 10-year ders] led to include: all machinery and equipment for tax holiday which contradicts the Pioneer a 35% rise tyre production are now duty and VAT free; Status act. The pioneer status act is a fiscal all machinery and equipment imported for incentive given to companies in designat- in vehicle the purpose of vehicle assembly will attract ed pioneer industries which provides for a importation zero percent import duty and will be VAT 3-year tax holiday that can be extended for through the free; pioneer status to be granted to all tyre another 1 or 2 years. plants and harmonised 20% duty on car, Lagos sea- lorry and bus tyres (Deloitte, 2015). The Automobile Policy Bill, if the grey areas port are resolved and it is accented to by the While there are criticisms of the Nation- President, will give effect to the provisions al Automotive Design and Development of the NAIDP, which also includes a 5 billion Council (NADDC) and the NAIDP, which naira, zero-interest loan to procure local- the recommendations will be based upon, ly assembled vehicles to Nigerians. The there has also been some development in absence of a legal framework in terms of the sector. However, the benefits of such policy to attract Original Equipment Man- developments do not appear to have been ufacturers (OEMs) is considered for the evenly spread, and they have rather ac- poor performance of the automotive sector. crued ‘vertically’, concentrated at the top of For example, Volkswagen Motors recently the industry. signed a Memorandum of Understand- ing (MOU) with the Nigerian government
46 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
to re-establish its assembly plant, but its Most of the auto firms are involved in the implementation hinged on the signing of the assemblage of Semi Knocked Down (SKD) automobile policy bill. vehicles with very little or no local content. As a matter of fact, in the reckoning of the The sale of locally manufactured vehicles Unions (SEWUN and AUTOBATE), most of in Nigeria reached 11,000 units in 2019 the firms are involved in auto import, sales alone – an improvement of 10 percent from and service. The Honda Manufacturing the previous year. At the beginning of 2020, Plant assembling motorcycles and Honda manufacturers had expressed confidence cars is reputed to be involved in auto as- % that sales will improve in 2020 especially sembly (SEWUN). The other plant owned by 10 with the finance initiative and closure of land Aliko Dangote in Kaduna is also reputed to borders. Meanwhile, the COVID-19 health be involved in solid development crisis has disrupted the automotive global of new assembly line infrastructure 11,000 locally supply chains and world of work, with about (Source: NADDC). The NAIDP doesn’t manufactured 80 percent of workers away from work for address the issue of investment in new vehicles were months. This has stalled the expectations of technology to drive environment and sold in 2019 – a growth in the sector. climate friendly manufacturing. 10% increase from 2018. In the Nigeria Industrial Revolution Plan released in January 2014, the key challenges militating against the development of the automotive sector were identified as:
1. Fiscal measures – Nigeria currently tic automotive industries. It is critical does not have adequate fiscal mea- to always ensure affordable cars are % sures to encourage the development available, so that citizens can aspire to 80 of the local auto industry. Many coun- and afford to own vehicles. tries restricted import of fully built units 4. Unequipped auto clusters and sup- (FBU) (e.g. Brazil in the 1960s, and About 80% port infrastructure – Nigeria’s auto Egypt) or used high import duties which of workers clusters are not adequately equipped took cognisance of the level of compet- with supplier parks and dedicated port were away itiveness in the operating environment. infrastructure. from work for Over time the duties were reduced as months due to local capacity expanded. 5. Scale of operators – The existing auto the COVID-19 assemblers in the country need expan- 2. Poor local patronage – Existing locally health crisis. sions of existing assets. assembled automobiles are not ade- quately patronised by the public and 6. Other structural barriers - High cost private sector. Many countries with of power, tough investment climate, developed auto sectors have leveraged inadequate skills, high cost of funding, public procurement to push the indus- low finished goods standards for ex- try to develop. ports, etc (NIRP, January 2014). 3. Import of used vehicles – Nigeria It was gathered that the bulk of the auto- has become a huge market for used mobile companies that are licensed as vehicles imported from developed assembly plants are involved in the impor- markets. These have become a way tation of fully built vehicles into the Nigerian for Nigerians to access less expensive automobile market. These companies, the cars. Many emerging market countries, bulk of which only engage in auto sales in developing their local auto sector, and services, enjoy benefits via the gov- controlled the importation of used vehi- ernment’s support to assembly plants in an cles (while some other countries even attempt to encourage further investments banned such imports). These were then in the sector. This has impacted on the local strategically replaced with affordable production, use of local contents and, more vehicles made locally by their domes- importantly, on the workers.
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The large number of auto-dealers granted Beyond patronage and vehicle purchase licenses to set up assembly plants are hap- financing, the whole question of sustain- py to draw on the 10-year tax waivers and ability rests on the creative and effective other incentives and concessions for vehi- implementation of the Automotive Industry The full re- cle assembly. Unfortunately, the conditions Development Bill when assented to by the surgence of contained in the NAIDP are quite loose in President and ensuring that only genuine terms of migration from SKD to CKD, which manufacturers retain the license and enjoy the automo- offers opportunities for greater value addi- the prescribed benefits for local assem- tive sector is tion and qualitative employment. The policy blage of vehicles. provided that when the annual sales figures dependent reach about 10,000 units of cars and SUVs, This component of policy implementation on a vibrant and 3,000 units of commercial vehicles, ve- must address decisively the disruptive economy hicle assemblers can move to CKD. But the impact of smuggled vehicles and ensure policy also provided that assembly plants adequate protection for locally assembled and full are free to move to CKD operations, even if vehicles. The Africa Continental Free Trade commit- their sales figures are lower (NAIDP). Agreement (AFCTA) provides an opportu- nity to address the perennial question of ment to the The full resurgence of the automotive smuggling through structured trade and outlined sector is dependent on a vibrant economy exchange across the continent and particu- plans in the and full commitment to the outlined plans larly the West Africa sub region. in the NAIDP strictly for established auto NAIDP manufacturers and not emergency car The general manufacturing environment assemblers as we have seen with over 40 must be improved with accelerated de- licenses issued. Nigeria has a large and velopment of supportive infrastructure, youthful population and petroleum and particularly power and roads. The auto steel resources are critical to a supportive industry like every other manufacturing firm ancillary industry and a supportive policy for will benefit from an improved macro-eco- auto-sector revival. nomic environment with a stable exchange rate and predictable access to foreign It is imperative that the Federal Government exchange. It is important to extend similar drives very aggressively the patronage of support to auxiliary industries particularly locally assembled vehicles by taking the steel, machine tools and petrochemicals. lead in buying locally assembled vehicles This will ultimately boost local content and for officials, Departments and Agencies. It assist in mitigating the impact of unstable is counter-productive for the government exchange rates. agencies and officials to have imported about 105 SUVs and over 300 cars for Na- Prior to the COVID-19 outbreak, between tional assembly members in the first quarter 2018 and 2019, the Nigerian economy had of 2020. recovered from recession and the automo- tive industry experienced growth in produc- tion and sales, to the point that profits are said to have been used to pay salaries in other sections of the industry in Africa.
48 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industryindustry development, investment and sustainability: country views
2.6 Rwanda 2.6.1 The Rwandan auto industry
In 2018 The automotive industry in Rwanda is still Rwanda had at its infant stage, but the government of 16.8 vehicles the Republic of Rwanda has put much effort in developing the sector. A big part for every of new investments is in electric vehicles, Future investments are expected in the 1,000 and in particular in the assembly of electric expansion of the current companies, most people. motorbikes and cars, following the coun- of which want to expand their business This number has try’s attempt to implement a green growth towards the assembling of e-cars. Victoria been growing at agenda across several productive sectors Motors is distributing Mitsubishi vehicles a pace of 10% on (Kobina, 2020). Since the Second Econom- at the moment but is planning to assemble average in the last 5 years. ic Development and Poverty Reduction hybrid cars and it is in the testing stage Strategy (EDPRS, 2013) (GoR, 2013), cur- (Kobina, 2020). rently continued with the National Strategy for Transformation (GoR, 2019), Rwanda The number of motor vehicles had signifi- pursues a green economy approach to cantly grown over five years (2012-2017). its economic transformation, with a policy In the period of 2012-2017, overall vehicle framework represented by the National ownership in the country grew by 63% Green Growth and Climate Change Adap- (average annual growth of 12.6%). Still the tation Strategy (GoR, 2011). The strategy motorisation rate is very low: Rwanda had outlines the pathway to a sustainable and 16.8 motor vehicles for every 1,000 inhabi- secure future Rwanda. tants by the end of 2017 (NISR, 2018). This number has been growing at a pace of 10% So far companies like Ampersand, SAFI and on average in the last 5 years. Looking just REM (Rwanda Electric Mobility) are report- at private vehicles, there are 4.8 private ed to have started operations to assemble cars and 6.3 private motorcycles per 1,000 electric motorbikes. VW – CFAO Motors inhabitants (NISR, 2018). This shows that Rwanda is the only company in Rwanda the government of the Republic of Rwanda assembling internal combustion cars and should put significant effort into the au- planning to assemble e-cars in the future. tomotive sector so that citizens can start Besides that there is Rwanda Akagera owning vehicles made in Rwanda, not im- Motors which is an exclusive distributor for ported second-hand from somewhere else. Mercedes Benz, Nissan, Renault, Kia, Futon This could also have important spill-over and Mahindra. effects on the rest of the economy.
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ABOVE: A motorbike 2.6.2 The industry and COVID-19 parked at Ampersand’s The sector was heavily affected by Ampersand didn’t hire any new staff during swap station in the COVID-19 crisis so far, hit hard by the lockdown from March until the middle of Kigali, Rwanda. unemployment caused by restructuring May 2020. Their structure stayed the same Photo by and the interruptions in the assembling of and they didn’t reduce the salaries of their Ampersand. cars at VW – CFAO Motors Rwanda and of workers. Ampersand has also supported electrical motorbikes in Ampersand, REM their motorbike drivers, paying them a once- and Safi. off amount of USD 94 for the time during lockdown when they didn’t work (Wale, REM had a plan of assembling and 2020). completing 160 e-bikes by the end of April 2020, but due to COVID-19 it will COVID-19 has affected Safi: it has delayed not be able to achieve this goal – they their programme of training their new have only managed to assemble and workers to assemble and drive their electric complete 10 e-bikes. Furthermore, in REM motorbikes. Now things are going better, a restructuring has occurred, with the and they have started training their work- company putting workers on hold without ers and re-started their production (Tony, getting paid, which really affected them. 2020). Generally, the main negative impact At the time of writing, 50% of workers was the loss of jobs and income; loss of in REM have returned to work, because job opportunities and the socio-economic the COVID-19 situation in Rwanda had issues related to movement/work/business reportedly improved (Kabanda, 2020). limitations (Musoni, 2020).
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2.6.3 Current investment plans
Rwanda’s dynamic investment facilitation of electric cars, and the Victoria Gorilla, an The VW agency, the Rwanda Development Board exclusive dealer of MITSUBISHI, is planning (RDB) has sought to boost the country’s to start the assembly of hybrid cars (using Rwanda in- attractiveness. Special Economic Zones both fuel and electricity) in Rwanda (Dahir, vestment is (SEZ) meant to offer an attractive package 2019). supposed to of tax and customs incentives. For example, Volkswagen has established its Rwanda YUTONG has a plan to start the assembling be sustain- operations in Kigali’s SEZ, where it will be and the production of their buses in Rwanda able for the eligible for a seven-year corporate income and it has already registered its investment tax holiday if it invests over USD 50 million business in the Rwanda Development workers and (Risks, 2018). Board. YUTONG will probably start the for the in- production of buses in 2021. vestors be- The government of Rwanda has ambitious industry and trade investment plans in TVS, BAJAJ and Rwanda Motorbikes cause there different sectors. One of the sectors taken Company (RMC) are assembling internal is a huge into consideration is the auto industry, since combustion motorbikes. Ampersand, Safi demand for this is still at an infant stage where there and Rwanda Electric Mobility (REM) have is currently no manufacturing of vehicles. started assembling electric motorbikes, new cars However, there are some initiatives in place but the production is still very low – most of in Rwanda, which have started the assembling of vehi- them only launched the investment in 2018 cles, including both motorcars and motor- (Kobina, 2020). Ampersand has a plan of while the bikes (Kobina, 2020). working with the existing internal combus- country has tion motorbikes companies instead of going been dis- VW established its factory and started for electric cars. It aims to build affordable assembling cars in Rwanda in 2018. This is electric motorbikes and charging stations cussing a the only company that is assembling cars in for five million taxi drivers in East Africa, ban on old Rwanda so far, with an announced plan of with plans to raise 3 million USD in equity producing 5,000 vehicles per year and cre- capital and further plans to raise 7 to 10 cars. ating 1,000 jobs. In its future investment VW million USD in the East Africa region in 2022 also has a plan of investing in the assembly (Wale, 2020).
2.6.4 Investment, sustainability and local development
VW CFAO Motors Rwanda is the only com- in Rwanda’ brand. This is also intended to pany that is assembling cars in Rwanda so help the investors sustain the business and far. The VW Rwanda investment is sup- support the stability of workers in terms of posed to be sustainable for the workers and having long and decent contracts. for the investors because there is a huge demand for new cars in Rwanda, while the VW CFAO Motors Rwanda represents a country has been discussing a ban on old significant contribution to the local devel- cars. This is part of the new national trans- opment of the country, having promised to port policy to reduce greenhouse gas emis- provide many jobs to the local population sions from old cars and support green and and to create 1,000 new jobs per year (Da- clean transport, together with the ‘Made hir, 2019). It is also expected to contribute
www.industriall-union.org 51 Section 2
to the development of the country through Safi has about 15 employees so far but it is 23 See for example: significant taxation. in the process of hiring additional staff. The https://www.new- times.co.rw/business/ company is currently training the workers to rwandas-electric-mo- In addition, there are several motorbike assemble and ride the electric motorbikes. torcycle-compa- assembly investments in Rwanda such as In this training programme Safi is focusing ny-marks-250000km: BAJAJ and Rwanda Motorbikes Company on women to increase female participation (RMC), which are assembling internal com- in the automotive sector (Tony, 2020). bustion motorbikes. Ampersand, Safi and Rwanda Electric Mobility (REM) have also REM (Rwanda Electric Mobility) is started assembling electric motorbikes. working in a strong partnership with RMC Ampersand aims to build affordable electric (Rwanda Motorcycle Company), which motorbikes and charging station systems started its business of assembling both for five million taxi drivers in East Africa.23 internal combustion engine motorbikes for RMC in 2017 and e-motorbikes for Ampersand has 43 employees so far, and REM in 2019. REM is a Rwandan company occasionally the company hires contract with a shareholder from Singapore. It is workers tasked with special work such as assembling electric motorbikes and it is mechanical operations or specific projects planning to assemble electric cars in the like the construction of changing stations. future. REM has been conducting research It’s operations are still incipient since it is a during the last two years and it has officially small company at its starting point. At the started doing its business in January 2020. time of writing, Ampersand has produced It imports completely lockdown parts and only 20 motorbikes, with aims to produce assembles them in Rwanda. 40 additional motorbikes in November 2020 and to conduct more work on the REM has only one expert from Singapore assembly of batteries. The company who provides training on new technology recently met some delays due to COVID-19 – the rest of the personnel are all from and the late reception of some incentives Rwanda. REM is going to use e-trucks in such as import duties from the government. its operation by testing them to see if they Ampersand is aiming to produce between can also be assembled in Rwanda, hoping 1,000 and 2,000 motorbikes by 2021 to further expand their business in this (Wale, 2020). direction (Kabanda, 2020).
52 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industryindustry development, investment and sustainability: country views
The South African automotive 6.8% industry contributes 6.8% to the Gross Domestic Product (GDP)
The South African automotive 29.9% industry accounts for 29.9% of manufacturing output
The South African automotive 14.3% industry accounts for 14.3% of exports
2.7 South Africa
24 Department of 2.7.1 The SA auto industry Trade, Industry and Competition, Portfolio Committee on Trade The South African automotive industry is a ing the duration of the pandemic, it is hard and Industry, South major player in the South African economy. to predict the full impact the crisis will have African Automotive It contributes 6.8% to the Gross Domes- on the industry. Current expectation is Masterplan: Post 2020 tic Product (GDP); accounts for 29.9% of that South Africa’s recovery, by the end of Policy Framework, 10 September 2019. manufacturing output and 14.3% of exports; 2020, could have been around 20% lower Accessed at http:// employs 110,000 workers in vehicle and in terms of productive activity than before www.thedtic.gov.za/ component production; and the annual the COVID-19 crisis.27 The poor economic wp-content/uploads/ Automotives.pdf on 24 investment by vehicle assemblers amounts indicators and the uncertainty around the August 2020. to R7.2 billion.24 COVID-19 pandemic cast doubt on the investment plans of the vehicle manufactur- 25 The South African economy contracted Given the recent poor performance of the ers in the years ahead. by -0.8% in the 3rd South African economy with four con- quarter of 2019, -1.4% in secutive quarters of negative growth, the This section will focus on the South Afri- the 4th quarter of 2019, importance of investments by the automo- can auto industry as a whole, including the -2% in the first quarter of 2020 and a huge tive industry for the economy cannot be component segment of the auto value chain -51% drop in the sec- underestimated.25 in order to examine the investment strate- ond quarter of 2020. gies of the major original equipment man- 26 Accessed at However, the COVID-19 pandemic is having ufacturers (OEMs) as well as some major https://naamsa.net/ on a major impact on the South African auto component suppliers. However, interviews 19 September 2020. industry. Reported data for August 2020 confirmed how the decisions about invest- indicate a year-on-year drop of 39% in ments in South Africa are in most cases part 27 Barnes, Justin. (2020). COVID-19: The domestic production; a 41% drop in total of investment strategies formulated at the South African auto exports; a 35% drop in total local sales; and headquarters of the OEMs for the broader industry. 10.13140/ a 33% drop in total imports as a result of the Sub-Saharan Africa (SSA) region, so some RG.2.2.21078.80965. impact of the COVID-19 pandemic on the consideration will also be given to the re- auto industry.26 With uncertainty surround- gional dimension.
www.industriall-union.org 53 Section 2
ABOVE: Cars parked in 2.7.2 A snapshot of the local the colourful Bo-Kaap auto industry neighbourhood of Cape Town, South Africa. The SA auto industry comprises the fol- (3.9%), Isuzu (3.8%) and BMW (2.8%). Oth- lowing OEMs, with their respective market er vehicle importers (Hyundai, Kia, Renault, Photo by share: Toyota leads with 24.2% of new vehi- Tata, Mazda, Honda, etc) make up the rest Devon Janse van Rensburg cle sales, followed by Volkswagen (16.7%), of the new vehicle market share. on Unsplash Ford (9.5%), Nissan (9.2%), Mercedes-Benz
Figure 7 South African auto assemblers with new vehicle market shares
29,9% Other
24,2% Toyota
16,7% Volkswagen
9,5% Ford
9,2% Nissan
3,9% Mercedez-Benz
3,8% Isuzu
2,8% BMW
Source: NAAMSA, Automotive Export Manual 2020.
54 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
There are about 200 first tier suppliers and Metalworkers of South Africa (NUMSA) on 28 NAACAM interview. 80 second tier suppliers. In terms of own- the union side. The auto components sector 29 Accessed at ership, first tier suppliers are mainly large falls primarily within the Motor Industry Bar- https://www.naamsa. multinational companies with about 75% gaining Council (MIBCO), although there co.za/SalesStats on foreign ownership. South African ownership are about 20 components manufacturers 24 June 2020. in component manufacturing companies is which for historic reasons are under the 30 In respect of total more present in the second tier suppliers.28 Metal and Engineering Industries Bargain- passenger vehicle ing Council (MEIBC). MIBCO covers a wide sales, 80.9% is taken up through the dealer In labour relations terms, the sector as we range of sectors and involves two employ- channel, 12.7% to the have defined it above falls under separate ers’ organisations and two trade unions. rental industry, 3.5% collective bargaining arrangements. The The negotiations in MIBCO take place for all to industry corporate seven assemblers/OEMs are in the National fleet sales and 2.9% the sectors in plenary but the negotiations to government. Bargaining Forum, represented by the Auto- for the components sector are the most im- Automotive Industry mobile Manufacturers Employers’ Organ- portant and are primarily between the Retail Export Council (AIEC) isation (AMEO), with the National Union of Motor Industry (RMI) and NUMSA. Automotive Export Manual 2020.
31 Accessed at http:// www.statssa.gov.za/ In terms of contribution to the South African economy, the industry plays publications/P0441/ a significant role: P04412ndQuar- ter2020.pdf on 08 • It contributes 6.8% to GDP (manufac- • The auto sector is the country’s 5th September 2020. turing and retail); largest exporting sector out of all 104 32 Accessed at sectors; https://www.iol. • The total automotive revenue in South co.za/business-re- Africa amounted to R500 billion in 2019; • The manufacturing segment of the port/economy/ industry presently employs more than • In 2019, the export of vehicles and au- closures-job-loss- 110,000 people across its various tiers es-loom-as-wheels- tomotive components reached a record of activity (from component manufac- come-off-car-rental- amount of R201.7 billion, equating to business-50893743 turing to vehicle assembly); on 08 September 15.5% of South Africa’s total exports; 2020. • Combined with the industry’s strong • The industry accounts for 27.6% of the multiplier effect, the industry is respon- country’s manufacturing output; sible for approximately 457,000 jobs • Vehicles and components are export- across the South African economy’s ed to 151 international markets; formal sector.29
Whether this contribution can be sustained The COVID-19 pandemic and lockdown has is questionable given the country’s poor exacerbated the downturn in sales. In the economic performance and the impact of second quarter of 2020 household expen- the COVID-19 pandemic. diture decreased by 49.8%, expenditure by the government decreased by 0.9%, The auto industry is largely driven by the and the tourism sector came to a complete strength of the economy, which determines halt affecting land transport, air transport demand for new vehicles. It is therefore and transport support services.31 A direct not surprising that the new vehicle market consequence of the current environment is sales, particularly passenger cars and light company closures and the consequential commercial vehicles, took a dip in 2019 on retrenchment of staff. One such example the back of the subdued macro-economic is Bidvest car rental, one of the biggest car environment and pressure on consumers’ rental companies, indicating their intent to disposable income.30 close their car rental business.32
www.industriall-union.org 55 Section 2
33 Automotive Export 2.7.3 The industry in a global context Manual 2020.
34 Barnes, J., The South African auto sector is a minor industry remaining critical to the South Black, A., Comrie, player in the global auto production land- African economy, both in its totality, and D., & Hartogh, scape, accounting for only 0.69% of total in respect of the manufacturing portion T. (2018). South African Automotive global production volumes in 2019 – only of the automotive value chain. The South Masterplan report 1 marginally improving on its 0.63% of global African automotive industry is at best a Geared for Growth production volumes in 2018. It ranks only second-tier player within global automotive South Africa’s nd automotive industry 22 in terms of total units produced in 2019, value chains, although this perspective masterplan to 2035. with 631,983 units, well behind the leading varies considerably from one major vehicle A report of the South producer, China, with over 25 million units; operation to the next. It would appear as if African Automotive the USA with almost 11 million units; Japan at least four of the seven light vehicle OEMs Masterplan Project. The South African with just under 10 million units; and Germa- are firmly within the second tier of their Department of Trade ny and India with just over 5 million units parent company’s global operations, with the and Industry (the each.33 balance third tier operations.”34 DTI) Government of the Republic of South Africa, 18th The industry therefore has a long way to go The industry, however, has potential. In December. to achieve the 1% global vehicle production 2019 SA was one of only four countries target set by the South African Automotive that increased the number of vehicle units 35 International Organization of Masterplan (SAAM) (see more below). produced. Furthermore, its leading position Motor Vehicle There are many challenges facing the South in Africa is a reason for optimism. It pro- Manufacturers African vehicle manufacturers in becoming duced 631,983 (57%) of the 1.1 million motor (OICA), World Motor Vehicle Production a bigger global player. SAAM notes that: vehicles manufactured on the continent in (2019). Accessed at 2019. The only other major African vehicle http://www.oica.net/ “… the South African automotive industry manufacturing country is Morocco which category/production- statistics/2019- is beset with numerous competitiveness produced 394,652 (36%) vehicles during statistics/ on 28 challenges. The South African automotive 2019.35 The full list of vehicle producing August 2020. industry remains a marginal player globally, countries on the African continent appears with comparatively small vehicle assembly in the table below. plants, and an underdeveloped automotive components industry relative to leading Similar to global production, only the South developed and developing economy African vehicle volumes increased over the competitors. This is despite the automotive 2018-2019 period.
Table 3 The SA auto industry on a continent scale
Contribution, Contribution, Country 2018 2019 2018 (%) 2019 (%) Algeria 70,597 6.4% 60,012 5.4% Egypt 18,500 1.7% 18,500 1.6% Morocco 402,085 36% 394,652 36% South Africa 610,854 55% 631,983 57% 1,102,036 100% 1,105,147 100% Source: International Organisation of Motor Vehicle Manufacturers (OICA)
56 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
36 Accessed at 2.7.4 Domestic vehicle manufacturing https://naamsa.net/ industry-overview/ on 10 September 2020. As noted above, the key market players in The local vehicle manufacturing industry the country are the seven OEMs (BMW, has been experiencing declining vehicle 37 Creamer Media’s Ford, Isuzu, Mercedes-Benz, Nissan, Toyota sales over the last five years due to low Automotive report, June 2020. and Volkswagen). In terms of geographical consumer and business confidence, slow location, the OEMs are split between three economic growth, high unemployment and 38 NAAMSA provinces with Ford, Nissan and BMW op- the ongoing load-shedding of electricity.37 interview. erating in Gauteng; Volkswagen, Isuzu and 39 Automotive Mercedes-Benz in the Eastern Cape; and The figure below indicates the extent of Industry Export Toyota in Kwazulu-Natal.36 declining vehicle sales over the 2015 to Council (AIEC) 2019 period. Automotive Export Manual 2020. Figure 8 SA vehicle sales, 2015-2019
640,000 Source: NAAMSA 630,000 620,000 610,000 600,000 590,000 580,000 570,000 Of particular 560,000 concern is 550,000 a decline of 540,000 530,000 467 jobs in 520,000 the second 2015 2016 2017 2018 2019 quarter of 2020; a mas- Vehicle sales for 2020 will be significantly the auto industry. Of particular concern is sive year-on- lower due to the worsened economic cli- a decline of 467 jobs in the second quarter mate and COVID-19 pandemic. The National of 2020; a massive year-on-year decline year decline Association of Automobile Manufacturers in vehicle manufacturing due to COVID-19 in vehicle of South Africa (NAAMSA) interviewee lockdown restrictions; and negative eco- manufac- painted a grim picture of the impact the nomic growth in the country coupled with a pandemic is having on the performance of global financial crisis.38 turing due to COVID-19 lockdown 2.7.5 Vehicle imports
restrictions. During 2019 a total of 290,624 new light In terms of the top three countries of origin, vehicles (passenger cars and light com- SA imported most new light vehicles from Source: International Organisation of Motor Vehicle Manufacturers (OICA) mercial vehicles) were imported into South India (106,199), followed by Germany Africa to meet the domestic demand. This is (36,759) and Japan (34,351). What is evi- a decline from the 292,197 units imported in dent is that the importation of new light vehi- 2018. Imported light vehicle sales increased cles continued to hover between 55% and from 55.7% (2018) to 57.1% (2019) as a pro- 57%, notwithstanding the declining market portion of total light vehicle sales, slightly – from 587,209 new light vehicles in 2015 to surpassing the 57% mark in 2015.39 508,570 in 2019.
www.industriall-union.org 57 Section 2
2.7.6 Exporting volumes and destinations The export volumes of light motor vehicles Japan. Mercedes-Benz held the position of showed a steady increase over the 2015 to top exporter over the 2015 to 2018 period 2019 period from 332,725 vehicles (57% but was overtaken by Volkswagen in 2019. of vehicles produced) in 2015 to 386,298 (64.1%) in 2019. The top three destinations It is worth noting that no African country of South Africa’s light motor vehicle exports features in the top ten destinations of light are the United Kingdom, Germany and motor vehicle exports.
2.7.7 The South African auto industry policy framework
While there The South African Automobile Masterplan This aspirational plan is built around the is growth po- (SAAM) is the current policy framework to below six strategic implementation pillars tential in the transform the South African automobile val- to realise the industry’s 2035 vision. The six ue chain in order to become a global player pillars are aspirational, and only time will tell SA market, by 2035. SAAM, under the Department of whether they are attainable. SAAM recog- that growth Trade, Industry and Competition (DTIC), nises that it will require the commitment of is dependent was jointly developed by stakeholders in all stakeholders (firms, unions, government, the automotive value chain (government, and broader civil society) to realise the ob- on sustained industry and organised labour). jectives set out in its policy framework. economic growth. 2.7.7.1 Local market optimisation Under this pillar the local market will need to in people reprioritising spending. This may grow to absorb increased vehicle produc- explain a drop in the local demand for new tion volumes and there also needs to be vehicles. As for the alignment between lo- greater alignment of locally produced vehi- cally produced vehicles and local demand, cles and local demand thereby reducing the SAAM notes that SA consumer demand is demand for new vehicle imports to satisfy for small passenger cars with only the Polo/ local demand. The objective here assumes Polo Vivo and Chevrolet Spark being locally two interrelated challenges. First, while produced. While economy of scale is a key there is growth potential in the SA market, determinant in the OEM industry, vehicle that growth is dependent on sustained eco- manufacturers should also seek to meet the nomic growth. The SA economy has been demand of the local consumers to boost sluggish over the last few years resulting production volumes.
2.7.7.2 Regional market optimisation This pillar advocates for the development of instance the state of SSA economies a regional automotive plan with SA playing and the importation of second-hand a leading role in the development of the vehicles – and advocates for a gradual region’s auto industry. The SAAM notes approach to realise the region’s auto some of the challenges in the region – for manufacturing potential.
58 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
ABOVE: 2.7.7.3 Localisation Workers struggle against Under this pillar there should be a move a joint initiative between the government, precarious work. towards greater local manufacturing of organised labour, OEMs and suppliers, components to service the auto value signalled the intent on the part of all industry chain. Linked thereto is the development stakeholders to move in the right direction. of skills needed in the value chain, As for the provision of uninterrupted enhanced productivity and the ability of electricity supply, indications are that SA is the government to provide a cost effective likely to experience load shedding for the and uninterrupted supply of electricity. The foreseeable future. With that in mind, some 40 Volkswagen establishment of the Automotive Supply OEMs are investing billions to generate announced investing 40 R3.5 billion in a Chain Competitiveness Initiative (ASCCI), their own electricity supply. bio-gas plant to generate electricity at its Uitenhage plant. 2.7.7.4 Automotive infrastructure development This will enable the plant to operate This pillar advocates for an improved Special Economic Zone, an automotive independently of infrastructural shift in the automotive value component supplier industrial park in power from Eskom’s electricity grid. See chain, from logistical linkages, transport Mamelodi, Pretoria, is an example of the https://techcentral. infrastructure, industrial parks, skilled and progress being made to ensure greater in- co.za/vw-to-take- available labour, to technological changes frastructural development in the automotive its-huge-uitenhage- 41 plant-off-the-eskom- like fuel quality. The Tshwane Automotive value chain. grid/93526/ . Other OEMs are doing likewise. See https:// techcentral.co.za/ 2.7.7.5 Industry transformation ford-joins-vw-in- taking-plant-off- The realisation of this pillar will advance the Empowerment (BBBEE) at tier two and the-grid-in-south- transformation of the automotive industry in three suppliers and a labour force represen- africa/93899/ the form of Broad-Based Black Economic tative of the demographics of the country.
41 Accessed at https://fordauthority. com/2020/09/ 2.7.7.6 Technology and new-ford-south- africa-special- associated skills development economic-zone-to- generate-8500-jobs/ Under this pillar the automotive industry materials development, product recycling, on 19 September 2020. must develop its capacity to meet and also and more. Linked thereto is the ongoing compete in the development of new tech- skills development needs to train the nological innovations required by the global workforce to use the new technologies in a automotive industry. This will include new competitive global automotive industry.
www.industriall-union.org 59 Section 2
42 WhoOwnsWhom, 2.7.8 Investment plans, local The Motor Vehicle Industry October 2019. development and sustainability
43 OEM investment It has been noted that there has been a in the local economy. In Table 4 we detail the data obtained from downturn in the number of units produced investment announcements by the respec- NAAMSA interview. over the recent period, but this has not tive OEMs.43 deterred new investment by the country’s 44 NAACAM, Automotive Export major OEMs. Collectively, Mercedes-Benz, Component manufacturers, on the other Manual 2020. Nissan, BMW, Ford, Toyota and Volkswagen hand, invested R3,5 billion in 2019 with a Accessed at https:// have pledged to invest R39 billion in new further R20 billion investment expected naacam.org.za/auto- 42 44 export-manual/ on 03 capacity over the next five years. over the next five years. In Table 5 we list September 2020. some of the investments of component These investments announced by the major companies during 2019.45 45 Creamer Media’s Automotive Report, OEMs clearly signal a degree of confidence June 2020. No further details are available. Table 4 Investment plans of SA OEMs 46 Accessed at https:// www.timeslive. OEM Type of investment Job creation Project timeline co.za/sunday-times/ news/2018-06-25- R10 billion investment driving-forward- Mercedes- for new generation Investment announced huge-investment- No indication. as-bmw-group-sa- Benz model C-Class model to at the beginning of 2018. starts-producing-the- be introduced in 2021. new-x3/ on 24 June R4,28 billion investment 2020. of which R2,43 billion 47 Creamer Media’s in new passenger car Automotive Report, model introduction in June 2020. 500 new jobs and 1,000 Announcement made in Toyota 2021 and R454 million jobs in the supply chain. 2020. in new Hiace minibus taxi and other portions in warehouses and facilities. R1,2 billion investment Announcement made in Isuzu for new generation Saving of 1,000 jobs. 2019. bakkie. Investment of R3 billion 1,200 new jobs and Announcement made in Nissan for new Navara bakkie. multiplier in supply chain. 2019. R6,16 billion investment Announcement made in BMW46 at its Rosslyn plant to No indication. 2018. produce new BMW X3. R3 billion investment Announcement made in Ford47 at its Silverton plant to 1,200 jobs. 2017. increase output. Source: NAAMSA (interview)
60 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs Industry development, investment and sustainability: country views
ABOVE: Table 5 Investment plans, SA component manufacturers ZF Lemförder SA’s new plant in East London, where Company Investment production of front ZF Lemförder SA R240 million and rear axles takes Ebor Automotive Systems R140 million place for their client, Mercedes-Benz SA. VM automotive (Pty) Ltd R426,23 million Faurecia Interior Systems South Africa (Pty) Ltd R250,72 million Atlantis Foundries (Pty) Ltd R82,3 million and R90 million in 2020 48 NAACAM interview. Metair R650 million
49 NAACAM, Source: Creamer Media Automotive Export Manual 2020. The National Association of Automotive ship on new investments between the OEM Component and Allied Manufacturers and first tier suppliers given the close link (NAACAM) interviewee stressed the point between the two. Second-tier suppliers are that any new investments by the OEMs in, generally manufacturers producing a range for example, a new vehicle model, will lead of products for clients beyond the auto to new investments by component manu- industry and there may not be a straightfor- facturers as they must supply the OEMs ward link between OEM investments and with the required components for the dura- second tier suppliers. tion of the contract. The transformation of the automotive sup- This snowballing effect is most beneficial to plier base is a key priority of the SAAM. The first tier suppliers, which are ordinarily tied R6 billion Automotive Industry Transforma- Source: NAAMSA (interview) to a seven-year supply agreement with the tion Fund (AITF) is geared towards support- OEM. But it is also beneficial to the sec- ing black participation in the auto supply ond-tier suppliers which manufacture the chain. The SAAM target is to have 500 tier sub-components for the first-tier suppli- two and three suppliers by 2035, of which ers.48 There is therefore a strategic relation- 25% needs to be black-owned.49
www.industriall-union.org 61 Section 3 3. The labour issue: decent jobs and gaps to fill
50 In relation to the Ghanaian labour 3.1 Ghana market, vulnerable employment is a term used to indicate the sum of self- 3.1.1 Decent employment in Ghana employment and employment in family- Decent employment is hard to find in self-employment. Vulnerable employment run small businesses. Ghana, despite years of consistent eco- – the combination of self-employment and nomic growth. At about 8.4 percent, open employment in family-based enterpris- 51 Workers employed on short periods, unemployment is relatively low, but the es – covers more than three-quarters of usually less than 6 majority of the workforce is engaged in the Ghanaian workforce. While the overall months. vulnerable employment (76.4% in 2017).50 unemployment rate is low, young workers Less than one quarter of the workforce has (18.5%) face more than twice the national wage employment and more than half is in unemployment rate.
Table 6 Ghana’s workforce per employment status, 1999-2017 (%)
Status 1999 2006 2013 2017 Wage employment 13.8 16.4 20.2 23.5 Self-employment 68.7 55.9 52.4 53.4 Contributing family worker 17.2 25.2 22.3 16.9 Domestic employee 0.2 0.2 0.2 0.2 Apprentice 2.2 2.0 0.7 Casual worker51 2.6 5.2 Other 0.3 0.1 0.1 0.1 Vulnerable employment 86.2 83.5 79.5 76.4 Source: GSS, 2000, 2008, 2014, 2019
Figure 9 Unemployment rate in Ghana, 1999-2017 (%)
20 18 15+ Youth (15-24) 16 14 12 10 8 6 4 Source: GSS, 2000, 2008, 2014, 2019 2 0 1999 2006 2013 2017
62 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
3.1.2 The automobile industry and decent jobs The union is In the face of these gloomy statistics, any the value chain, towards CKD processes. urging the investment that promises to create employ- Again, the development of local ancillary government ment is most welcomed especially when industries able to supply parts and com- targeting the manufacturing sector. There- ponents locally will see more jobs being and the fore, jobs, or promises to create them, have created along the value chain. At the same educational been cited as one of the core reasons for time, the union is urging the government and authorities the huge fiscal and other incentives being the educational authorities to endeavour to offered to attract major automobile firms to strengthen the skills content of national ed- to endea set up vehicle assembly plants and to manu- ucation. It argues that the automobile indus- vour to facture vehicles in Ghana. try is currently at a high level of technology, which requires high-end skills and knowl- strengthen The Ghana Automobile Development edge. In addition to markets, the availability the skills Policy is clear about the intention to create or otherwise of skilled labour will determine content of “highly skilled jobs in the automotive industry the expansion and/or the sustainability of and the manufacture of components and current investments. national parts…”. This policy envisages backward education. and forward linkages that will facilitate the In terms of labour rights, the union does not creation of more jobs in the larger Ghana- anticipate any major challenges. Given that ian economy. In defending the amendment most of the automobile manufacturing com- of the Customs Act, 2015 (Act 891) to ban panies are working through their dealers in imports of salvaged and overaged vehicles Ghana, where workers are already union- in Parliament, the Minister for Trade and ised, the union does not foresee any chal- Industry was categorical that increased lenge with unionising workers in the assem- investments in the automobile industry will bly plants. Indeed, the workers currently create diverse economic linkages, which assembling VW cars are already members will propel the creation of employment. of ICU. The union has membership across However, at this early stage of low econom- all major automobile companies in Ghana. ic activity involved in the assembly of SKD In terms of health and safety standards, the kits, not many jobs are expected. According union is satisfied with the high standards at to the Industrial and Commercial Workers the factories. Workers have state of the art Union (ICU) (interviews) – the union with a tools and machinery as well as health and dominant presence in the automobile indus- safety gadgets. try in Ghana – VW is currently using many computerised systems in its assembly pro- Despite such a positive assessment, the cesses with very little labour employed. union admonishes the government and its agencies involved in attracting the auto- ICU can confirm that VW has not recruited mobile manufacturers and negotiating the any Ghanaian workers for its assembly terms of their businesses in Ghana to make plant. The company is relying exclusively them aware of the labour laws in Ghana. on workers and facilities of its dealership company in Ghana – Auto Parts. The union At no point should the investors be made shares the view by the government that this to think that there is cheap labour at their will change when the companies move up disposal and for their exploitation.
www.industriall-union.org 63 Section 3
Table 7 ICU Membership in Major Automobile Companies in Ghana
Name of locals Male Female Total Membership As shown in Auto Parts Ghana Limited 100 16 116 Table 7, the Avery Ghana Limited 12 0 12 Dizengoff Ghana Limited 133 17 150 union has Ghana Heavy Equipment Limited 31 5 36 member- Honda Place Ghana Limited 27 4 31 ship in 12 Japan Motors Trading Co. Ltd. 170 13 183 automobile Mantrac Ghana Limited 400 5 405 companies Mac Auto Ghana 27 5 32 including Mechanical Lloyd Ghana Ltd. 91 7 98 companies Modern Automobile 32 3 35 that have Rana Motors 660 65 725 Toyota Ghana Limited 144 14 159 partnered Total 1,827 154 1,982 with their Source: ICU, 2020 parent ma nufacturers to assemble 3.1.3 The role of unions vehicles in The ICU is not new to the automobile mation. The possibility for the emergence Ghana. industry. The union has been organising of ancillary industries transforming the workers in the industry for several decades. automobile value chain and offering more It has been successful in its unionisation and better paying jobs is on the horizon. The efforts. As shown in Table 7, the union has union stands to benefit from increased and membership in 12 automobile companies diverse membership. The expanded auto- including companies that have partnered mobile value chain could spawn new and with their parent manufacturers to assem- highly skilled workers. Such workers could ble vehicles in Ghana. Equally successful be harder to unionise. are its negotiations and general industrial relations activities in the sector. Earnings Furthermore, vehicle manufacturing can in the industry are above average earnings spur new processes, including the automa- in Ghana. Workers have access to all the tion of the value chain. Even if the overall statutory benefits as specified in Ghana’s job impact is positive, the processes can labour laws. The union has been able to transform the existing patterns of industrial negotiate additional benefits such as free or relations beyond the capacity of the union. subsidised medical care. There are oppor- The union is aware of these dynamics and tunities and challenges going forward. is positioning itself appropriately. The union welcomes the opportunities for new and As major automobile manufacturers line-up diverse membership. It also embraces the to assemble vehicles in Ghana, the entire challenges of a possible revolution of the dealership industry which the union has industrial relations atmosphere in the auto- been dealing with is up for major transfor- mobile industry.
64 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
3.2 Ethiopia 3.2.1 Trade unions and the auto sector in Ethiopia In Ethiopia, workers in the private sector pulp and packaging, automotive sales and are represented by the Confederation services, assembly, machine manufac- of Ethiopian Trade Unions (CETU). The turing, automotive spare parts and ac- current CETU was established in 1963 and cessories production, among others. Few is the only national workers confederation workers in the automotive and machine that represent workers at National and and spare parts manufacturing industry International levels. It has nine sectorial af- are also organised by the Federation of filiated federations with estimates of more Construction, Metals, Woods, Cement and than 500,000 workers and 1,182 basic Related Industry Workers Trade Union. For unions as members (CETU Data). CETU example, workers from Mesfin Industrial is also an affiliate of ITUC and ITUC Africa. Engineering and Akaki Metal Engineering The Federation of Commerce, Technique belong to it. One tyre company is organ- Source: ICU, 2020 and Printing Industry Workers Trade Union, ised by the National Federation of Energy, whose mandate is to organise workers in Chemical and Mining Trade Union (Ad- the automotive and related industry, is also dis Horizon Tire factory). Except for the a member of CETU (together with nine industries mentioned above, more than other affiliated sectorial federations). 98% of the automotive sector mandated to organise through the FC, T&PIWTU. So The Federation of Commerce, Technique far it represents 7,500 workers and 20 and Printing Industry Workers Trade Union basic unions as members – of these 2,260 (FC, T&PIWTU) is mandated to organise workers and 12 basic trade unions are from workers in electronics, printing, paper and the automotive sector. 3.2.2 Freedom of association, social dialogue and collective bargaining Regarding trade union and workers rights, organising against the constitution and Ethiopia has ratified 22 of the ILO conven- subsequent laws of the country (FDRE tions, including 8 fundamental ones. It has Constitution, 1994). It also grants labour ratified the Convention on Governance rights to workers as individuals and as part (No. 144) on Tripartite Consultation. In of a group – mainly in the form of the right addition, Ethiopia has ratified 12 technical to form trade unions and to bargain collec- conventions including No. 15 and No. 155 on tively with employers, which can include OSH. The conventions No. 26 and No. 131 the right to strike (the most difficult right to on minimum wage have not been ratified, be allowed in practice), reasonable working nor have No. 1 on working hours, No. 154 on conditions, pay, leave and a safe working collective bargaining, or No. 81 on Labour environment (FDRE Constitution Article 31, Inspection (Annie Francis, Mapping of the and Article 42, 1994). Textile, Garment Industry in Ethiopia, 2016). The new Labour Proclamation No. 1156 The FDRE constitution grants the right to (revised one, 2019) has replaced all its freedom of association for any purpose, predecessor labour proclamations N0. but with exceptions of any actions or 377/2003, No. 466/2005, No. 494/2006
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and 632/2001 and now it is the principal the government). This is chaired by MOL- national legal document governing labour SA and other governmental ministries can issues for the private sector and that cov- be presented as observers. The mandate ers the whole aspects of employment rela- of the tripartite social dialogue at national tions. Part 8, chapter 1, article 113 (Labour level is purely advisory, and meetings are % law No. 1156/2019) clearly stipulates that held every two months (Interview with 1-2 workers and employers shall have the right CETU representatives). to establish and organise trade unions and associations respectively. In addition, arti- According to an ILO report, collective Collective cle 114 states that in an enterprise with ten bargaining coverage in Ethiopia ranges be- bargaining and more workers, workers can establish a tween 1 to 2 percent of the total work force coverage in trade union (Labour law No. 1156/2019). (estimated total workforce of 5 million) (ILO, Ethiopia ranges Inclusive Labour Markets, Labour Relations between 1-2% Regarding social dialogue as a key instru- and Working Conditions, Branch INWORK, of the total ment of industrial relations at all levels, in 2017). The legal basis of collective bargain- work force many terms this is still at its lowest stage ing rights lies under the new labour law (No. (CETU representative interview). A report 1156/2019, chapter 2, article 125 up to 136), from Samuel Andreas Admasie, (Social which states that a basic union has the right Dialogue in the 21st Century Ethiopia, June and power to negotiate the employment 2020) indicates that all parties believe in relation and conditions of work on behalf of the importance of social dialogue in labour their members. So far, the trends in collec- relations, but this is not well developed due tive bargaining and agreement remain at to a lack of knowledge on the subject mat- enterprise or factory level and no sectorial ter. The legal ground for social dialogue is or national level collective bargaining has set by the International Labour Standards started or is allowed. There are several Convention No. 144/1976. This was ratified reasons for the absence of national or by proclamation No. 709/2011 – based on sectoral level negotiations. Some reasons this, a tripartite structure has been estab- can be attributed to the lack of knowledge lished at national level composed of five on the parts’ social partners together representatives from each of the follow- with a low level of union density and a low ing: the Confederation of Ethiopian Trade level of industrialisation (interview, CETU Unions (CETU), Ethiopian Employers Fed- representatives). So far, the FC, T&PIWTU eration (EEF) and the Ministry of Labour has 20 active CBAs in general and 12 in the and Social Affairs (MOLSA) (representing automotive sector (FC, T&PIWTU Data). 3.2.3 Wage and working conditions It is evident that the automotive industry is with other sectors like textiles, garments gradually growing, and workers need to be and shoes. However, there are still many organised. In this regard, the FC, T&PIWTU challenges with regards to organising should keep up with the pace of the indus- workers. This includes the low or negative try in organising. So far there is no agency/ attitude toward unionisation which makes contractual employment in the sector and it difficult for the federation to organise formal contractual employment is generally workers (Interview with Federation). adhered to. In some exceptions, workers are hired through agencies engaged in In terms of wages, Ethiopia has not ratified cleaning and security services (Interview the ILO Minimum Wage convention No. 131. with Union Leaders). Similarly, the country does not have a Stat- utory National or Sectoral, nor Regional Based on interviews with key informants, Minimum Wage. CETU and its partners, like so far trade unions can be seen in good the ILO country office, sponsored various terms with their employers in comparison pieces of research on the minimum wage
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ABOVE: issue, but at the time of writing no regula- workers in the textile and garment sectors A timelapse tion or declaration regarding the setting of working in the industrial parks receive image taken of a minimum wage has come up yet (Inter- salaries as low as USD 26 per month. The vehicles driving view with CETU representatives). Under report further states that wage conditions on a busy street the new Proclamation, No. 1156/2019, for are far below the rest of East Africa and in Addis Ababa, Ethiopia. the first time the issue of minimum wage some Asian countries – the minimum wage is mentioned and the government has in Kenya is USD 207, in Vietnam it is USD Photo by gone one step forward to establish a Wage 146 and in Bangladesh and Myanmar it is Gift Habeshaw Board comprising of representatives of the around USD 95. on Unsplash government, employees and trade unions, together with other stakeholders that will During discussions with union leaders the carry out studies for setting and periodical- question of the salary in the automotive ly revising minimum wages. However, it is sector, just like in other sectors, remains noted that so far, no wage board is officially crucial. It was also discovered that There is established, nor has a minimum wage been companies that engaged in vehicle set (Interview with CETU representative). sales and after-sale services tend to pay no law [in better than those companies engaged Ethiopia] In the private sector, wage is decided upon in vehicle assembly. However, even in negotiations between employee and em- those companies paying better in relative that protects ployer, and most of the time offered by the terms, workers still claim that the salary workers from employers depending on the type of work needs to be raised, as the cost of living is being paid or level of skill and experience. The situ- skyrocketing every day and it becomes ation is often a case of ‘take it or leave it’, hard to keep up with. below fair whereby there is no law that protects work- standards. ers from being paid below fair standards The discussion held with union leaders (Interview Federation and desk review). from Li-Fan motors, a Chinese vehicle assembler, highlighted how a BSc degree As the country promotes itself by position- holder in mechanical engineering can be ing its relatively competitive wage advan- hired at around USD 53 per month, which tage for foreign direct investment (absence is far below the expectation of a degree of minimum wage and low wage as an holder at that level. Likewise, the Bishoftu advantage to investors) by comparison to Automotive Industry, the government other competing countries, wage remains owned assembly company, is also one the lowest by international standards. of the lowest salary paying companies. Workers in various economic sectors earn Disputing also other working conditions, very low wages. According to a report workers are in uprising – the company is by New York University, Stern Centre for thus currently revising its salary scale and business and human rights, Ethiopian discussing other adjustments.
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3.2.4 COVID-19 and OSH The COVID-19 pandemic has already were parts of the signed protocol. significantly affected the world of work Accordingly, some unions have already Some globally, and in Ethiopia specifically (ILO suspended the collective bargaining companies COVID-19 and the textile industry in Ethio- process. For example, union leaders at forced their pia, 2019; FDRE Job creation commission, AMICE explained that the expected salary 2020). In the time since the first confirmed increment for this year and the start of new employ- cases of COVID-19 were found in Ethiopia negotiations have already been halted. On ees to take in late March and early April 2020, the gov- the workers’ side, union leaders explained annual leave ernment took various measures in order to that workers are operating under severe minimise the spread of the virus, including psychological stress. Some companies to reduce the state of emergency directives passed reacted by reducing the number of workplace by the council of ministers. Since then, the working days (three days a week at Li-Fan impact of the virus was felt in every sphere motors, for example) or some provide congestion, of life and it spread rapidly. transportation to avoid contact while using and some public transport. companies On March 24, a Tripartite COVID-19 work- place response was signed in line with ILO Some companies forced their employees temporarily guidelines for response to crisis manage- to take annual leave to reduce workplace suspended ment when work is under attack by natural congestion, and some companies and manmade disasters. The signatories temporarily suspended workers for some workers for of the protocol were MOLSA, CETU and days. It was also observed that nearly all some days. EEF, and they aimed to strengthen pre- companies strengthened their workplace vention methods, to mitigate the impact of safety measures in order to prevent the virus among workers and to minimise the spread of the virus among workers. the adverse impact on the entire economy Examples include detecting workers (MOLSA COVID-19 workplace response and other customers’ body heat through protocol, March 2020). infrared thermometers, stringent personal hygienic procedures, and enforcing the use Among others, suspending any ongoing of mouth and nose masks everywhere in collective bargaining and salary increments the working environment.
3.2.5 Conclusion and recommendations Although the automotive industry in Ethio- national automotive industry development pia is still in its early stage, with very few as- policy and will gradually improve the bottle- semblies without significant value addition necks that still hinder the industry. Similarly, or localisation, the prospect seems bright as the industry keeps growing, with re- with potential to generate decent work for nowned multinational vehicle manufactur- the country’s engineers and technicians in ers entering the market, trade unions need the years to come. However, if the indus- to keep up with the new progress especial- try needs to grow fast and sustainably, all ly in the areas of organising, strengthening stakeholders need to work together on social dialogue and active involvement in common issues and forward policy inputs the process of sectoral and national levels to ensure that the country will have a sound of discussions.
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Based on this study’s findings, the following points are recommended:
• Initiate or push for sector level social – Sharing of experiences and learn- dialogue or any other form of dialogue ing from other countries, like Mo- or platform among partners, especially rocco and South Africa in Sub-Sa- automotive assemblers representatives haran Africa or like Thailand and or associations, government concerned Vietnam in Asia, on key areas like bodies (like EIC and Industry Minis- automotive sectoral policy develop- ter, MIDI), research centres and trade ment, research and communication unions and trade union partners, for a on the sector, institutional capacity consistent exchange of information on building and cooperation and col- the sector and to contribute inputs and laboration among key partners. recommendations on short and long • On the union side, as the industry is term policies, especially in the areas of: expanding, the federation should be – Strengthening social dialogue supported in the areas of: at national tripartite, bipartite on – Capacity building at confederation minimum wage/living wage, indus- and federation level on strengthen- try specific OSH and other working ing social dialogue, conditions; • At federation and basic trade – Working among partners to improve union levels: tax structures in a way that favours the demand for locally assembled – Strategic planning, mapping and or manufactured vehicles; networking; organising drives and organising strategies; – Establishing a training scheme development for small and medium – Communication strategy in general enterprises, especially aimed and raising awareness and educa- at producing spare parts and tion about the importance of joining components; unions for workers through various communication channels; – Designing automotive-specific policy incentives for local assembly, – Capacity building for union leaders localisation and manufacturing of for example in the areas of union original equipment manufacturing leadership, sound industrial rela- and related accessories that also tions and building peaceful indus- include a limitation on the use and trial relations, awareness on the import of used vehicle; improving new labour law (currently revised), vehicle financing schemes in collab- collective bargaining skill develop- oration with private banks; ment, OSH (automotive-specific workplace safety and health), com- – Collaboration, coordination, munication and team building and research and communication and life skill development in the areas exchanges of information among of saving and microfinance linkage key partners and with other similar for workers’ economic support and institutions; empowerment.
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3.3 Kenya
While em- 3.3.1 Current workforce ployers are The automotive sector is one of the big- In 2017, estimates placed the number of seemingly gest industries in Kenya in terms of both people employed in the automotive indus- less en- the number of people employed and the try at over 12,000, of which 3,000 people gaged in percentage share of private sector employ- were directly employed in assembly plants. ment. Evidence regarding this has emerged Another 3,690 people were employed in trying to ob- from the 2020 Economic Survey, which downstream spin-offs, and a further 5,782 struct unioni- shows that in 2019, the ‘wholesale and in support sectors (Government of Ken- retail trade and repair of motor vehicles’ ya, 2019). Overall, the number of workers sation efforts, was the third leading industry providing employed in the three assembly plants trade unions wage employment in the private sector, amounted to just over 1,000 employees. are increa accounting for 13.0 percent of the total According to the interviewed representa- private sector employment just behind the tive for Amalgamated Union of Kenya Metal singly ‘manufacturing’ and ‘agriculture, forestry Workers (AUKMW), Isuzu East Africa has challenged and fishing’ industries, representing 15.9 around 300 unionisable (non-managerial and 14.4 percent respectively. positions) employees, with almost a similar in the number in management. AVA has around ways they Its contribution to employment has been 280 unionisable employees and about 180 recruit and rising steadily over the last five years, from in management, while KVM has around 200 230,700 jobs in 2015 to 267,700 in 2019 unionisable employees with about 150 in represent (Kenya National Bureau of Statistics, 2020). management. workers. 3.3.2 Unionisation and labour relations AUKMW is the principal trade union in the membership process. Comments from one representation of workers in the Kenyan interview also suggest that union member- automotive industry. On the whole, the ship has been affected (at least temporar- formal economy is the major source of ily) by divisiveness over a faction of AVA trade union membership. Workers within employees that wanted to join the Dock the segment of automobile manufacturers Workers Union. This however was not pos- are currently engaged under three types of sible due to unions being sectoral-based. employment contract: permanent employ- The affected members have at the time of ment contracts, fixed-term contracts and writing sought to rejoin AUKMW. piece rate contracts. Isuzu East Africa and AVA have employees under permanent and While employers are seemingly less fixed term contracts. KVM, on the other engaged in trying to obstruct unionisation hand, has employees engaged under all efforts, trade unions are increasingly three contract arrangements. challenged in the ways they recruit and represent workers. One of the most An interview with the representative for fundamental issues AUKMW is having AVA indicated that union membership cuts to deal with is long-term job stability. across all three contract categories. Nearly Comments from the interview with a all workers are union members, by virtue of Kenya Engineering Workers Union the fact that they receive wages that carry representative revealed that the Labour deductions for union dues. The majority of Relations Act has also contributed to the employees that currently do not belong drive more activity in fixed-term contracts to a union have simply not initiated the or contracting out work to third-parties. In
70 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
ABOVE: the case of AUKMW, it has given impetus to The informal workforce, which represents Collective engagement of workers on a piece rating about 84 percent of the total workforce bargaining in basis, with KVM, as noted above, being the remains excluded. According to the Kenya. company affected the most. The numbers COTU representative interviewed, the of workers employed under the piece rating challenge in organising the informal system far outweigh those in fixed-term workers into the formal trade union is, in a and permanent positions. For example, in sense, inherent to the very characteristics the month of August, the company had 128 of employment in the informal economy, piece rating employees as compared to by the reason that some of them employ 50 fixed term and permanent employees. as few as 1 to 2 people, while some others The key informant’s sentiments show have workers who are family members of that workers contracted under a piece their employer, which by and large makes rating contract system have reduced it difficult to bargain or negotiate for these motivation for trade union activities. workers. As further noted by the Kenya According to the Kenya Private Sector Engineering Workers Union representative, Alliance representative, this feeling of the other impediment of involving informal obligation among workers to join or remain workers in a trade union has to do with in the union is for protection of their jobs the current legal provision, which is based rather than for better remuneration. principally on a continuing relationship between the employer and the worker More generally, contingent employment is concerned. According to the Labour proving difficult for the union to effectively Relations Act, employers are bound by represent members, in the absence of the collective agreement to deduct and implicit contracts between workers and remit trade union dues and agency fees employers, as noted from the following from unionisable employees covered by comment, “They recruit daily, a contract of collective agreements, including those who one month, two months; so even if the unions are not members of the trade union recruit members, you go there and the (Government of Kenya, 2007). For that employees who are members of the union reason, casual or otherwise non-permanent are not there. Even if you take employers to workers are not unionised, essentially court you find the members are not there and because the process of collection of new people have been put in their place.” union dues is based on a check-off system (Kenya Engineering Workers Union through payroll deductions each month and representative) sending these deductions to the union.
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3.3.2.1 Representation Union representation is structured in • Training through the Directorate of three levels: shop stewards, branch Industrial Training Authority officials and national level officials. The key informant interviews revealed the The various structures of representation mechanisms through which employees in also form a continuum of arbitration pro- the workplace are represented: cess for grievance handling in the work- place, based on how difficult it is to come • Grievance handling when the worker to an agreement. The shop floor is the has issues with the employer that beginning point and the national office the develop into a dispute ultimate level within the union structures. • Collective Bargaining Agreement If the grievance remains unresolved, it is (CBA) to improve conditions for terms referred to the Ministry of Labour. of service, which are supposed to be better than the minimum legal require- If no settlement has been reached at this ments late stage, then it is deemed a dispute, after which the union gets a Certificate of • National Social Security Fund, where Disagreement, and the matter is referred workers’ deductions are deposited for to the Industrial Court or Employment purposes of pension and provident fund and Labour Court for judicial settlement. schemes According to AUKMW, most decisions are • National Hospital Insurance Fund for however often made conclusively at the medical purposes national level.
3.3.2.2 Bargaining Bargaining is undertaken by means Ministry of Labour. The group sits once a of collective agreements that have a year and is responsible for determining the duration span of up to two years before general wage increase which covers even renewal by parties. Federation of those who are not members. Kenya Employers (FKE) was cited as a significant party to collective agreements The second form is where employers in in the bargaining process, acting as the a sector form an employer’s group or or- neutral arbitrator between the union and ganisation under the FKE and bargain with employers. The key informant interviews the respective union. The main purpose for highlighted three forms of Collective doing this is to ensure that there is no high Bargaining Agreements (CBA) where level of labour turnover from one employer workers are represented. to another in a specific sector.
The first form is the national level, which The third form is the company or enter- sets the terms and conditions of service. prise level where it is one union to one This is done through the general wages employer. All the three assembly plants order and order of the specific industry, are members of FKE. At present, AVA and and is generally done through tripartite KVM are on one CBA on a multi-employer negotiation involving Central Organisation basis, while Isuzu East Africa is on a single of Trade Unions (COTU), the FKE and the establishment basis.
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ABOVE: 3.3.2.3 Compensation, benefits and incentives An auto manufacturing CBAs are used in negotiations for the ben- that workers in the automotive industry plant in Pretoria, efit of several collective interests in respect generally receive greater compensation South Africa. of the terms and conditions of employment compared to most other occupations. The of employees, which the employers within COTU representative interviewed noted 52 Collective the industry follow; But it is important to that wages in the automotive industry are Bargaining Agreement ending June 30, 2014 note that the CBA of workers at KVM does sometimes two to four times higher than the not cover workers employed under the minimum wage, depending on the organ- piece rate system. Essentially, after negoti- isation. In general, permanent and fixed ating and signing a CBA, it is registered in In- term employed workers enjoy the same dustrial Court after which it becomes legally wages after the CBA has been negotiated. binding. According to one informant, the The most pertinent benefits for permanent CBA provides the ground for legal action employees are those that deal with pen- against an employer who fails to meet the sion schemes, which are not extended to terms under the agreement. The CBA be- fixed-term employees. tween the Motor Trade and Allied Industries Employers Association and the AUKMW Other than pension, one issue that re- contains 32 clauses addressing issues of mains a key sticking point is that of sever- wage payments and social benefits such as ance payment. The KVM shop floor repre- maternity leave, sick leave and holidays.52 sentation has a deep and vested interest in this issue, with a special concern for the When it comes to incentives (rewards for employees under piece worker arrange- good work, including bonuses), the Union ment who are not entitled to severance pay leaves this to the discretion of the man- when they leave employment. agement, contingent on results achieved. With regards to wages and earnings, a It also makes sense to look at the issue of common finding from the interviews was wage differentials across different grades.
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According to the CBA ending 2014,53 the from Ksh 32,000 to 43,200 average monthly salary, including housing, (USD 296 to 430). The other employee for employees in the manufacturing categories are clerical, with monthly department ranged from 32,000 to 54,000 earnings ranging from Ksh 35,400 to A key narra- Kenyan Shillings (Ksh), or USD 296 to 501. 56,400 (USD 328 to 523); and security, with tive emerg- For those in the Manual and Artisan monthly earnings ranging from Ksh 29,400 departments, the monthly earnings ranged to 31,800 (USD 273 to 295). ing from the interviews with union 3.3.2.4 Health and safety represent- In keeping with the Occupational Safe- an individual qualified as clinical officer ty and Health (OSH) Act, 2007, an explicit respectively. The study findings indicate atives is the occupational health and safety manage- high levels of OSH management practice, need for ment system – comprising of a health along with emergency planning, including training on and safety policy and a health and safety alarm system installation in the event that committee (HSC) – is required if an estab- an emergency occurs. A significant issue the basics lishment has more than 20 employees in here concerns creating ongoing awareness of occupa- order to ensure the health, safety and wel- of safe working practices. A key narrative tional health fare of all personnel. The health and safety emerging from the interviews with union policy is overseen by the Directorate of representatives is the need for training on and safety. OSH under the Ministry of Health. Individual the basics of occupational health and safe- unions have also to some extent been able ty. According to the COTU representative to develop their own HSP, overseen by the interviewed, it is crucial to build the capacity health and safety committee. The commit- of the trade unions, in national, branch and 53 The figures are tee extends across the entire company, shop level, on occupational health and safe- likely to be slightly and includes both union and management. ty. This would be a much more efficient way higher on account of The chair and secretary consist of person- of ensuring adherence to health and safety pay adjustments with subsequent CBAs. nel from the human resources office and policies and other related measures. Note that the pay increase from the preceding CBA was 10 percent for 2013 3.3.2.5 Training New workers receive induction training to work based on their profession, but concerning the environment, the tools more generally the workers are flexible to to be used and the company policy as perform different duties as assigned. part of job orientation. Workers also receive task specific training to assemble According to the interviewed AVA rep- particular vehicles. This is provided by resentative, this is based on the fact that instructors sent from abroad. When vehicle manufacturing work highly relies it comes to the assignment of tasks, on ‘on-the-job training’ and workers are not in some cases workers are assigned employed on the basis of specific training.
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3.3.3 The role of trade unions One of the key findings from this research In more general terms, the union plays a that is generating attention and interest valuable role in strengthening the health is the observation that shop floor union and safety practices of the workplace by leaders have relatively informed knowl- working together with management. Aside edge regarding investment plans. Despite from health and safety issues, the union the awareness of the investment plans remains of key importance as a bargaining and products, the union is not adequately agent on issues affecting its members. informed to increase their bargaining level In the context of representing employee with management. interests and concerns, the KVM shop floor in particular has been negotiating with This is highlighted in the following management on several aspects of piece comment: “Most information is with rate employees, and on possible conversion management, either we believe them from piece rate to permanent employment. one hundred percent, or if you are sharp enough, you can only challenge some While ongoing feedback suggests that man- areas, and that will be the only opportunity agement is beginning to take steps to get for the union to get some information. We to a solution, they are not in agreement need to move with the management when with regards to issues around payment of we hear such projects are in the pipeline salaries, house allowance and overtime. to get information.” (Isuzu East Africa They have agreed to the rest of the terms, representative). including maternity.
3.3.4 Moving forward The current findings show that the quality of jobs in the automotive industry varies some- what by employer. Precarious work manifests its distinctiveness in piece rate work ar- rangements characterised by lower wages, and without severance entitlements. This factor also determines in a great way the level of workers’ involvement as well as the way workers engage in the union.
When the key informants were asked to comment on how the union could intervene, and where, responses pointed to the following four aspects:
1. Improvement of bargaining and nego- 3. Education and training on aspects of tiating ability of the union representa- health and safety, capacity of negotia- tion to enhance their representation of tors and paralegal training for people members; that go to court; 2. Improvement on how workers issues 4. Addressing extension of coverage are represented at ministry level and health care and providence fund at Employment and Labour Relations schemes to all workers. Court so that the union shop floor rep- resentations are more able to resolve grievances;
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RIGHT: Members of MANWU campaigns to demand a better living wage.
54 Labour Resource and Research Institute (2015) The Cost of Basic Needs in Namibia’s Low Income Households.
3.4 Namibia
The automotive industry is the 3rd highest The Labour Resource and Research Insti- contributor towards employment in Namib- tute (LaRRI) conducted a study on the Ba- ia, after Agriculture (24.9%) and accommo- sic Needs Basket concept54 on low income dation and food services (11.4%). households and concluded that a family of about six people will require, at the least, for Table 8 (below) gives a snapshot of figures food and non-food items, N$10,661.91, and of employment, mean wages and union this was in 2015. density according to national data on wholesale and retail trade. There are more Factoring in the concept of decent wages males employed in the industry and they versus cost of living especially in Wind- earn more than their female counterparts. hoek, there is a huge gap in the automotive Looking at the wages, these are not suffi- industry on paying workers, and this needs cient when compared to the standards of to be further reviewed. living in the country.
Table 8 Statistics on wholesale and retail trade in Namibia
Females Males Totals + % # of Employed persons 38,969 (10.7%) 41,882 (11.6%) 80,852 (11.1%) Mean wages N$ 3,338 N$ 4,623 N$ 4,019 Informal employment 38,952 (48.2%) Union density 2,912 2,895 5,802 (7.2%) Source: Namibia Statistics Agency, Labour Force Survey (2018)
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The main custodian of the industrial able are paid low wages that are “unable to 55 Ministry of Labour relations, development and decent work pull them out of poverty, hence not meeting interview extract agenda is the Ministry of Labour, Industrial decent living requirements”.55 There is 56 Ministry of Labour Relations and Employment Creation. The currently no wage progression system in interview extract ministry supports the concept of decent the country. Decent work includes issues jobs and has a Decent Work Country on Occupational Health and Safety (OSH). 57 The average salary in the industry is Programme which outlines the objectives The Ministry of Labour indicated that many N$4,019 but the union of the programme. workplaces (formal) have general OSH indicated that from Policies in place. They seem to be effective their members the lowest paid in the auto According to the Ministry, any work that because there are no or low occupational sector is N$1,500, does not meet the International Labour accidents and incidents in this sector. which is lower than Organisation (ILO) standard definitions of the minimum wage “decent work”, is not “decent work”. However, this does not change that every for domestic workers N$1600. area of labour and employment needs There are substantial employment discrep- improvement, especially on OSH related 58 The figures are ancies when it comes to fulfilment of what training and awareness. This is critical in based on the whole 56 industry and not decent work entails. The poor and vulner- the wake of COVID-19 pandemic. disaggregated Currently, there are a number of gaps to fill when it comes to decent work. Looking at 59 Actual figures the automotive industry these gaps are as follows (from interviews); for the automotive industry out of 57 approximately 2900 • The need to have decent salaries • Unorganised workers without union employed in auto work which allow workers to have a representation either lack or have no as the union indicated decent life; bargaining power; • Eradication of racial biases when it • Some workers considered poor and vul- comes to positions, payment and nerable are left at the mercy of employ- conditions of work; ers and state law enforcement agencies who may not adequately protect them; • Workers are not covered in terms of social protection; • Most workers are unaware of their rights or simply fear to exercise them.
3.4.1 Trade unions in the sector and main challenges Trade union representation is active in However, there is no employers the automotive sector. Although there is association for the industry. It is voluntary representation it is quite low with 5,808 for the employers to form an association, members out of an estimated 80,852 and there is no law that requires them to employed workers.58 There is only one do so. Due to this it is hard for unions to active union, the Metal and Allied Workers collectively engage the sector employers Union (MANWU), which has a total of on the conditions of work. The Namibia 39859 members on record. The unionised Employers Federation (NEF) is the only workers are across different retail federation representing employers. companies operating in the country. The The federation has employers from union is active in engaging in collective the automotive sector as a part of the agreements with the various companies. federation. It is through the federation Source: Namibia Statistics Agency, Labour Force Survey (2018)
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that trade unions engage with some of the relations. That way the custodians of in- 60 NSA Labour Force employers at tripartite level. vestment and labour are on the same page Survey 2018 when it comes to benefits for the state as a 61 This amount is Another challenge is the presence of whole and citizens who provide the labour based on 2018 data anti-union sentiments that are displayed force. and if the exchange by some employers and employees. This rate of 2018 is used the amount would be makes it difficult for the union to organise Decent work extends towards wages and USD 279,80 which workers in those entities and at times pro- salaries. The union has been in constant would be slightly cesses last longer to get into a bargaining negotiations with employers to pay decent higher than it is now with the US dollar agreement. The unions have to face such salaries. Imbalance of wages and working fluctuating issues in the industry and require employers conditions due to discrepancies between 62 Ministry of Labour and employees to be sensitised to the role employers (which is a race challenge) has Interview of the unions and debunk stereotypes or become quite prominent. According to anti-union opinions. These issues could be the NSA data as of 2018 the mean aver- one of the reasons for low representation age wage in Wholesale and Retail Trade by unions in the industry. The trade union is N$4,019 (USD 238.90).61 This amount is currently organising in the sector has a the mean wage in the Wholesale and Retail union density of 7.2%60 (5,808 members) Trade industry, and some workers get as from a pool of 80,852 workers. little as N$1,500 (USD 89.50) in the automo- tive sector yet they are in the same position Imbalance Trade unions are not consulted nor in- as someone else getting much more in a volved in new investments discussions. The different company. of wages and conversations around new investments working con- according to the union are mainly conduct- The Ministry of Labour62 confirmed that ditions due to ed at a government level and they only deal there is no minimum wage in the sector. with the aftermath. The consultations only Wages are determined through a collective discrepancies come to the union offices once the invest- bargaining system where union exists, and between em- ment logistics are concluded. This leaves where it does not exist, wages are offered very little room if any for the unions to voice by the employers on a “take it or leave it” ployers has their opinions and give input. The effect of basis. In this case it is where the union become quite this is that at policy level the unions’ voice faces difficulties and not having universal prominent. is absent and hence measures are put in agreements but specific to the company, place that will affect workers and citizens which contributes to working conditions at large. discrepancies in the sector.
Furthermore, it is of great importance that With no central bargaining system in the Ministry of Trade and Labour deliberate the sector, each company has its own on investment matters as the investments collective agreement, which leads to translate into issues of labour and industrial discrepancies in employment. 3.4.2 Building capacity for union members Trade unions play a crucial role in capacity are industry related, the union requires building. MANWU has been conducting training in order to build its own capacity a number of trainings for their members, and that of the members. especially on the Labour Law. The law sets out employment standards and regulations, According to the Employer’s Federation which have been the basis for trade union this is where a strong and solid tripartite engagement with employers. However, engagement is needed to better relation- when it comes to other acts/policies that ships and enhance social dialogue.
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ABOVE: 3.4.3 Recommendations Waves breaking on the Namibian coast at Sandwich • A legislation review is needed to make • Training and retraining are key compo- Harbour near sure that new investments cater for new nents of this sector. Without that, work- Walvis Bay in manufacturing plants that uphold the ers may not keep up with new technol- Namibia. state standards of investment, business ogy and skills needed to manufacture, and employment. service, sale or just repair different Photo by Sergi types and models of vehicles that enter Ferrete on Unsplash • Namibia should improve the education the market rapidly. system in order to change the mindset of graduates (good quality education) • Advocacy for the workers (unions) to and promote more vocational training. gain more knowledge on the auto sec- tor at policy level. • Decent jobs have to be present in all segments of the sector (from manufac- • Improved consultations between turing throughout the supply chain to the government, employers and trade the dealership). unions in order to realise the impor- tance of engagement when considering • Any new investment should be legally new investors. obligated to create decent work by making a deliberate undertaking • Unions need to be capacitated and to provide decent work as a key equipped to deal with policy reviews component of business imperative and changes, legislations, and new and modelling. investments in order to promote social dialogue and engagement
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ABOVE: Two rickshaws 3.5 Nigeria drive down a street in Ikeja, Nigeria. Photo by Godwin 3.5.1 The challenge of decent work in Olatunde on Unsplash the automotive sector
Our discussion on decent work in the The newly licensed plants are not union- automotive sector in Nigeria will seek to ised. For example, Stallion group occupies 63 In the early 1980s, Nigeria had over 500 highlight the changes and transformation the expansive privatised old VW plant and national assets. Most that have occurred in the automotive sector it utilises the space to assemble about 5 of these were sold from independence to the onset of crisis brands including Ashok Leyland, Hyundai, to big corporations and only 37 of them in the SAP era in the 1980s and the current Nissan and Volkswagen. The Bajaj Tricycle exist to date. Many situation in the Industry. is also assembled in the premises. Stallion of these were forced has successfully resisted unionisation over to shut down, or downsized. In 1988 Organising deficit and weakened workers’ the last decade. the unemployment power is the lot of trade unions particularly rate in the country was in the automotive sector at the wake of The trade unions’ numerical strength was 5%, in the first quarter SAP implementation with privatisation decimated in the period that follows the im- of 2020 this reached 27.1%. and deregulation including labour market plementation of SAP. SEWUN is a merger of deregulation. Rising unemployment comes four industrial unions; iron and steel, metal, with the privatisation of the assembly automobile and precision. In 1996, at the plants post-SAP, with a mass of workers time of the merger, the numerical strength being retrenched.63 Also, the bulk of the of SEWUN was over 15,000 members. At vehicle assembly plants including the the moment, SEWUN has a membership privatised ones are currently without a estimated to be 10,000, with the automobile union. However, there are few exceptions, and precision sector representing about for example Boulos Enterprises, a big 2,000 of that. diversified conglomerate who recently took on the Suzuki franchise in Nigeria Similarly, AUTOBATE has suffered serious and has an assembly plant within its setbacks concerning organising. The expansive industrial location. Here, the union has lost membership due to mass union leveraged on the existing union retrenchments at each economic turn; the management relationship to launch their AUTOBATE membership is estimated to be own auto branch. around 1,200. In the last 5 years the union
80 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
has managed to unionise a new workplace. 30,000 and this is being further decimated 9 million Efforts at winning more workplaces are by the crisis of COVID-19. On the other being thwarted by the union bursting hand, the combined strength of the two A workforce management. unions (AUTOBATE and SEWUN Auto of 9 million Sector) is just above 3,000. This represents direct workers According to the World Association of Car just about 10 percent of workers in the is required Manufacturers, or rather the Organisation sector. to build 60 Internationale des Constructeurs d’Auto- million vehicles, mobiles (OICA), about 73.4 million cars and There is very little to no working relationship including all the 23.84 million trucks were produced in the between the two unions in the sector. Whilst parts that go world in 2017 alone. OICA equally con- SEWUN (auto sector) organises junior into them. firmed that a workforce of 9 million direct category staff, AUTOBATE organises the workers is required to build 60 million vehi- senior staff in the auto sector. Yet there is cles including all the parts that go into them. no clear-cut framework for collective action Going by the data provided by the associa- or a common strategy for organising. 61,000 tion, Nigeria, with a production capacity of over 408,000 units per year, would require The two unions are separately part of Nigeria, with at least 61,000 direct workers. the bargaining council in the auto sector. a production Even though the sector has a collective capacity of over Meanwhile the size of the indirect work- bargaining mechanism where the two 408,000 units force in the automotive sector is 5 times unions are involved, plant dialogue is weak per year, would that of the direct workers. That means, and not as robust as expected. The two require at least in the case of Nigeria, a total of at least unions need to build power to expand 61,000 direct 360,000 jobs will be created in the sec- influence at plant levels. tor if the country meets its full production workers. capacity. The Director General of NADDC Discussions with the two unions revealed in a statement in March 2020 estimated the huge organising gaps and the need for total number of direct and indirect workers capacity building. The two unions belonged in the sector to be 50,000. to two trade union centres and needed to leverage on that for visibility and policy en- The unions consider current direct gagement and campaigns for decent work employment in the sector to be about in the sector. 3.5.2 Automotive sector, structural adjustment programme and employment conditions Between the 1970s and the 1980s, em- (1,000+) and STEYR (1,000+) were fully ployment conditions in the automobile and unionised (union estimates). The ancillary ancillary firms in Nigeria compared favour- firms such as Dunlop Tyres, Michelin Tyres, ably to other segments of the economy, with Machine Tools and Steel Rolling Mills were full compliance with Nigeria’s labour laws also organised into other unions, providing and ILO standards. There was widespread opportunity for broader union power and unionisation in all the firms. All the big firms collective action along the value chain of were organised and union density was more automobile manufacturing. The auto sector than 80 percent of the workforce of the big was a sector with vibrant workers and a automobile assembly plants. The big auto- strong union presence. The union thrived mobile assembly plants like PAN, Kaduna on strong structural power, able to disrupt (5,000) ANAMMCO, Enugu (4,000), VW, production to put pressure and achieve Lagos (5,000), LEYLAND (2,000), FIAT reasonable results from its demands.
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The financial crisis in the 1980s caused a of the four unions (the metal, steel and engi- severe economic downturn, including an neering, auto and precision sectors) to form enormous decline in real wages (as inflation the Steel and Engineering Workers’ Union was rising) both in the public and private of Nigeria (SEWUN) in 1996. AUTOBATE, sectors. As the crisis persisted the com- which represents the senior staff catego- panies resulted in frequent redundancies ries of employees, from supervisor to man- and ultimately closures – such that by the agerial cadre, also struggled for survival as middle of the 1990s most of the auto-plants membership was reduced to a few hundred were shut down. This crisis and the sudden members. The resurgence in the auto closures resulted in prolonged industrial sector since 2014 had given birth to new op- disputes in the big firms. timism and a determination to reposition the union. The Union recently recruited a young This also led to a major decline in union and vibrant General Secretary, Sola Olorun- membership and a near total collapse of femi, and a new union organiser – both with the unions in the auto and allied industries. student union activism backgrounds. Such developments necessitated a merger 3.5.3 Impact of labour market deregulation in the automotive sector Many [auto- Labour market deregulation, which includes Companies in the automotive sector now mobile as- labour casualisation, leasing, workers out- engage in serious anti-labour practices. sembly com- sourcing and contract staffing, is an ele- Findings revealed that the automobile ment of neoliberalism that subjects workers assembly companies do not just engage panies] have to precarious conditions. Labour casuali- workers through a recruitment agency. registered sation, outsourcing or contract staffing is Many of them have registered recruitment recruitment made formal and supported by legislation in firms to be subsidiaries to their companies, the labour act. in an attempt to cut workers’ wages and firms to be other work remunerations that would have subsidiaries The dichotomy between full time staff, incurred more cost. contract staff and outsourced and casual to their com- workers is wide. Although full time staff About 70 percent of direct workers in the panies, in an enjoy the fair semblance of regular employ- automotive sector are currently employed attempt to ment – letter of contract, confirmation of by method of casualisation, outsourcing or appointment after 3 months or a maximum contract staffing. For instance, in Stallion cut workers’ of 6 months, leave and leave allowance, and Motors, it was established that assemblage wages and 8 hours of work with added hours recorded of tricycles relied largely on casual and other work as overtime – they are denied the benefits contract workers. All security staff of the of social dialogue and industrial justice company are outsourced staff with condi- remunera- through a participatory grievance process, tions even poorer than those who work in tions that as no workers are allowed to form a union. the plants (interview, Stallion Motors).
would have Conditions are much worse for casual, The COVID-19 crisis and ensuing economic incurred contract and outsourced staff. They are recession has compounded the precarious more cost. often employed without a letter of appoint- situation in the sector. The crisis of foreign ment or have pay structures that fall short of exchange, currency devaluation and dollar industry standards. They have longer hours scarcity has weakened demand, resulting in of work, often without it being counted as poor sales, declined production and about overtime. The prospect of promotion and a 50 percent reduction in workforce. One of career progression is often very tight as the management staff interviewed hinted of there is no union to push these demands. a partial divestment into agro-ventures.
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3.5.4 Privatisation, new investments and growing precarious work Experiences around the world show Plant run by Stallion group are regarded as that new investments do not necessarily staff members with all the legal benefits of translate into decent jobs, but that jobs are employees – a letter of employment stating secured and workers’ rights guaranteed the nature, terms and conditions of employ- only when workers can exercise the rights ment, confirmation and compliance with to freedom of association and collective relevant provisions of the employment laws bargaining in line with the ILO conventions in relation to hours of work, wages, allow- 87 and 98. ances, leave and leave allowance, medicals through Health Management Organisations, In the emerging context of new investments etc (interview, Stallion Motors). in the automotive sector, trade unions in the automotive sector must be strategically The remaining two thirds of the employees re-positioned to benefit in terms of new are mostly contract and outsourced staff membership. The current situation is that with consolidated pay structures and SEWUN and AUTOBATE are not signifi- prolonged working hours. All categories cantly present in the privatised and new of workers have no form of representation auto-plants. as trade unions are not allowed in the assembly plants. Previous efforts to Currently, there is no union presence in organise and form local unions were ANAMMCO, STEYR, VW and PAN. These frustrated by the management. Similar plants were once powerful centres of union conditions prevail in most of the new auto activism before privatisation. Similarly, most plants in utter disregard for section 40 of the new vehicle assembly plants (INNO- of the 1999 Constitution of the Federal SON, KIA MOTORS, DANGOTE TRUCKS, Republic of Nigeria and sections 9 (a) and ELIZADE ETC) are not unionised. For exam- 9(b) of the Labour Act cap 198 Laws of ple, Stallion Group occupies the expansive the Federation 1990 which conferred on privatised old VW plant and it utilises the Nigerian workers the right to associate and space to assemble about 5 brands includ- join the union. ing Ashok Leyland, Hyundai, Nissan, and Volkswagen. Bajaj Tricycle is also assem- To underscore the dangers of the absence bled in the premises. Stallion Management of the union in the workplace, our interview has successfully resisted unionisation over with a labour officer in charge of the trans- the last decade. Similarly, the union had port sector reveals that there are constant struggled to organise the plant and had disputes apprehended by the Ministry of even taken the management to the national Labour around unfair termination, poor industrial court, all to no avail. conditions of service, non-payment of retirement benefits and denial of the rights Our findings show that just about a third to form union (interview, Federal Ministry of of the workforce in the old Volkswagen Labour and Employment).
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ABOVE: Action against 3.5.5 Current challenges precarious work by our Nigerian It is apparent that current working condi- labour centres with which SEWUN and affiliates, led by tions in the auto industry fall far short of the AUTOBATE affiliate respectively. oil and gas union standards experienced in the sector at its NUPENG. peak in the 1980s (with stable, regular em- Trade unions need to adapt to changing ployment and vibrant union representation). employment relationships and ensure union Our engagements with the unions suggest coverage for all categories of workers. the need to review internal challenges Luckily, the NLC and TUC are involved in confronting the union, and to recruit and the ongoing process of Labour law re- build capacity of new organisers who would view pushing for seamless recruitment of take forward the union struggles in the contract and outsourced workers across emerging automotive sector. This project of all sectors of the economy. In the interim, union revitalisation is imbued with obvious the NLC and the TUC had, in conjunction challenges. with affiliates in the oil and gas sector (NUPENG and PENGASSAN) and affiliates The first challenge relates to how to expand in the banking and financial services sector membership recruitment by re-energising (NUBIFIE and ASSBIFI), mounted pres- union organising efforts. Organising needs sure on the Federal Ministry of Labour and to spread across all the emerging plants Employment to develop a policy guideline in the sector and cover all categories of for the recruitment of contract and out- workers – junior staff, senior staff and sourced workers in the oil and gas and the contract and outsourced workers. This calls banking and financial services sectors. The for synergy between the organising work of unions must also push in this direction for AUTOBATE, SEWUN (auto and precision such a policy guideline for the auto-sector sub-sector) and the mother union (SEWUN) because contract and outsourced employ- with the support of NLC and TUC, the two ment are the dominant forms of employ-
84 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
ment in the auto sector. The unions in the capacity for recruitment, representation auto sector must work and build synergy and campaigns in order to promote and with the trade union centres to launch a advance the rights of workers in the auto nationwide organising campaign that will sector. align labour rights with investment in the auto sector. Finally, the union must play an active role in policy development processes through The second challenge is to build the ca- lobbying, campaigns and policy advocacy. pacity of the leadership of the unions at all This requires specific skills and capacity levels, national, zonal, state and enterprise development for officers of AUTOBATE and levels. It is imperative to build a new crop of SEWUN to ensure that the unions become union organisers with the right ideological important stakeholders in the policy pro- orientation and with the requisite skills and cesses and implementation. 3.5.6 Recommendations
Nigeria has a huge market for vehicles and • There is a need to build the capacity of component parts with over 200 million peo- the leadership of the unions at all levels: ple; the largest market in Africa. Yet there national, zonal, state and on the factory is a deficit in terms of available vehicles per floor. It is imperative to build a new crop person. Similarly, Nigeria is home to raw of union organisers with the workers’ materials that could feed different tiers of ideological orientation, the requisite the automotive supply chain but there are skills and capacity for recruitment, problems of policy inconsistencies and representation and campaigns to weak implementation. promote and advance the rights of workers in the auto sector. It is in the light of the huge potential the • Huge tariffs should be placed on country holds in the automotive sector importation of fully assembled vehicles and the numerous challenges confronting even by the licensed assembly plants sustainable development and decent work to reduce the domination of imported in the sector that the following recommen- vehicles in Nigeria auto markets. dations are being made. • Workers are important stakeholders • There should be massive in the automotive industry, it is thus industrialisation driven by public important to expand the National intervention in important sectors such Automotive Design and Development as petrochemicals and textiles. There Council (NADDC) to include should be massive state investment in representatives of the workers. Also, linked sectors and automotive sub- the unions must play an active role sectors – a lesson should be drawn in policy development processes from the boom period of the automotive through lobbying, campaigns and policy industry. advocacy. This requires specific skills and capacity development for officers • All the trade unions in the automotive of AUTOBATE and SEWUN to ensure sector should have a joint organising that the unions become important team to synergise their efforts stakeholders in the policy processes in confronting union bursting and implementation. management. SEWUN and AUTOBATE must tap more into the solidarity • The processes of finalising the support of IndustriALL and the trade automotive bill should be accelerated union centres for organising campaigns and the president assent secured to get investors’ confidence.
www.industriall-union.org 85 Section 3
3.6 Rwanda
In Rwanda, in the private sector, there are generally only the employer is facilitated The inves- some labour issues such as unfair salaries and the employees tend to be forgotten. tors or em- and unfair dismissals or contract termi- COTRAF also raised an issue of financial nations, often due to alleged economic or means to provide proper capacity to the ployers need technological reasons. Workers’ safety trade unions. Social dialogue between to under- issues have been raised by various labour employer and employees is still lacking in unions, one of them being COTRAF, which Rwanda. The investors or employers need stand the im- received 12 cases of issues related to the to understand the importance of trade portance of construction sector in 2018. By now the unions and welcome them to work together trade unions safety complaints are much lower (Bishum- as this could contribute to the sustainable ba, 2020). development of any productive sector. and welcome The current mechanism of contract or job them to work The new labour law (2018) has also fixed negotiations in the informal automotive the previous issues of compensation for sector is still not having a proper line together as employees who get injured at work while because employers are still the one to fix this could not insured with social security. Article 19 the salary and the contract period, without contribute to provides for compensation of employees a clear negotiation or discussions. who had occupational accidents or diseas- the sustaina- es, entitling the employees to compensa- As COTRAF reports, “the dialogue or ble develop- tion equivalent to the social benefits they communication between employee and ment of any would have received from a social security employer is still an issue because there is a body in Rwanda if their employer had lack of respect from the employer side and productive contributed for them, including medical and the mindset of the employee that says that sector. related expenses (Mifotra, 2018). the boss is always right and you don’t have the right to discuss with him regarding your In an interview with COTRAF, it was rights at work. This issue always causes mentioned that there was still an issue many problems including losses in any of lack of information, which they say sector, because if the employee is not happy continues to impede employees in many with his remuneration and his rights, he will ways. COTRAF also raised the issue not perform well at work and this will drive of doing business in Rwanda, where the company to the loss.” (COTRAF, 2020).
According to the new labour law of 30/8/2018, the employer should:
1. provide some main duties; 7. affiliate and contribute for an employee to the social security organ in Rwanda; 2. provide an employment contract and its copy; 8. discuss with the employees or their representatives on matters relating to 3. provide the agreed work at the time and work; place as agreed upon; 9. provide employees with professional 4. supervise to ensure that the work is training and continue upgrading their done in suitable working conditions, capacity; as far as security and health in the workplace are concerned; 10. provide an employee with working equipment; 5. pay the agreed salary, on time; 11. notify the labour inspector in case of 6. avoid whatever can hamper the a work-related accident or death of an company’s life and safety, its employees employee (Mifotra, 2018). and the environment;
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ABOVE: The workers who were not unionised often the employees’ representatives amicably An employee of an experienced challenges surrounding their settle individual labour disputes between automobile factory rights and most did not know what to look employers and employees. If employees’ paints car body for in contracts, or did not understand how representatives fail to settle the disputes elements. to calculate or check their RSSB contribu- amicably, the concerned party refers the tions (COTRAF, 2020). matter to the labour inspector of the area where the enterprise is located. If the They need more information about dispute Labour Inspector of the area where an en- settlement procedures, information on con- terprise is located fails to settle the dispute tract termination, information on working due to the nature of the case or a conflict hours and 48 percent on minimum wage, of interests, they refer the dispute to the more information about the rules of over- Labour Inspector at the national level, stat- time pay, and information on unionisation. ing grounds to refer such a dispute. If the amicable settlement fails before a labour The labour law accepts the validity of inspector of the area where an enterprise unwritten employment contracts on the is located or before the Labour Inspector at condition that they do not exceed 90 days. the national level, the case is referred to the Some employers continue to hire the competent court. However, the court can services of employees for longer periods decide not to receive the case after deter- without written contracts, leaving them mining that steps for amicable settlement vulnerable (COTRAF, 2020). provided for in this article have not been followed (Mifotra, 2018). If labour disputes arise in such cases, labour inspectors face difficulties in The ministry seeks to address matters handling complaints from these employees of employees particularly in the informal without contracts. Such employees still sector. The new labour law defines infor- encounter major difficulties in presenting mal sector employees as an employee credible evidence to support their working for an enterprise or an individual complaints (Musoni, 2020). for an employment that is not registered in the register of companies or with a public According to the new Labour Law of authority. Previously, the labour law was 30/8/2018, article 102 on the amicable limited to matters prevailing in the informal settlement of individual labour disputes, sector covering only such issues like social
www.industriall-union.org 87 Section 3
security, trade union organisations, and wage, only stating that this will be catered health and safety at the workplace. for under a subsequent order of the minis- ter in charge of labour (Mifotra, 2018). However, the new labour law is broadly covering such aspects as the minimum Currently no national minimum wage has wage where it says that an order of the been fixed yet, but Rwanda’s minimum minister in charge of labour determines wage rates range from RWF 500 to minimum wage, but this ministerial order 1,000 per day (USD 0.51 to 1.03) in the tea is not yet in place. The minimum wage industry, RWF 1,500 to 5,000 a day recognised by law based on each cate- (USD 1.54 to 5.14) in the construction gory of occupation, the right to leave, and industry and RWF 5,000 to 15,000 a day protection against workplace discrimina- (USD 1.54 to 15.43) in the auto industry tion. However, it does not set the minimum (Minimum-wage.org, 2020).
3.6.1 Background on current trade unions and their role in Rwanda
In Rwanda there are three active union ests of workers; quality services (special- federations with the aim of improving ised COTRAF staff checks with workers the rights of workers and safety of whether their rights are respected in terms the working environment. These are: of working time, wages, hygiene, health CESTRAR (Rwanda Workers’ Trade and safety at work); legal assistance (pro- Union Confederation), COTRAF (The vided that you have been affiliated for six Congress of Labour and Fraternity in months); and information through periodi- Rwanda) and COSILY (Conseil National cals, brochures, and the internet (COTRAF, des Organisations Syndicales au Rwanda) interview, 2020). (LMIS, 2018). Generally unions participate in some CESTRAR (Rwanda Workers’ Trade Union socio-economic development policies and Confederation) is the oldest and biggest laws, more specifically the employment National Centre in Rwanda with 16 affiliated and industrial relations. They also indirectly Rwandan trade unions, with a progressive provide through their communication chan- membership of more than 165,000 workers nels some information about the potentials in different sectors. It is working on union- and issues in each sector. But directly, they ising the workers in the automotive sector are not consulted for specific investment (FES, 2020). promotion. Their role in current investment is passive but their daily activities (labour COTRAF-RWANDA is an inter-profes- relations, decent work, minimum wage, sional federation bringing together unions labour disputes and conflict management) from agriculture, farming and construction influence future investment decisions sectors, industry, banks, hotels, various (Kobina, 2020). services, private and public, education and others. COTRAF currently fulfills its mis- Some interviewed industry representatives sion of defending and promoting workers’ like REM declared they are willing to work rights and interests through three services together with the trade unions once they to its affiliates and to Rwandan workers in are in place because they will help them general on a regular basis. better control the workplace and provide professional and quality work, which will COTRAF provides affiliates the following help them to grow their investments in the benefits: defending the collective inter- automotive sector (Kabanda, 2020).
88 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
3.6.2 Auto-workers: current situation and reasons not to be unionised
The automotive sector in Rwanda is at its Everywhere in the world, it is a problem infant stage which makes workers in the to unionise workers in the informal sector assembling and manufacturing of vehicles because many are self-employed, have sector hard to reach by the trade unions. no employer and many are not registered The workers in the automotive sector are anywhere in the labour inspector office. being managed by the industry itself, in Therefore, it is not easy to organise them. terms of providing internal training and For these reasons, some totally lack providing them contracts. awareness about unions. Even in some registered automotive companies, the In the future, trade unions in the auto sector lack of information about unions can be a will be needed and this will strongly help reason why some are not unionised. They the workers to have decent and sustainable need to be approached and unionised as jobs, also the investors will be facilitated to for other formal workers (Musoni, 2020). hire qualified and organised workers who CESTRAR is having discussions with some care about their work and provide quality organised companies such as VW Rwanda work. The interviewed policy makers also on how their workers can join the union. mentioned that the trade unions are need- ed in the automotive sector as it is a key As mentioned above, the challenge is in and growing sector. the informal sectors where it is difficult to discuss with their cooperatives, and it This way, the government or other support is not easy as many workers are working institutions will be able to easily provide on their own without any control or any training or any other support, since union- organisation. Another challenge lies in isation will make workers more accessible the financial limitations to continue the and their rights can be well monitored and campaign of sensitisation and keep giving respected, to eventually guarantee decent training so that workers can understand and sustainable jobs (Kobina, 2020). the interest of being unionised (Musoni, 2020). At present, the main reason for workers not to be unionised is general to all informal Criteria for workers to join the union are sector workers where the businesses are the same as per the provision of Rwandan rarely registered on a national level - some- Labour Law No. 66/2018 of 30/8/2018, art. times they don’t pay taxes and don’t have 10, art. 40, al. 4: it is a fundamental right of formal arrangements for their employees. any worker to join a union of their choice. In Rwanda there are some informal types Many times, unions can internally set con- of business such as those selling vehicle ditions like membership fees, but generally, spare parts, small automobile repair shops a worker willingly adheres to the union of and workshops and those selling food. their sector (Mifotra, 2018).
www.industriall-union.org 89 Section 3
ABOVE: A mechanic in 3.6.3 Building capacity and challenges the Volkswagen assembly facility in Normally, it is the responsibility of the employers who rarely respect their basic Kigali, Rwanda. employer to train their workers to maintain rights (COTRAF, 2020). the quality of service provided to clients. But the government has a formal educa- The rights in bargaining are formally safe- tion system – human capacity develop- guarded for workers in Rwanda, especially ment programmes and vocational training in the private sector as per the Labour programmes through which workers are Law (No 66/2018 of 30/8/2018 Art. 91-98) trained. Trade unions also train workers for (Mifotra, 2018). There are some challeng- their labour rights and industrial relations, es in practice but as unions are more and which help them improve their working more incapacitated in terms of training environment and competitiveness in the and finances, more collective bargaining labour market. The financial constraint is agreements are formally concluded. Still, a big barrier to union plans to mobilise and the mindset of employers needs to change provide training to as many workers as (COTRAF, 2020). possible in that sector. FES Rwanda supports trade unions on ca- For formal sector workers, there are not pacity building, but it doesn’t get to go into many problems in terms of social security, their internal structures and organisation but in the informal sector, it is very prob- processes. Trade unions identify gaps and lematic as many workers are somehow FES Rwanda supports their ideas to bridge self-employed, or work for non-registered those gaps. An example is the new labour
90 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
law – with this we provide means to gain positions to the benefit of society. The pro- training on labour law for their members gramme in Automobile Technology is aimed (Muhire, 2020). at providing technicians with knowledge and skills. Graduates of the programme The Rwanda Polytechnic through its IPRC should be able to: check out new cars be- provides the mechanical engineering with fore delivery and make sure that all systems the objective of the undergraduate pro- are functioning and in proper adjustment; be gramme in Mechanical Engineering which responsible for doing the normal check-up is to prepare graduates so that, within three offered to the buyer after a certain mileage years of graduation, they will have success- has been reached and be called on to do fully established themselves in professional minor repairs and adjustments, services, careers and/or obtained a graduate de- dismantling, checks, repairs, reassemble gree, and will have begun to generate new engines, transmissions, transaxles and knowledge or exercise leadership in their differentials, and more. (Kigali, 2019).
3.6.4 Recommendations
• The government of Rwanda should put in the automotive sector to have more effort into the automotive sector organised workers and respect their to facilitate the investors so that the right and to be open to the trade unions. sector can grow at a good rate. • The government of Rwanda through • The government of Rwanda through MIFOTRA (Ministry of Public Services RDB should consult and consider the and Labour) should support the trade trade unions in the investment plans. unions in capacity building and in awareness of the workers’ rights so • The government of Rwanda through that decent and sustainable jobs can be RDB should work on formalising all improved. sectors and avoid the creation of new informal sectors. • FES Rwanda should have a deep discussion with COTRAF and • The government of Rwanda through CESTRAR to learn about the RDB should encourage the new challenges and how those challenges investors to respect trade union rights. can be tackled especially in providing • The government of Rwanda through capacity building to the workers in the MINEDUC (Ministry of Education) automotive sector and other sectors. should initiate the basic knowledge • The trade unions should be able to about labour law programmes in access the investors and show them schools. the importance of working with the • MIFOTRA should take an assignment trade unions. together with PSF (Private Sector • The trade unions should contribute Federation) of supporting the trade to growing awareness amongst both unions in Rwanda. workers and investors on what they do • The government of Rwanda through and how they can help both sides to RDB should encourage the companies develop the industry sustainably.
www.industriall-union.org 91 Section 3
64 NAACAM, Automotive Export 3.7 South Africa Manual 2020. 65 Interview NAACAM representative. 3.7.1 Decent jobs and the role of trade unions This section unpacks trade union organisa- The four pillars of the ILO Decent Work tion, the state of collective bargaining and Agenda (employment creation, social pro- employment conditions in the South African tection, rights at work, and social dialogue) auto industry. The purpose is to indicate will serve as the basis to compare employ- whether employment in the auto industry is ment in the auto and component industries decent and the extent to which such decent with decent employment practices. These employment practices are coupled with four decent work pillars are broadly cov- strong trade union organisation. ered under the sub-headings below. 3.7.2 Employment in the auto assembly and auto component sectors Average monthly employment by vehicle resulted in a doubling of total employment in manufacturers totals 30 250 and the com- the auto value chain. COVID-19 makes all of ponent sector employs a further 80 000 this uncertain. employees.64 The table below provides a breakdown of employment at the seven In terms of the component industry, of the OEMs. 80,000 employees, 63% are employed in workplaces with more than 250 employees, In the absence of COVID-19, employment 19% in workplaces with between 151 to 250 in the auto assembly industry would have, employees, and 17% in workplaces with if all went well, expectantly increased in the between 1 to 150 employees.65 The bigger foreseeable future as a direct result of the workplaces are generally first tier suppliers investments announced by some OEMs. given their greater market share. As with This would have been further supported auto assembly employment, the prospect by the SAAM’s ambitious target of growing of sustainable employment growth in the the South African vehicle production to 1% component industry was anticipated, but is of total global output, which would have in doubt because of the pandemic.
Table 9 SA employment by OEM
Original Equipment Manufacturer Total employees BMW 4,000 Ford 3,700 Isuzu 976 Mercedes-Benz 3,668 Nissan 2,501 Toyota 8,539 Volkswagen 4,748 Total 28,132 Source: WhoOwnsWhom / Eikon / MarketLine.
92 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
ABOVE: Workers 3.7.3 Employment categories in the struggle against precarious work. auto and component industries An important measure of decent work is cost of the training of the constant stream the employment status of workers. Decent of new entrants to the industry.67 work is compromised by the trend towards non-standard/atypical work facilitated by These interviewees therefore indicated 66 Interview with NAAMSA outsourcing and the use of labour brokers. that the employment status of a very large representative. This appears to have been minimised in the majority of workers in the auto and compo- 67 Interview auto and component industries (interviews). nent industries is permanent and full-time with NAACAM The NAAMSA interviewee noted that the at either an assembler or a tier one or two representative. auto industry requires a skilled and dedicat- component supplier. Further, the industry ed workforce to meet its operating de- reports to the Motor Industry Development mands. It is for that reason that employment Plan (MIDP) on labour utilisation, including in the auto assembly industry is generally on the use of labour broking, outsourcing, etc. a permanent full-time basis.66 Such reports reveal an official decrease in non-standard employment practices and In the case of component suppliers, the attest to the benefits of long-term, secure NAACAM interviewee indicated that, to employment for the industry. The impact their knowledge, 89% of jobs are of a per- of the COVID-19 pandemic may change manent nature, 8% are fixed term and 3% the tide towards non-standard employ- are outsourced. The interviewee further ment practices as employers could seek pointed out that outsourced labour is on a to squeeze labour cost as a result of losses steady decline. This is to reduce the high over the lockdown period. Source: WhoOwnsWhom / Eikon / MarketLine.
www.industriall-union.org 93 Section 3
ABOVE: Workers 3.7.4 Trade union organisation, struggle against precarious work. collective bargaining and social dialogue in the auto and component industries
68 We could not The National Union of Metalworkers of reported membership of 150,000, although obtain NUMSA’s South Africa (NUMSA), one of the largest there is a smaller trade union, the Motor membership data in the auto assembly trade unions in South Africa with a reported Industry Staff Association (MISA) which or- industry. It is the membership of 350,000, is currently the ganises mainly in the auto dealerships sec- only representative sole trade union negotiating with vehicle tor. The employers’ organisations at MIBCO trade union in that manufacturers at the auto National Bargain- are the Retail Motor Industry Organisation industry, i.e. no other 68 trade union meets the ing Forum (NBF). Negotiations take place (RMI) and the Fuel Retailers’ Association required threshold to centrally and the vehicle manufacturers are of South Africa.70 The MIBCO agreement negotiate at the NBF. represented by the Automobile Manufac- covers a variety of sectors, which are ac- 69 Godfrey S, Maree J, turers Employers’ Organisation (AMEO). commodated as ‘Chapters’ in the collective Du Toit D and Theron J agreement, with component manufacturers Collective Bargaining in South Africa: Past, The NBF was established in 1990 following falling under Chapter III. The current MIBCO Present - and Future? prolonged action by NUMSA to set up a wage collective agreement runs until 2022 (Juta, 2010). central bargaining forum. While the NBF but is as yet unsigned. 70 In a recent is not a bargaining council established in arbitration NUMSA terms of the Labour Relations Act (LRA), Over and above the collective bargaining successfully challenged the collective agreements reached are binding role of NUMSA, the union actively partic- MIBCO status of on the entire industry because all the OEMs ipates in shaping the policy framework of another employers’ are members.69 Aside from regulating indus- the auto and component industries (e.g. association, the try wages, the NBF collective agreement shaping the policy framework of the SAAM National Employers’ Association of South covers various other employment condi- and MIDP) and plays a key role in skills Africa (NEASA). tions (see table below for a selection of development (e.g. the Automotive Supply The arbitrator ruled employment conditions). The current wage Chain Competitiveness Initiative – ASCCI). that NEASA is not a party to MIBCO as collective agreement runs until 2022. The union’s contribution to the develop- it failed to meet the ment of the auto and component sector is membership criteria. The negotiation of wages and employ- recognised with the NAACAM interviewee 71 Interview ment conditions in the components sector commenting that “we have probably one of with NAACAM takes place in MIBCO, a bargaining council the most sophisticated relationships with our representative. established in terms of the LRA. NUMSA is trade unions and in other sectors that is not the majority trade union at MIBCO with a the case.”71
94 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs The labour issue: decent jobs and gaps to fill
73 Personal interview with NUMSA official. 3.7.5 Minimum wages and 74 Interview NAACAM representative. employment conditions Employment conditions in the auto assem- ant consideration given the uncertainty bly and component industries are generally of the COVID-19 pandemic on the South more favourable than other private sector African economy. central collective bargaining fora. This is measured by the wide range of employment Monitoring compliance with the terms of conditions applicable in both industries wage agreements is generally left to bar- as well as the levels at which wages and gaining council agents or the parties to the conditions are set. The NBF has one of collective agreement. The OEMs further- the highest minimum wages in the private more insist that their tier one suppliers are sector when compared to other private compliant with the terms of the applicable bargaining council collective agreements collective agreements. This is done to and provides for a medical aid scheme and ensure that there would be no disruptions in housing allowance – employment condi- the supply of products due to, for example, tions not commonly associated with private strike action. To monitor compliance, the sector bargaining councils. In the case of OEMs conduct annual audits and should component manufacturers, the employ- non-compliance be uncovered, this can ment conditions of workers covered by the lead to termination of the contract to supply relevant chapter of the MIBCO agreement the OEM. To ensure consistency in the sup- (Chapter III) are generally more favourable ply chain, the first-tier suppliers in turn audit than other workers falling under MIBCO. In- their (tier two) suppliers.73 These checks asmuch as bargaining councils set minimum and balances are another example of the wages in a particular industry, our NUMSA vertical integration of the auto and compo- informant indicated that wages at compo- nent industry’s operating regime. nent manufacturers are much higher than the MIBCO minimum wage rates.72 In the table below we set out the minimum wage rates and some employment condi- Additionally, the NBF and MIBCO collective tions negotiated at the NBF and MIBCO. agreements run until 2022. This provides These are not the full employment condi- labour peace to employers and guaranteed tions within the respective industries but the wage adjustments to workers for the period only employment conditions we managed of the wage agreements. This is an import- to obtain from NUMSA.
Table 10 Employment conditions negotiated at the NBF and MIBCO
Industry minimum wage R79.52 ($4.63) per hour. Annual bonus 8.33% of basic pay. R2,675.00 (USD 156) per annum equates to R222.92 (USD 13) per Transport allowance month. Medical aid scheme An industry framework agreement is currently being developed. Once-off payment of R5 000 (USD 291) for first-time homeowners; Housing allowance a monthly subsidy of R500 (USD 29) for qualifying employees. 3 days paid leave per annum as per the BCEA and 3 days per oc- Family responsibility currence in the event of death of the employee’s immediate family leave members.
Source: Authors (from interviews)
www.industriall-union.org 95 Section 2
3.7.6 Key recommendations
Below we make recommendations which NUMSA, or alternatively IndustriALL, could consider in moving forward.
1. The NUMSA interview established or at the NBF to ‘safeguard’ certain that the union is consulted at policy fundamental rights to be applied level (with government and industry when an OEM decides to expand their stakeholders at, for example, the MIDP operations into the rest of Africa. Such and ASCCI). Investment decisions are an RFA could include a floor of basic however decided at the overseas head- rights like freedom of association, quarters of the respective OEMs where the right to collective bargaining, NUMSA have no direct representation. prohibition of discrimination, forced In the case of German car manufac- labour and child labour. Where possible, turers (e.g. Volkswagen), investment an RFA could include specific rights decisions are taken in consultation with such as full-time employment and the Works Council comprising work- social security provisions. er representatives from all the global 3. Regional OEM union networks should operations of a company. Thus, in the be developed under the umbrella of In- case of Volkswagen, NUMSA mem- dustriALL. Such a structure would bring bers are part of the Works Council and, together worker representatives of by extension, part of the investment individual OEMs operating across the decision. This places NUMSA at an region. For example, a selected number advantageous position to influence the of Volkswagen representatives from all sustainability of new investments and the African countries VW operates in the kind of jobs to be created. would constitute a network. Individual Informed by the above, NUMSA could country representatives will report on play a leading role to advise its sister operations in their country and develop unions in the rest of Africa on new in- organising and collective bargaining vestment decisions, key policy instru- strategies vis-à-vis the OEM. ments affecting the auto and compo- Such a network of individual OEM nent industries, collective bargaining shop stewards could take place once strategies, skills development and a year and include presentations on more. the global performance of the OEM; 2. NUMSA has a strong presence at investment decisions, etc. The network individual OEMs and is the only trade meeting could also include a training union bargaining with AMEO at the component. A regional network NBF. NUMSA could use their collective structure of this nature currently exists bargaining strength to enter into a under UNI Africa, involving the three Regional Framework Agreement major SA food retailers: Shoprite, (RFA) at either individual OEM level Massmart and Pick n Pay.
96 The Auto Industry in Sub Saharan Africa: Investment, Sustainability and Decent Jobs Conclusions and recommendations 4. Conclusions and recommendations Building capacity, embracing
A decent job challenges, supporting decent is one that jobs: what unions can do epitomises appropri- In 2005, the ILO unveiled the decent work In order to assess what existing trade agenda as a vehicle to promote opportu- unions can do, at country and regional ate labour nities for men and women to obtain de- level, to ensure that new investments in the standards, cent and productive work in conditions of respective auto industries will translate particu- freedom, equity, security and human dignity. in the creation of decent jobs, this project The concept of decent work relates to and started from a collective reflection on what larly the advances the ILO declaration of fundamen- is not decent. Throughout this process, fundamen- tal principles and Rights at Work adopted at clear weaknesses and challenges emerged. the 86th session of the ILO in 1998. These ranged from the large scale of tal rights vulnerable employment in Ghana, to the ab- conventions The attainment of the decent work goal sence of sectoral bargaining and minimum and the rests on four pillars: promote and realise wage agreements in Ethiopia, Namibia and standards and fundamental principles and Rwanda, to the persistence of a piece rating declaration rights at work; create greater opportunities system in Kenya, to the high percentage of on rights at for women and men to secure decent em- outsourced, casual and contract workers ployment and income; enhance the cover- in Nigeria, to gender and race biases in the work. age and effectiveness of social protection treatment and remuneration of Namibian for all; and strengthen tripartism and social workers, to the frequent anti-union be- dialogue. haviours in Nigeria, Namibia and Rwanda.
Decent work is not an abstract concept; it Identifying the gaps to fill allowed us to draw is practically about how the world of work specific recommendations. The sugges- is configured to fulfil the expectations for tions pertaining to the individual country decent wages, standard working hours and contexts will be found in the single country working arrangements, a balance between reports. Here, we try to put together some work and family life and general conditions points for a collective way forward. Issues of work. Decent work emphasises that jobs common to different labour markets, indus- must provide security, dignity, respect for trial sectors and union organisations, and freedom of choice and opportunities for that could be tackled also at regional level. social dialogue and collective bargaining. In Indeed, a serious and coordinated effort the view of the ILO, a decent job is one that by partner unions in the automotive sector epitomises appropriate labour standards, would allow for a stronger capacity-building particularly the fundamental rights conven- process and more targeted strategies to tions and the declaration on rights at work. promote more and decent jobs.
www.industriall-union.org 97 Section 4
Overall, these are some broad points that emerged from our discussions and country comparisons:
1. The need for trade unions to be 6. More capacity-building initiatives properly consulted in investment should be organised, involving both decisions and involved in industrial workers and union leaders, on issues policy planning. In this regard, the such as collective bargaining, skills participation of the SA NUMSA in both development, labour laws, etc. the SAAM and the previous ASCCI 7. Stronger and more effective initiative represents a positive example strategies are needed to counter to possibly follow. A strong proposal processes of casualisation, also comes from SA, and concerns the informalisation, outsourcing and need for higher participation of local against the increasing employment of unions in the decision-making process workers on short-term contracts (see or discussion fora of the respective Kenya’s piece-rating system, Nigeria, OEMs headquarters. Once involved, Rwanda). In this regard, unions need to the unions should more strongly acknowledge that such processes also advocate for localisation, local supply affect a traditionally protected sector chain development, and in direction like the automotive, weakened by years of all those segments with a higher of privatisations and deregulations, potential for employment creation; and that a-typical, precarious and 2. A joint effort should be made to unprotected forms of work are on the re-energise and strengthen union rise. In particular, keeping a vigilant eye organising where this is weak or where on the impact of the COVID-19 crisis will union density is low: beyond OEMs and be crucial; along the supply chain, in newly formed 8. As far as the COVID-19 crisis is companies where union presence is concerned, unions will have to make obstructed (ex. Nigeria) or where anti- sure that all supposedly temporary union sentiments persist (ex. Namibia, suspensions of workers and union Rwanda); rights are lifted (eg. Ethiopia); 3. More support is needed to develop 9. The harmonisation of OSH policies structures for social dialogue where at sectoral level would be needed this is weak or absent (ex. Ethiopia, in several of the contexts analysed, Rwanda); especially in light of the experienced 4. More support would be needed to pandemic; expand the collective bargaining 10. The possible creation of Regional coverage in the contexts where plant/ Framework Agreements and Regional firm level bargaining is imposed or OEM Union Networks, per company dominant (eg. Ethiopia, Namibia); but across countries, to strengthen 5. Stronger political strategies should be the international dialogue and develop implemented to secure Minimum Wage common strategies. A positive example Agreements where these do not exist, is what was already created by UNI or where they have been promised but Africa involving the three major SA never enacted (eg. Rwanda, Namibia); food retailers, Shoprite, Massmart and Pick n Pay. This could happen within the existing IndustriALL umbrella (see South Africa’s proposal).
98 The auto industry in Sub Saharan Africa: Investment, sustainability and decent jobs References
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www.industriall-union.org 103 Section 4
Appendix 1: List of interviews
Ghana Kenya
Association of Ghana Industries (AGI) Deputy County Labour Officer, Ministry of Labour Ghana Ministry of Trade and Industry General Manager, Kenya Motor Industry Industrial and Commercial Workers Union Association (ICU) Public-Private Dialogue Assistant, Kenya Private Sector Alliance
Ethiopia Chief Shop Steward, Isuzu East Africa
President, FC, T&PIWTU Nairobi Branch Secretary, Kenya Engineer- ing Workers Union CETU, Legal Advisor CETU Assistant Secretary General, Amalgamated Union leader, AMICHE Union of Kenya Metal Workers
HR, AMICHE Industrial Relations Officer, Central Organi- zation of Trade Union Union chairperson, BAI Chief Shop Steward, Associated Vehicle MIS, BAI Assemblers
President, FC, M, C, W&RIWTU Chief Shop Steward, Kenya Vehicle Manu- facturers Union leader, Niyala Motors
Union leader, Li-FAN
Li-Fan motors representative, Li-FAN
Union leader, Res engineering
Local car dealers
104 The Auto Industry in Sub Saharan Africa: Investment, Sustainability and Decent Jobs Appendix 1
Namibia Rwanda
Ministry of Industrialisation, Trade and SME FES Rwanda, Programme Coordinator, 24 Development (MITSMED) August 2020
Ministry of Labour, Industrial Relations and RDB, Manufacturing investment Sector Employment Creation (MLIREC) Lead, 28 August 2020
Metal and Allied Workers Union (MANWU) REM, CEO, 28 August 2020
Namibia Employers Federation (NEF) CESTRAR, Deputy General, 14 August 2020 Namibian Competition Commission Ampersand, CEO, 03 September 2020
Safi, CEO, 03 September 2020 Nigeria COTRAF, General Secretary, 15 September Automobile Boatyard Transport Equipment 2020 and Allied Senior Staff Association (AUTO- BATE)
Steel and Engineering Workers Union of South Africa Nigeria (SEWUN) National Union of Metalworkers of South National Automotive Design and Develop- Africa (NUMSA), 26 August 2020. ment Council (NADDC) National Association of Automobile Man- Federal Ministry of Industry, Trade and ufacturers of South Africa (NAAMSA), 01 Investment (FMITI) September 2020.
Federal Ministry of Labour and Employment National Association of Automotive Compo- (FML&E) nent & Allied Manufacturers (NAACAM), 02 September 2020.
Industry expert, 03 September 2020.
www.industriall-union.org 105 Industriall SSA Regional Office +27 11 242 86 80 [email protected]