Kenya’s huge potential as a vehicle industrial hub for Africa

By Rita Kavashe

Kenya is positioned in a favourable location between a port and vast landlocked countries. The population of the East African Community (EAC) which stretches as far as the Democratic Republic of Congo (DRC) and Rwanda stands at slightly over 300 million. The fledgling socio-political stability in the great lakes region will be a great boost to regional trade in the EAC.

Kenya enjoys cordial bilateral diplomatic and trade relations with her neighbours. This has nurtured commercial activity in the export of finished products as well as human resource.

The rich skills pool and talent that abounds in Kenya is also serving in a wide range of industries across the EAC. These include finance, engineering, education, hospitality, agriculture and manufacturing.

Kenya currently has three major motor vehicle assemblers with annual production of40,000 commercial vehicles. These are: Associated Vehicle Assemblers (AVA) in Mombasa, Kenya Vehicle Manufacturers (KVM) in Thika and Isuzu East Africa in Nairobi.

The vehicle manufacturers have invested in state-of-the-art equipment capable of producing international quality vehicles for the domestic and export markets.

The latest such investment is the Electro-Deposition Paint Plant which was commissioned on 7th June, 2023 by President William Ruto at Isuzu East Africa. The only other Electro-Deposition plants in Africa are in North Africa and South Africa.

As the name suggests, Electro-Deposition is a method of painting that uses electric current to ensure that paint reaches all surfaces of a vehicle giving it an ultra-smooth finish. It also shortens the time it takes to paint vehicles.??

This Plant will ramp up production capacity for Isuzu East Africa from 11,000 units to 18,000 units per year. The paint facility is also available to Isuzu’s competitors including motorcycle and other motor vehicle manufacturers. ??

So, what does this mean for Kenya?

Regional trade blocs such as the Common Market for Eastern and Southern Africa (COMESA), and the EAC have provided opportunities for cross border trade and investment thereby supporting economic development and regional integration.?

At the 2018 African Union (AU) assembly in Kigali, 44 Heads of state signed the agreement establishing the African Continental Free Area (AfCFTA). It came into force in 2019 creating the world’s largest free trade area bringing together the 55 countries of the African Union (AU) and eight (8) Regional Economic Communities (RECs).

The overall mandate of the AfCFTA is to create a single continental market. A population of about 1.3 billion people across the continent and a combined GDP of approximately US$ 3.4 trillion presents a huge basket of opportunities for investment and job creation.

Part of AfCTA’s mandate is to eliminate trade barriers and to advance trade in value-added production across all sectors of the African economy. As an example, vehicles that are assembled in Kenya have about40% of their component parts locally manufactured. Some of the components manufactured locally by our own SMEs are seats, leaf springs, exhaust pipes wire harnesses, batteries, paint and vehicle bodies. The net effect of this, local content industry is the creation of over 10,000 jobs in the automotive industry.

The already established Kenyan automotive industry has the potential to take the country to the fore as a regional vehicle manufacturing hub supplying the Eastern and Central Africa regions. To achieve scale and competitiveness to become a regional and global automotive supplier, Kenya needs to fully implement the National Automotive Policy which aims to spur growth within the local automotive industry. In particular, the implementation of the Kenya Standard 1515 will be a game changer for the industry.

The Standard spells out gradual reduction of importation of used vehicles where there’s capacity to assemble the vehicles in the country, e.g. used commercial trucks and buses between 3 to 30 tonnes. The importation age for passenger vehicles (saloons, station wagons and SUVs) remains at 8 years.

By implementing the KS1515 Standard, Kenya’s automotive assembly industry has the potential to double by moving production of commercial vehicles from 12,000 per annum to 24,000 within 2 years, while creating an additional 10,000 jobs. The Standard will also grow local content manufacturing in Kenya. The value chain will gain the much needed stimulus to expand and meet the demand for body building works, pipes, seats, windscreens, harnesses, paints and much more.?

African countries which have progressed to become global suppliers of motor vehicles are South Africa, Morocco and Egypt. South Africa produces 400,000 vehicles and exports over 100,000 vehicles.?The automotive industry in South Africa employes over 110,000 people directly and over 350,000 people indirectly.

Egypt produces over 80,000 vehicles and provides about 70,000 jobs even after being affected by the 2011 revolution. Egypt is trying to get back on track with ambitious plans to produce 500,000 vehicles and export over 100,000 units in the near future. While Morocco assembles over 250,000 vehicles and exports about 170,000 vehicles annually. The industry has created over 160,000 jobs in Morocco.

The enactment of the National Automotive Policy into law will pave way for the formation of the National Automotive Council to be responsible for scaling up the local Automotive Industry for export competitiveness. This will prepare the Kenyan automotive sector and allied industries for the operationalization of AfCFTA, thereby unlocking the country as a regional automotive assembly hub.

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Rita Kavashe is the Managing Director of Isuzu East Africa. An abridged version of this article was published in the Business Daily of 31st July, 2023.