Ethiopia, the second most populous country in Africa, has a population of about 100 million. The Gross Domestic Product (GDP) of the country in 2019 is estimated to be 105 billion Dollars, according to Trading Economics Global Macro Models and Analysts.
These make her one of the most recommended countries for investment. Despite the huge population size and large economy, the market for automotive industry remains small. A press release of the Ethiopian Investment Commission indicates Volkswagen, a German automotive industry, is expanding its investment in sub-Saharan Africa. And consequently, has signed a Mem orandum of Understanding(MoU) with the Government of Ethiopia to collaborate in the delivery of a joint vision for the development of an automotive industry.
Volkswagen Sub-Saharan Africa Region Head Thomas Schaefer told The Ethiopian Herald that the company eyes on Ethiopia to explore how to set up sustainable automotive industry. Ethiopia has a huge potential and opportunity for automotive assembly and component manufacturing, according to him. Schaefer added that the government needs to formulate automotive policy to escalate the little demand of automotive in the country. The absence of automotive policy is the main cause of the low demand. After solving this problem, the demand in the country could be high.
The issue of spare part which is a chronic problem in Africa would also be solved after establishing a local automotive production, he confirmed. Mulugeta Baynekaw, Salesperson of Afritrac Import Private Limited Company, remar ked most of the cars in Ethiopia are of low quality. He added that the purchasers also prefer cheaper cars regardless of the quality. This is mainly because of the unaffordable price of quality cars. Mulugeta mentioned that the government needs to formulate automotive policy that could fix the little demand of cars in the country.
It should facilitate smooth trade between importers and customers. It should work to increase the demand in the country. It should formulate policies that would help the people with low income could buy vehicles on installment basis. Mulugeta said that the spare parts of the cars in the country lack durability as they are of poor quality. The government needs to formulate automotive policy that bans the importation of low quality cars, according to the salesperson.
The salesperson added that the establishment of renowned automotive industry such as Volkswagen could reduce problems related to quality and spare part. When the industry starts to produce the spare part locally, customers will be able to replace the damaged parts of their cars in a short period of time. Their company has an agreement with some banks for covering of the costs.
The consumer pays 50 percent at hand while the bank covers the rest as per the agreement with their company, according Mulugeta. Abebe Abebayehu, Commissioner of the Ethiopian Investment Commission, on his part, remarked that the coming of famous companies like Volkswagen is an indicator of the trust investors are having on the economy of this country. It testifiest to the suitability of Ethiopia for investment, according to him. The MoU signed is chiefly about the local production and supply of locally produced cloth, leather, and electronic equipment for Volkswagen. Eventually, all the spare parts would be produced locally as the market and industry grows, said the commissioner.
The next step is to decide the where and how to establish the industry. This will take place immediately after the signing of the memorandum which was accomplished that day, according to Abebe. The establishment of the industry would create job opportunity, and play a role in sharing of knowledge and exerience. It also encourages other investors to come to Ethiopia. The government will also make the necessary policy adjustments in order to curb the problems related to the car industry, added Abebe. Thus, local production of spare part could be part of the solution to the existing problem. thus, the government needs to improve the policy to enhance the production and consumption of car.
Herald FEBRUARY 2/2019
BY GETAHUN LEGESSE
