oCCasioNal PaPer 231
June
2016
The PoTenTial for regional Value
Chains in The auTomoTiVe seCTor:
Can saDC learn from The
asean exPerienCe?
Chelsea Markowitz
SOUTH AFRICAN INSTITUTE OF INTERNATIONAL AFFAIRS
the south african institute of international affairs (saiia) has a long and proud
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PROGRAMME HEAD talitha Bertelsmann-scott
talitha.bertelsmann-scott@saiia.org.za
ABSTRACT
the association of southeast asian Nations (aseaN) industrialisation Cooperation
(aiCo) scheme created an opportunity for both foreign investors in the aseaN
region and member states to benefit from the regional free flow of goods in support
of regional industrial development. the scheme played an important role in the
development of a strong automotive sector in the aseaN region, and lessons can be
learned from its implementation.
Despite the fact that the middle class in southern africa is growing, vehicle ownership
is still minimal. it is thus appropriate to examine the prospects for a similar scheme
within saDC. south africa has by far the most developed automotive sector in
the region, while zimbabwe and Botswana are both attempting to build up their
industries and Mozambique is beginning to receive foreign direct investment. Due to
south africa’s automotive dominance, regional integration has not expanded much
beyond its exporting components and vehicles to other countries in the region. there
is also an emerging trend of south african companies’ shifting production of certain
components to other southern african Customs Union (saCU) countries.
additionally, insufficient regional market demand for new vehicles prevents the
realisation of economies of scale in production, and manufacturing in saDC is not
very competitive due to infrastructure bottlenecks and labour market constraints. the
effective implementation of a regional Common effective Preferential tariff and even
enforcement of the existing saDC and saCU rules of origin are hampered by the
low levels of local value addition.
Despite these barriers, there are measures that saDC, south africa and private
investors can take and are taking to enhance the prospects of regional automotive
integration. south africa and interested investors can assist in transferring skills and
technology to the region to make labour more competitive, and in capacitating
small and medium enterprises to enter potential value chains. additionally, south
africa can advise other saDC countries on how to develop their own components
and assembly operations to be more competitive. as regional automobile demand
continues to grow, these initiatives could facilitate the realisation of an aiColike scheme in saDC. this paper will examine aiCo’s utilisation, challenges and
successes in order to derive lessons for saDC, as well as the prospects of regional
automotive integration.
ABOUT THE AUTHOR
Chelsea Markowitz is a Visiting researcher at the south african institute of international
affairs’ economic Diplomacy Programme, and is completing her Ma in Development
studies at the University of the witwatersrand. her research interests include the
political economy of development, industrialisation and foreign investment.
saiia oCCasional PaPer 231
ABBREVIATIONS AND ACRONYMS
AAAM
AFTA
AICO
AIS
APDP
ASEAN
BLNS
CBU
CEPT
CKD
dti
FDI
MIDP
NAACAM
NAAMSA
NAIDP
OEM
PRCC
SABF
SACU
SMEs
WMMI
4
African Association of Automotive Manufacturers
ASEAN Free Trade Agreement
ASEAN Industrialisation Cooperation
Automotive Investment Scheme
Automotive Production and Development Programme
Association of Southeast Asian Nations
Botswana Lesotho Namibia Swaziland
Completely Built Unit
Common Effective Preferential Tariff
Completely Knocked Down
Department of Trade and Industry
foreign direct investment
Motor Industry Development Programme
National Association of Automotive Component and Allied Manufacturers
National Association of Automobile Manufacturers of South Africa
New Automotive Industry Development Plan
original equipment manufacturer
Production Rebate Credit Certificate
Southern African Business Forum
Southern African Customs Union
small and medium enterprises
Willowvale Mazda Motor Industries
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
EXAMINING AICO
OVERVIEW
The Association of Southeast Asian Nations (ASEAN) Industrialisation Cooperation
(AICO) scheme was initiated in 1996 in order to facilitate the eventual full implementation
of a Common Effective Preferential Tariff (CEPT) for the ASEAN Free Trade Area (AFTA),
with the ultimate goal of enabling the free movement of goods within the ASEAN region.1
Under the AICO scheme, two different businesses operating in two different ASEAN
countries2 could form an ‘AICO arrangement’ by lodging an application with the ASEAN
Secretariat. The terms were later amended to allow different divisions of the same company
to enter into an arrangement in two different countries. The main advantage of an AICO
arrangement was that the participating companies received preferential AFTA tariff rates of
0–5% for raw, intermediate and finished goods (although some products deemed sensitive
by the relevant national governments were excluded from the arrangement) before the
AFTA rates were fully realised for all trade. The arrangement also required the companies
to engage in industrial complementation,3 industrial co-operation and/or resource sharing
for the benefit of the host countries. The products enjoying the preferential tariff were
required to have at least 40% ASEAN content and the companies were required to have at
least 30% national equity.4
The scheme was mainly utilised by Japanese automotive companies, and to a much lesser
extent by electronics manufacturers and agro-processors. In total, 129 AICO agreements
were formed, 116 of which were in the automotive sector (primarily in the form of
Completely Knocked Down [CKD] kits).5 Foreign investors utilising the scheme often
produced a particular vehicle model in one country to export to the whole region and, less
1
2
3
4
5
The Common Effective Preferential Tariff (CEPT) for the Association of Southeast Asian
Nations (ASEAN) Free Trade Area (AFTA), signed in 1992, originally stipulated that from
1 January 1993 the ASEAN member countries would reduce tariffs to 20% within five to
eight years (specific timeframes within that span would vary by country). The subsequent
tariff reductions to 0% would be completed within an additional span of seven years.
AFTA was later amended and became the ASEAN Trade in Goods Agreement (ATIGA) in
2010. The ATIGA stipulated that the ASEAN 6 (Indonesia, Malaysia, Philippines, Brunei,
Singapore and Thailand) would eliminate import duties by 2010 and the CMLV (Cambodia,
Laos, Myanmar and Vietnam) by 2015.
The ASEAN countries at the time of AICO’s signing consisted of Brunei, Indonesia,
Malaysia, the Philippines, Singapore, Thailand and Vietnam. During AICO’s lifespan,
Cambodia, Laos and Myanmar also joined ASEAN.
Industrial complementation refers to the allocation of the manufacture of products that are
complementary in a value chain to different countries of ASEAN.
ASEAN, ‘Basic agreement on the ASEAN Industrial Cooperation Scheme’, http://www.asean.
org/?static_post=basic-agreement-on-the-asean-industrial-cooperation-scheme, accessed
21 January 2016.
ASEAN, ‘Approved AICO applications as of 21 April 2005’, http://www.asean.org/?static_
post=approved-aico-applications-as-of-21-april-2005, accessed 21 January 2016
5
saiia oCCasional PaPer 231
often, clustered their components production across the region.6 Eventually countries in
the region began to produce for export out of ASEAN, most notably 1 tonne trucks from
Thailand. In 2011, the AICO scheme was terminated because most ASEAN countries had
reached a 0% tariff level, which was the ultimate goal of AFTA.7
Given the sizeable uptake of the AICO scheme by foreign companies and the success
in achieving the tariff rate, the scheme has been held up as a successful example of
facilitating regional integration. However, there are lessons to be learned from both the
challenges and successes of AICO.
CHALLENGES
given the sizeable
uptake of the
aiCo scheme by
foreign companies
and the success in
AND SUCCESSES
One of the biggest challenges with AICO was getting buy-in from member states, and the
willingness to loosen national protections for the benefit of the scheme. For example,
while the Thai government welcomed AICO and encouraged multinational investments,
the Malaysian government was hesitant and worried about AICO’s effect on the country’s
locally produced car models.8 Thus some countries were more willing to relax the 30%
national equity requirement, which was largely unfeasible for foreign investors, while
others were initially resistant.9
achieving the tariff
rate, the scheme has
been held up as a
successful example of
facilitating regional
integration. however,
there are lessons to
be learned from both
the challenges and
successes of aiCo
There are different theories as to what eventually pushed the ASEAN countries to buy into
the AICO scheme. The private sector drive behind AICO likely played the biggest role in
its adoption. Foreign investors claimed that the scheme was essential to their business
operations, and thus ASEAN national governments were compelled to adopt it in order to
ensure that foreign direct investment (FDI) would continue to flow. Additionally, ASEAN
learned lessons from two previous regional industrial initiatives,10 and thus the adjustment
towards regional integration occurred gradually. The 1997 Asian financial crisis also
significantly affected individual economies in the region and compelled member states
to pool their resources and competitive advantages and look toward regional initiatives.
However, it is important to note that ASEAN countries still subsidised and incentivised
their own industries even after agreeing to the free regional movement of goods for
participating companies.
6
7
8
9
10
6
Kohpaiboon A, ‘FTAs and supply chains in the Thai automotive industry’, in Findlay C
(ed.), ASEAN and Regional Free Trade Agreements. London: Routledge, 2015, p. 229.
Sim E, ‘Celebrating the life and death of AICO’, ASEAN Economic Community Blog, 6
June 2011, http://aseanec.blogspot.co.za/2011/06/celebrating-life-and-death-of-aico.html,
accessed 25 January 2016.
Fujita M, ‘Industrial policies and trade liberalization: The automotive industry in Thailand
and Malaysia’, in Omura K (ed.), The Deepening Economic Interdependence in the APEC
Region. Tokyo: APEC (Asia–Pacific Economic Cooperation) Study Center, Institute of
Developing Economies, 1998, pp. 149–187.
Ibid.
AICO was preceded by the ASEAN Industrial Joint Venture Scheme and the Brand to Brand
Complementation Scheme in the 1980s.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
The ‘ASEAN way’ of consensus – co-operating, and agreeing on principles first and refining
the specifics of agreements later – did lead to challenges in AICO’s implementation.
Logistically, there was inconsistency in the way in which applications were processed, with
some applications taking almost two years to be approved despite the 60-day requirement.11
One of the issues that also contributed to delays was the lack of communication with
the private sector. The scheme could have provided a better channel for private sector
companies interested or involved in the initiative to communicate with the ASEAN
Secretariat, member countries and local companies.12
The success of the
scheme is attributed
largely to the
underlying market
size of asean and
the prevalence of
indigenous industries
Another issue with implementation was the capacity of the automotive industries within
the ASEAN countries to utilise the scheme. This was especially the case with small and
medium enterprises (SMEs), arguably the key drivers of growth in developing countries,
which did not have the capacity or quality standards to collaborate with the Japanese
companies involved in the scheme. This initially posed a problem. However, countries
such as Thailand eventually developed their own capacity utilisation schemes in
co-ordination with the investing foreign companies. This helped to bridge manufacturing
capacity deficits within the ASEAN region, although inevitably some local component
manufacturers and assemblers were squeezed out as a result of the large amounts of
foreign investment.13
The success of the scheme is attributed largely to the underlying market size of ASEAN
and the prevalence of indigenous industries. In 1996, when the AICO scheme was
initiated, combined vehicle sales in the four major markets (Philippines, Thailand,
Indonesia and Malaysia) were almost 1.5 million units (as indicated in Figure 1), which
created a large enough market to achieve economies of scale in local production for the
region. Additionally, all four of these countries had engaged in some prior protection and
development of their own industries, which allowed them to achieve value addition in
foreign investments.
11
12
13
Yoshimatsu H, ‘Preferences, Interest, and Regional Integration: The Development of the
ASEAN Industrial Cooperation Arrangement’, International Centre for the Study of East
Asian Development Working Paper Series, 2000-19, 2000.
Interview, Gainmore Zanamwe, SADC, 8 February 2016.
Ibid.
7
saiia oCCasional PaPer 231
FIGURE 1
VehiCle sales in four maJor asean markeTs (1996)
Thailand
Phillipines
malaysia
indonesia
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
Number of vehicles sold
Source: Dey A, ‘The Impact of AFTA on the ASEAN Automotive Industry’, Frost & Sullivan Market Insight, 21 March 2002,
http://www.frost.com/prod/servlet/market-insight-print.pag?docid=IMAY-58VK85
CURRENT STATE OF THE AUTOMOTIVE INDUSTRY IN SADC
Given that the AICO scheme was primarily utilised for automotive production, this
paper will focus on the prospects for regional automotive integration in SADC. Currently
in SADC there is scant evidence of regional automotive integration, or indeed of any
flourishing national automotive industries outside of South Africa.
SOUTH AFRICA
In South Africa, the automotive sector is well developed, especially compared to the
rest of sub-Saharan Africa. In 2015 South Africa’s ZAR14 151.5 billion ($11.9 billion)15
automotive industry accounted for 64% of total vehicle production in Africa, with Egypt
and Morocco in Northern Africa supplying the bulk of the remainder.16 Since the 1920s
the South African government has expended much effort on building up and protecting
its automotive industry, with local content stipulations dating back to the 1960s. Various
pieces of legislation have been implemented to further this aim, such as the Motor Industry
14
15
16
8
Currency code for the South African rand.
Dollar values calculated using Oanda’s average exchange rate for 2015: R12.74834/$.
AIEC (Automotive Industry Export Council), South African Automotive Export Manual 2016,
http://www.aiec.co.za/Reports/AutomotiveExportManual2015.pdf, accessed 8 February 2016.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
Development Programme (MIDP), in place from 1995–2012, which provided import
duty rebates based on the cost of local material in exported Completely Built Units
(CBUs) and components. This has now been succeeded by the Automotive Production
and Development Programme (APDP), which, among others, provides import duty
rebates based upon local value addition in the supply chain. Additionally, the APDP has
put in place stable import tariffs on components and CBUs, an import rebate duty for
significant volume of vehicles produced in an assembly plant, and cash grants for vehicle
and component manufacturers with the Automotive Investment Scheme (AIS).17 The AIS
marks the first cash-based incentive that South Africa has implemented in the automotive
sector. Opponents to such cash incentives are bound to contest its value given the current
tight fiscal constraints faced by the South African government.18 These programmes have
allowed the industry to provide substantial local employment, with 29 715 employed
in the manufacturing sector and 82 790 in the components sector in 2014.19 The South
African automotive industry is relatively sizeable, having exported 333 802 CBUs in
2015 at a total value of ZAR 101.9 billion ($7.99 billion). 20 Its components exports, at
ZAR 49.6 billion ($3.89 billion) in 2015, are dominated by catalytic converters, with
20 326 catalytic converters having been exported in 2015. It also exports a substantial
amount of tyres, leather seats, engines and parts and radiators.21 However, the country
represents less than 1% of global automotive production.22 Figure 2 shows that there
has been significant FDI into the industry, and therefore a substantial number of original
equipment manufacturers (OEMs) spread throughout the country. However, the existing
government support is essential for the survival of the industry. Australia is a good example
of how quickly this sector can be lost in the absence of suitable levels of state support.23
A challenge to be addressed in South Africa remains that much of the more complex first-tier
drive train components are still imported from outside Africa for use in final local assembly.
17
18
19
20
21
22
23
Republic of South Africa, International Trade Commission of South Africa, ‘APDP
Regulations’, 1 January 2014.
Interview, Renai Moothilal, dti (Department of Trade and Industry), Director of
Automotives, 14 March 2016.
AIEC, op. cit.
Ibid.
dti, EDD Parliamentary Portfolio Committee, ‘Presentation on SA Automotive Sector’, 9 June
2015, https://www.thedti.gov.za/parliament/2015/SA_Automotive_Sector.pdf, accessed
3 March 2016.
Van Wyngarrot M, ‘Makhura, automotive industry leaders discuss challenges, opportunities’,
Engineering News, 17 February 2015, http://www.engineeringnews.co.za/print-version/
makhura-automotive-industry-leaders-discuss-challenges-opportunities-2015-02-17,
accessed 24 March 2016.
For more information, see Barnes J. “Case Study on the Australian Automotive Industry,”
ASSCI, 2015, http://ascci.co.za/wp-content/uploads/2015/12/ASCCI%20Quarterly%20
Newsletter%20July-September%202015%20-%20Case%20study%20on%20the%20
Australian%20automotive%20industry.pdf
9
saiia oCCasional PaPer 231
FIGURE 2
maJor oems in souTh afriCa
limPoPo
mPumalanga
gauTeng
norTh WesT
kWaZulurichards Bay
naTal
free sTaTe
norThern CaPe
Durban
easTern CaPe
east london
WesTern CaPe
Cape Town
Port elizabeth
Source: AIEC (Automotive Industry Export Council), South African Automotive Export Manual 2015
ZIMBABWE
Zimbabwe has perhaps made the most effort in SADC outside of South Africa to develop
an indigenous automotive sector, beginning in the 1960s. Through import substitution,
Zimbabwe developed both components and manufacturing industries. These industries
reached their peak in the 1990s in the form of one primary plant, Willowvale Mazda
Motor Industries (WMMI), capable of assembling 10 000 CBUs per year.24 However,
24
10
Yu C, ‘The Transferability of Japanese Production System in Zimbabwe: A Case Study of
Willowvale Mazda Motor Industries’, Manufacturing Management Research Center, Faculty
of Economics, University of Tokyo, 2012.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
since this peak the automotive industry has struggled. Political and economic instability
in the country has led to decreased government ability to provide support and capital
to the industry.25 Some in the industry have lamented that the production incentives in
South Africa’s MIDP (now the APDP) have also hurt local component manufacturers
and assemblers by effectively subsidising imports into the region. The market is also
flooded with cheap second-hand imports, which have led to intermittent shutdowns of
WMMI. The government is currently trying to revive the industry, and tried to curb its
import reliance by issuing a directive in 2015 mandating public procurement from local
assemblers. However, this mandate will not solve Zimbabwe’s problem, as WMMI does
not have the capacity to supply the public sector and the plant only produces a limited
range of Mazda vehicles. Furthermore, the local content in WMMI is not as significant
as desired, with the plant merely importing and assembling CKD kits without providing
much value or cost-effectiveness. Thus the government is still grappling with a protected
yet struggling industry.26
BOTSWANA
Botswana also had a brief stint with a targeted industrial automotive programme,
particularly when Hyundai invested in an assembly plant in the country in 1993. The plant
benefitted from its proximity to South Africa and the common Southern African Customs
Union (SACU) tariff, and initially enjoyed relative success. However, it was closed down
in 2000 due to conflict with the South African MIDP rules of origin (to which Botswana
was bound through its membership of SACU) and internal management issues.27
Botswana does show promise in its demand for vehicles, as the country registered the
second-highest number of new vehicles in SADC after South Africa in 2015 (see Figure 3).
This number has more than doubled in the past 10 years, indicating the growing market
needed to stimulate industry development in the automotive industry. However, vehicle
sales in South Africa are still 15 times greater than in Botswana.
MOZAMBIQUE
Mozambique has a small components production industry, and in 2014 the country’s first
two assembly plants opened, with the aim of selling vehicles both locally and for export.
The Korean Youngsom opened a Hyundai assembly plant and the Chinese Tong Jian
Investment Company opened an assembly plant and tyre factory. In early 2016 Tong Jian
25
26
27
Muradzikwa S, ‘The SADC trade protocol and industrial performance in Southern Africa:
A case of the automotive industry in Zimbabwe’, Dissertation, University of Cape Town,
1999.
Mambo E, ‘Govt policy devastates automobile companies’, The Zimbabwe Independent, 8 May
2015, http://www.theindependent.co.zw/2015/05/08/govt-policy-devastates-automobilecompanies/, accessed 10 February 2016.
Zizhou F, ‘Linkages between Trade and Industrial Policies in Botswana’, TIPS (Trade and
Industrial Policy Strategies), Industrial Policy Thematic Working Group, December 2009.
11
saiia oCCasional PaPer 231
announced plans to expand the assembly plant to manufacture buses, aiming to increase
total vehicle production to 100 000 a year by 2017.28 Such investments are spurred by the
country’s infrastructure improvements, such as its railway infrastructure, and its annual
economic growth of around 7%.29 However, it remains to be seen whether these plants will
be able to add value and develop beyond low-volume CKD assembly.
FIGURE 3
ToTal VehiCle sales in seleCTeD afriCan CounTries, 2015, seConD quarTer
south africa
egypt
algeria
morocco
libya
Botswana
nigeria
angola
mauritius
Zimbabwe
Zambia
Tanzania
Congo
malawi
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
Note: Data for remaining SADC countries not available
Source: International Organisation of Motor Vehicles, ‘Registration or sales of new vehicles: all types’, 2015, http://www.
oica.net/category/sales-statistics/, accessed 11 February 2016
28
29
12
Club of Mozambique.com, 19 January 2016, ‘Mozambique: China courts partnership to
manufacture buses’, http://clubofmozambique.com/news/china-considers-partnership-inmozambique-to-manufacture-buses/, accessed 10 February 2016.
Campbell K, ‘Mozambique is rapidly developing an automotive assembly industry’,
Engineering News, 21 November 2014, http://www.engineeringnews.co.za/article/
mozambique-is-rapidly-developing-an-automotive-assembly-industry-2014-11-21, accessed
10 February 2016.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
OTHER
COUNTRIES
Angola has the advantage of growing market demand, receiving the highest number of
vehicle imports in SADC outside South Africa in 2014 and showing the third-highest
number of vehicle sales after South Africa and Botswana in 2015 (see Figure 3).30
The Chinese company CGS set up the country’s first assembly plant in Luanda in 2007.
China’s GONOW is also in the process of establishing an assembly plant in Zambia.31
Namibia has put in place policies to promote the automotive sector32 and has the logistics
advantage of Walvis Bay Port; however, little automotive development has occurred in the
country thus far.
EXISTING SADC
REGIONAL INTEGRATION
Overall, regional integration in the automotive sector has been largely one-sided, from
South Africa to SADC countries. Aided by the SADC free trade area, in 2015 South Africa
exported 80% of its automotive exports in Africa to SADC.33 As can be seen in Table 1,
South Africa exported automotive goods valued at over ZAR 1 billion ($78.2 million)
to seven countries within SADC. However, it does not import automotive goods in
significant numbers from any SADC countries, highlighting the lack of industry in other
SADC countries and the absence of regional value chains. South Africa imported more
from Zambia than from any other country in the rest of Africa; but at an overall value
of only ZAR 44.8 million ($3.5 million) the number is still very low.34 Given that South
Africa boasts a much larger industry, as well as production incentives for both components
and CBUs, some countries have indicated that this undermines their local automotive
production capability. However, representatives of the National Association of Automobile
Manufacturers of South Africa (NAAMSA) and the South African Department of Trade
and Industry (dti) counter that the greatest barrier to regional integration is the lack of
demand, capacity and industry in other SADC countries.
overall, regional
integration in the
automotive sector
has been largely
one-sided, from
south africa to
saDC countries
One notable instance of regional integration in SADC is the relocation of production of
certain components to the BLNS (Botswana Lesotho Namibia Swaziland) countries of
SACU. Lower labour costs and a seemingly more stable labour relations environment,
coupled with government fiscal support to the industry in these countries, have made this
30
31
32
33
34
Angola imported $2.164 billion worth of vehicles in 2014, according to ‘Vehicle imports to
SADC 2004–2014’, in WTO (World Trade Organization), International Trade Statistics 2015,
https://www.wto.org/english/res_e/statis_e/its2015_e/its2015_e.pdf, accessed 15 February
2016.
ZNBC (Zambia National Broadcasting Corporation), ‘Motor assembly plant coming’,
18 December 2015, http://www.znbc.co.zm/?p=27565, accessed 24 March 2016.
For more detail on Namibia’s Export Processing Zone, see Government of Namibia, Investor
Guide, ‘Export Processing Zone (EPZ) Industrial Development Strategy: Harnessing
Namibia’s Manufacturing and Exporting Potential’, http://www.embassyofnamibia.org.br/en/
docs/Namibias%20Export%20Processing%20Zone.pdf, accessed 10 February 2016.
AIEC, South African Automotive Export Manual 2015.
Ibid.
13
saiia oCCasional PaPer 231
a viable business decision.35 However, most significantly, given that the BLNS countries
form part of a common customs union with South Africa, they also enjoy the benefits
of the APDP. Primarily, these countries produce labour-intensive but technologically
simple components such as leather seats and glass products. Botswana in particular
has capitalised on the production of wiring harnesses. The recent relocation of Pasdec,
an automotive component manufacturer, from South Africa to Botswana is evidence of
these advantages.36 The production of these components does not represent incremental
regional value addition, as they would normally be produced in South Africa rather than
imported. However, this does represent an important step in developing value chains
in the region. As South Africa continues to deepen its production base of components
and increase its production of higher value second- and first-tier components as well as
number of vehicles assembled, such regional shifts will increase.37
Although not a member of SADC, Nigeria is fast developing its own automotive industry
and should be recognised as an important emerging African player in this sector.
The industry’s development is propelled by the country’s large population and rapid
economic growth, and the resulting increase in market demand. In 2014, Nigeria released
its New Automotive Industry Development Plan (NAIDP) to capitalise on these conditions.
As a result it is attracting significant FDI into this sector. Thus far Nissan, Peugeot and
Hyundai have opened assembly operations in the country, with other big automotive
companies beginning to follow suit.38 Alec Erwin, the former South African trade and
industry minister (1996-2004), has taken the lead in advising Nigeria on the NAIDP,
and hopes to ensure that South Africa gains preferential access to supply components
and sub-assemblies to Nigeria’s growing assembly industry. The dti is therefore working
on a framework for South African–Nigerian automotive engagement.39 Industry bodies
such as NAAMSA and the National Association of Automotive Component and Allied
Manufacturers are also looking for synergies with Nigeria, more so than with any SADC
country.40
35
36
37
38
39
40
14
Renai Moothilal, op. cit.; Interview, Norman Lamprecht, Executive Director, NAAMSA
(National Association of Automobile Manufacturers of South Africa), 8 February 2016;
Interview, Advisor to NAACAM (National Association of Automotive Component and Allied
Manufacturers), 7 March 2016.
Daily Express (Malaysia), ‘Pasdec Auto plant to relocate to Botswana’, 13 February 2015,
http://www.dailyexpress.com.my/news.cfm?NewsID=97219, accessed 10 February 2016.
Renai Moothilal, op. cit.
Furlonger D, ‘Nigeria joins race to expand motor industry’, Business Day Live, 27 October
2014, http://www.bdlive.co.za/africa/africanbusiness/2014/10/27/nigeria-joins-race-toexpand-motor-industry, accessed 7 March 2016.
Venter I, ‘SA task team seeks benefits from Africa’s burgeoning auto ambitions’, Engineering
News, 25 September 2015, http://m.engineeringnews.co.za/article/sa-task-team-seeksbenefits-from-africas-burgeoning-auto-ambitions-2015-09-25-1, accessed 7 March 2016.
Advisor to NAACAM, op. cit.; Renai Moothilal, op. cit.; Norman Lamprecht, op. cit.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
TaBle 1
souTh afriCan auTomoTiVe exPorTs anD imPorTs By CounTry (2015)
Automotive exports
ZAR (million)
Automotive imports
ZAR (million)
Germany
34 992,1
Germany
65 210,4
Us
20 946,9
Japan
22 052,6
Belgium
13 162,2
thailand
13 793,7
Namibia
9 440,0
China
12 585,9
Japan
7 809,5
Us
11 835,5
Uk
7 436,0
india
10 790,3
australia
5 257,1
Uk
8 001,4
Botswana
4 815,7
south korea
7 133,8
spain
4 073,4
spain
6 010,8
France
2 696,2
Brazil
4 725,2
Mozambique
2 639,2
italy
3 214,0
zambia
2 485,3
sweden
2 685,7
Brazil
2 430,3
Czech republic
2 384,3
zimbabwe
2 208,0
France
2 254,0
thailand
1 648,7
Poland
1 898,4
kenya
1 451,5
romania
1 689,7
india
1 416,8
turkey
1 609,6
Canada
1 400,2
slovak republic
1 522,2
Nigeria
1 385,8
Mexico
1 503,9
swaziland
1 280,7
taiwan
1 414,8
Uae*
1 203,6
hungary
1 396,3
DrC**
1 140,4
argentina
1 320,7
saudi arabia
1 139,8
indonesia
1 307,9
algeria
1 047,2
Netherlands
1 068,7
a
a Oanda’s average rand-dollar exchange rate for 2015: ZAR12.74834/$.
* United Arab Emirates
** Democratic Republic of the Congo
(showing countries above ZAR 1 billion)
Source: AIEC, South African Automotive Export Manual 2016
15
saiia oCCasional PaPer 231
CONSIDERATIONS FOR REGIONAL AUTOMOTIVE INTEGRATION IN SADC
The lack of indigenous Southern African automotive industries outside South Africa is
an important reason why major foreign automotive countries have not yet invested in
SADC. However, it is important to delve further into the challenges and opportunities
facing foreign investors and an AICO-like scheme in the future. According to Black and
McLennan’s analysis of automotive prospects in Africa, three factors are vital to cultivating
a thriving automotive industry in developing countries: adequate market growth,
competitive manufacturing capability, and supportive policy arrangements.41 These three
benchmarks provide a useful framework to analyse the prospects for integrating the
automotive sector in SADC.
MARKET
. . . three factors are
vital to cultivating a
thriving automotive
industry in
developing countries:
adequate market
growth, competitive
manufacturing
capability, and
supportive policy
arrangements
When regional integration in the automotive sector in Africa was first explored in the
1990s, one of the biggest limitations was the small market demand for cars, due to the
underdevelopment of the continent. Creating a local automotive industry anchored
initially on domestic demand is much more manageable than producing only for export,
which requires deep and globally competitive value chains. Thus, relatively lower levels of
domestic demand in the region largely explain the minimal automotive industrialisation
at a time when global production competitiveness became paramount.42 However, on the
back of significant economic growth in Africa, these dynamics have changed, evidenced
by increasing foreign investment in the continent. With 1 billion people and only
1.2 million new passenger cars sold on the continent in 2014,43 there is tremendous
potential for growth. Figure 4 shows that vehicle imports into SADC more than doubled
in the past decade, and the middle class in Africa has grown 30% in that time period.44
Continued economic growth on the continent would augur well for increased demand
for cars and is a crucial prerequisite for implementing an AICO-like scheme. However,
the recent global commodities downturn will likely cause a slowdown in demand in the
interim.
When AICO was implemented in ASEAN, the CEPT signified that its main intent was
to serve the regional market. As demonstrated in Figure 1, there was sufficient regional
demand to drive foreign investment and regional production at scale. Currently, in SADC,
vehicle sales are much lower, as indicated previously in Figure 3. No other SADC country
comes close to South Africa, which has similar levels of vehicle sales to Thailand at the
time of AICO implementation. Only a couple of countries in Northern Africa demonstrate
sufficient levels of demand. Additionally, much of the SADC market is served by imported
41
42
43
44
16
SIZE
Black A & T McLennan, The Last Frontier: Prospects and Policies for the Automotive
Industry in Africa, paper presented at TIPS Annual Forum 2015 – Regional Industrialisation
and Regional Integration, Johannesburg, 14–15 July 2015.
Renai Moothilal, op. cit.
AIEC, op. cit.
Ibid. The African middle class for this statistic is measured by an income level of between
$15–20 a day.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
second-hand cars. The used car market partly fills the demand for vehicles in the region,
impeding the creation of new industries. South Africa was able to ban imports because of
its successful indigenous industry to serve the growing market, albeit with an opportunity
cost to the South African consumer, but banning imports is still not yet viable or affordable
in most SADC countries.45 However, as local industries in SADC countries continue to
develop greater demand and capacity they will need to implement such restrictions, which
will provide the necessary protection to their local industries. Looking to the ASEAN
example, when trying to grow its industry Malaysia implemented a scrappage programme,
which allowed consumers to trade in cars that were 10 years or older in exchange for a
monetary incentive to purchase Malaysia’s national car brand. This could represent an
VehiCle imPorTs To saDC, 2004–2014 ($ ThousanD)
FIGURE 4
20 000 000
18 000 000
16 000 000
14 000 000
12 000 000
10 000 000
8 000 000
6 000 000
4 000 000
2 000 000
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: ‘Vehicle imports to SADC 2004–2014’, in WTO (World Trade Organization), International Trade Statistics 2015,
https://www.wto.org/english/res_e/statis_e/its2015_e/its2015_e.pdf, accessed 15 February 2016
45
Gainmore Zanamwe, op. cit.
17
saiia oCCasional PaPer 231
. . . much of the
saDC market is
served by imported
second-hand
cars. The used
car market partly
fills the demand
for vehicles in the
intermediary step for SADC countries to incentivise the purchase of locally manufactured
vehicles before completely banning imported vehicles.46
Although starting from a low base, demand for new cars in the region does show potential
for rapid growth, signifying that cost-effective scaled regional operations may not be
far off. For example, in Mauritius – one of the SADC countries experiencing the most
demand for new cars – demand increased by over 10% from 2013 to 2014 (although the
population in Mauritius is very small).47 Nonetheless, a challenge for the region is the
lack of accurate data on vehicle sales in many countries, which fails to provide foreign
and domestic investors with the necessary information on available market opportunities.
region, impeding
the creation of
new industries
MANUFACTURING
POTENTIAL
The lack of manufacturing competitiveness throughout SADC presents a significant
challenge to implementing a successful AICO-like scheme in the region. It is evident
throughout the region that infrastructure for water, electricity and transport, which is
particularly important for the purposes of regional integration, is either substandard or
non-existent.48 For example, inadequate rail systems linking countries within the region
and power supply issues greatly diminish the cost advantages of locating component
manufacture or vehicle model plants in different countries. This is especially relevant
in the automotive sector, where companies prefer links in their value chains to have
close geographical proximity, or alternatively have very good transport links, in order
to ensure ‘just in time’ 49 production. In the ASEAN region, countries are located much
closer together, and developments such as the Indonesian–Malaysian–Singapore Growth
Triangle helped to physically facilitate the flow of goods in the region and increase foreign
investment.
When comparing Africa’s labour characteristics to those of Asia, labour costs are higher
in Africa while efficiencies are lower, creating a disincentive for investment. Additionally,
in South Africa in particular, strong labour union opposition to relocating production
to cheaper countries in the region strains the development of regional value chains. For
example, at the time of writing the National Union of Metal Workers of South Africa
was disputing the relocation of subcomponent manufacture to cheaper countries in
46
47
48
49
18
Hamzah HZB, ‘The relationship between Japan and ASEAN countries in the automotive
industry through regional trade agreements’, Doctoral dissertation, Graduate School of East
Asian Studies, Yamaguchi University, 2012, http://petit.lib.yamaguchi-u.ac.jp/G0000006y2j2/
file/19851/.../DT07100631.pdf.
Focus2Move, ‘Mauritius vehicle market hit new record in 2014’, 31 March 2015, http://www.
mauritiustrade.mu/en/market-survey/market-report?id=422711&type_affichage=, accessed
10 February 2016.
Black A & T McLennan, op. cit.
‘Just in time’ manufacturing refers to a production model that creates products to meet
demand, avoiding overproduction and waste. Thus efficient logistics is essential to allow
production and supply to meet demand in a timely manner.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
SACU.50 Thus the cost advantages of regional linkages are being offset by labour disputes.
Non-tariff barriers in the region, such as corruption at customs borders and heavy
bureaucracy in rules and regulations, also increase the costs of trading in the region.51
Similarly to the issues with AICO, SMEs have difficulty integrating into the automotive
sector due to the stringent standards and economies of scale required by South Africa.52
Often South Africa does not deem the quality of components or subcomponents in
other SADC countries to be up to standard for international export. For example, a
SADC Secretariat representative recalls that at a component plant in Botswana whenever
there was a higher-level technical issue workers had to wait for an expert to come from
South Africa, which created costly delays.53 Unlike a lot of other industries, automotive
industries do not favour government standards but rather impose their own industry
standards, which tend to be very stringent.54
Although the lack of manufacturing competitiveness is a challenge, it should not be seen
as an absolute barrier. Improved infrastructure, which can greatly decrease manufacturing
costs, is rapidly being developed in SADC, and transportation infrastructure is prioritised
as one of the six key pillars of the SADC Regional Infrastructure Development Master
Programme (RIDMP).55
Some examples of regional infrastructure projects are the Nacala Railway from
Mozambique to Malawi, the Kazangula Bridge from Botswana to Zambia, and the Walvis
Bay transport corridors in Namibia.
. . . one of the
biggest challenges
aiCo faced was
maintaining a
balance between
protecting the infant
domestic automotive
DOMESTIC
AND REGIONAL POLICIES
industry and opening
up to regional trade
As indicated in the AICO overview, one of the biggest challenges AICO faced was
maintaining a balance between protecting the infant domestic automotive industry and
opening up to regional trade. This is currently also a challenge for SADC. Many countries
within SADC that have automotive industries protected as sensitive industries within
SADC’s free trade area have indicated that the APDP and South Africa will undercut
their own infant industries if they relax domestic protection in favour of a regional tariff
scheme. These concerns are justified, as inward-directed programmes were necessary to
create an automotive industry in South Africa and ASEAN, and will also be necessary for
other countries in SADC. While many countries in SADC have local content requirements
in order to export, these are difficult to adhere to given the lack of capacity (especially
for the export of CBUs), thus limiting the prospects for the regional free flow of goods.56
50
51
52
53
54
55
56
Norman Lamprecht, op. cit.
Advisor to NAACAM, op. cit.
Gainmore Zanamwe, op. cit.
Ibid.
Ibid.
SADC (Southern African Development Community), ‘Regional Infrastructure Development
Master Plan’, 2012.
Norman Lamprecht, op. cit., Advisor to NAACAM, op. cit.
19
saiia oCCasional PaPer 231
SADC countries also do not have the capacity or financial support to achieve local
content levels similar to those in South Africa. At the same time, local market demand
in most SADC countries is not great enough to achieve economies of scale by initially
only supplying domestically to avoid local content requirements and stringent quality
standards.57 This poses a major challenge for inter-SADC trade. A CEPT would likely
not yet yield regional benefits until other countries in the region have developed their
industries and infrastructure further and attracted greater FDI.
Additionally, as a customs union, all countries within SACU must comply with the APDP.
Although this creates the potential for countries to utilise APDP support, it also leads to
many challenges, as the BLNS countries are not capacitated to comply with the regulations.
In order to receive a Production Rebate Credit Certificate (PRCC), which allows a country
to export under the APDP, they must achieve a level of local value addition that the BLNS
countries currently cannot achieve (unless they export components only to South African
OEMs that will apply for the certificate). Companies operating in these countries must
also apply for the PRCC in their own country, which issues the certificate. According to
industry bodies, this has never been done before and the governments are unlikely to have
the know-how to do so.58 Thus there are significant policy barriers in facilitating free trade
in the SADC and SACU region. However, these could fall away over time as countries
develop their domestic demand to achieve economies of scale and the capacity to build
and support their local industries.
CURRENT DEVELOPMENTS AND RECOMMENDATIONS
a growing middle
class in africa will
lead to greater
development of
the automotive
sector as countries’
demand spur
economies of scale
in both domestic and
regional supply
A growing middle class in Africa will lead to greater development of the automotive sector
as countries’ demand spur economies of scale in both domestic and regional supply.
The continuing development of infrastructure to support the regional movement of goods
will also lead to more cost-effective regional automotive linkages. However, in SADC’s
current state, which is not quite developed to the point where ASEAN was when the AICO
scheme was implemented, there are initiatives that governments, private actors and SADC
itself can undertake (and are undertaking) to further the prospects of regional automotive
integration.
South Africa has an important role to play in capacitating the industries of other
SADC countries. According to the dti, South Africa is ‘fully supportive of regional
industrialisation as a complement to growth dynamics for the South African industry’.59
As indicated previously, South Africa is already seeing the movement of some of its
components production to other SACU countries. It is hoped that the economic
growth thus stimulated in these countries will stimulate similar demand for South
African assembled CBUs and other products.60 However, South Africa can also assist in
transferring skills and knowledge capacities to the region. The Automotive Supply Chain
57
58
59
60
20
Norman Lamprecht, op. cit.
Ibid., Furlonger D, op. cit.
Renai Moothilal, op. cit.
Ibid.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
Competitiveness Initiative is a non-profit initiative established in South Africa in 2013 that
aims to enhance supplier competitiveness, increase localisation and facilitate supportive
industrial policies and regulations.61 It is also one of the mechanisms that facilitate
co-operation between automotive associations, the government and labour unions. 62
The Automotive Industry Development Centre63 has also recently signed an agreement
to collaborate with the Japan International Cooperation Agency to dispatch experts to
assist in component supplier skills development.64 South Africa should look to assist
countries in the region in implementing similar capacity development programmes and
partnerships. Additionally, South African industry representatives from both the public
and private sector are already consulting with counterparts in Zimbabwe and Nigeria
to guide appropriate government policies to grow their indigenous automotive sectors.
Such assistance can be extended to other countries that are also building assembly and
component producing operations. It should be noted that there are various levers open
to support automotive production. In countries that may not necessarily have the cash
reserves associated with an AIS, different tax and related customs/rebate policies can be
used. Rebatable import duties represent a way in which the South African government
encourages localisation without additional ‘cash’ spending, and has worked well as one of
the core components of the APDP. 65
The imperative for South Africa to assist other countries lies in the economies of scale
and increased foreign investments that are realised in the long term from specialising in
certain models and parts in different countries. Even in the short term, the development of
automotive industries outside South Africa gives South African component manufacturers
the opportunity to export to infant assembly operations in the region. While South Africa
currently struggles to achieve optimal economies of scale in some of the more complex,
first-tier components, should these become feasible to export to additional emerging
automotive markets in Nigeria and other SADC countries it will be able to advance and
deepen its own components production.66 NAAMSA has also indicated that South African
companies would expect preferential access to these regional markets in return for their
assistance.67
One positive development is NAAMSA’s recent institutionalisation of the African
Association of Automotive Manufacturers (AAAM). Although the association will be
administered from NAAMSA offices, it will be independent, with a view to identifying
synergies in automotive industries on the African continent, and especially to assist
61
62
63
64
65
66
67
For more information see ASCII (Automotive Supply Chain Competitiveness Initiattive),
http://ascci.co.za/.
Renai Moothilal, op. cit.
The AIDC is a provincial agency established in Gauteng and the Eastern Cape to increase
the local automotive industry’s global competitiveness.
Kgaphola B, ‘Japan and South Africa collaborate to strengthen automotive supply in SA’,
JICA (Japan International Cooperation Agency), 15 March 2016, http://www.jica.go.jp/
southafrica/english/office/topics/160315.html, accessed 16 March 2016.
Renai Moothilal, op. cit.
Ibid.
Venter I, op. cit.
21
saiia oCCasional PaPer 231
South Africa’s further co-operation with and assistance to other countries. This can be a
good future resource for foreign investors to learn about opportunities for investment and
possible regional linkages, especially given the lack of information on automotive patterns
in Africa.68
A strategy that worked well in the ASEAN region, particularly in Thailand, was crowding
investment toward specific products. By focusing policies on the production and export
of 1 tonne pickup trucks, Thailand began with assembly operations but eventually gained
deep levels of expertise and value addition in this model. This allowed it to become a
major producer and exporter of 1 tonne pickup trucks – and as it moved up the value
chain the benefits and components production spilled over into the rest of the region.
This also made Thailand more attractive to foreign investors, encouraging Mitsubishi and
Isuzu to relocate their 1 tonne pickup production to Thailand. Other countries in the
ASEAN region are also specialising in the production of specific cars, such as Indonesia
in sport utility vehicles and Malaysia in passenger cars. South Africa could learn from
this example and look toward further segmentation and specialisation (right now the
country’s production spans a variety of makes and models). This segmentation can benefit
the region as well, given that when countries develop global assembly capability of a
segment with associated volumes they have the potential to attract associated component
manufacture to the region.69
SADC is in the process of identifying, strengthening and/or developing regional centres
for specialisation and excellence in member states, dedicated to different areas of technical
skills and training for a variety of sectors, including the automotive sector. For example,
the SADC Secretariat has already developed criterion for identification of Centres of
Excellence and Centres of Specialization in the pharmaceutical sector which was approved
by the Ministers of Health in November 2015. This can help to centralise the knowledge
base in the region and allow learners and workers from all over the region to receive firstrate skills, thus supportive of collaboration improving labour competitiveness.70
In the AICO scheme, lack of communication between the private sector and state actors
was one of the major challenges, and thus communication between different actors is
essential. The Southern African Business Forum (SABF) has been developed to create a
dialogue between SADC and the private sector in order to address these issues, and in the
SABF’s April 2016 working groups automotive regional value chains were highlighted as a
priority sector.71 Thailand’s SME capacity development programmes can also be looked to
68
69
70
71
22
Norman Lamprecht, op. cit.
Renai Moothilal, op. cit.; Farrell R & C Findlay, ‘Japan and the ASEAN-4 automotive
industry’, East Asian Economic Perspectives, 13, 2002.
Gainmore Zanamwe, op. cit.
Gainmore Zanamwe, op. cit.
The PoTenTial for regional Value Chains in The auTomoTiVe seCTor
for guidance in a SADC context, as they fostered better communication between foreign
investors and local suppliers.72
The SADC Industrial Development Policy Framework (2014) and the SADC Industrial
Upgrading and Modernization Programme (2012) list ‘machinery and equipment’ (which
includes automotives) as one of the nine key sectors prioritised for industrialisation. 73
It is recommended that SADC further operationalise this objective by developing a
framework which outlines the policies, programmes, infrastructure and finances needed
to support regional value chains in the automotive sector.74 It is also recommended that
SADC develop a protocol to help countries navigate the development of their own rules
of origin and incentives for their automotive industries to ensure that protections are
measured and breed efficiency, with a view to gradually lessening barriers to the regional
flow of goods. This protocol could form part of the SADC protocol on industry and the
SADC mandate to review rules of origin to support industrialisation.75 The protocol
could look to the industrialisation component of the AICO scheme for assistance (which
included sharing manufacturing processes, technology, research and development,
marketing and promotion tactics, and joint ventures). It is important for countries in the
SADC region that are just beginning to develop assembly operations to get programmes
and policies in place to deepen their supply chains early, so that their industries can
become competitive and effectively utilise potential government. They can learn from
the experience of South Africa, which, some argue, waited too long to shift focus to
components suppliers and thus still relies heavily on government support.76 These
industrial components, which were evident in AICO, should be adopted ahead of a CEPT,
as a CEPT will be more effective with greater indigenous manufacturing capacity and
development and consequently greater foreign investment.
Aftermarket production also represents a potential starting point for countries in the
region that do not yet have significant demand for new vehicles or the capacity to engage
in competitive full-scale production. Certain countries in the SADC region, such as
Mozambique, already have a sizeable components production set up specifically for the
aftermarket.77 By beginning with simply produced aftermarket components, such as glass
components, low-level electrical components, leather and tyres, the capabilities developed
could eventually be transferred into OEM assembly supply chains.78
72
73
74
75
76
77
78
aftermarket
production also
represents a potential
starting point for
countries in the
region that do not
yet have significant
demand for new
vehicles or the
capacity to engage
in competitive fullscale production
For more information on Thailand’s SME capacitation, see Punyasavatsut C, ‘SMEs in
the Thai manufacturing industry: Linking with MNES’, in Lim H (ed.), ‘SME in Asia and
Globalization’, ERIA (Economic Research Institute for ASEAN and East Asia) Research
Project Report, 2007-5, 2008, pp. 287–321, http://www.eria.org/SMEs%20in%20The%20
Thai%20Manufacturing%20Industry_Linking%20with%20MNEs.pdf, accessed 10 March
2016.
SADC, ‘SADC Industrial Development Policy Framework’, 2014.
Gainmore Zanamwe, op. cit.
Ibid
Advisor to NAACAM, op. cit.
Black A & T McLennan, op. cit.
Renai Moothilal, op. cit.
23
saiia oCCasional PaPer 231
Currently, the Blns
countries represent
the lowest hanging
fruit for regional
integration because
they are beneficiaries
under certain parts
of the aPDP
Currently, the BLNS countries represent the lowest hanging fruit for regional integration
because they are beneficiaries under certain parts of the APDP, and this is why component
production relocation to these countries has already begun. Outside SACU, South African
and foreign investors should look to collaborate with countries that are progressing in
their automotive assembly development due to population growth and increasing demand.
Although Nigeria is the clear frontrunner, Kenya is beginning to show progress. Countries
within SADC remain challenging in terms of deeper co-operation due to some of the
constraints mentioned earlier, but opportunities do exist. States such as Tanzania or the
Democratic Republic of the Congo may hold the potential for partnership due to growth,
equality and population variables. Angola and Botswana are of further interest due to
increasing demand for vehicles in these countries.79
CONCLUSION
With such a low number of vehicles per capita in Africa, and the SADC region exhibiting
the most development on the continent until the recent commodity downturn, the
potential for growth in automobile production in the region is evident. Notable barriers
such as low market demand and marginal indigenous industries outside South Africa
explain the minimal foreign investment up to this point. However, these dynamics are
changing and South Africa is looking to create more regional synergies. South Africa,
SADC and foreign investors interested in serving the regional market have a major role to
play in providing knowledge and resources, allowing countries to create their own value
chains and manufacturing capacity and develop the skills and policy frameworks to enable
such growth. If such developments occur, coupled with the continued improvement of
logistics within the region, the potential for an AICO-like scheme might not be far off.
79
24
Ibid.; Advisor to NAACAM, op. cit.
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