Africa is a continent that is, in general, dependent on the rest of the world (ROW) for manufactured imports. There are some exceptions to this, one of them being the automotive components trade. The automotive components trade (HS8708) is a subset of the larger automotive trade product group (HS code 87). Within HS87, the trade in components is usually the third largest group after freight vehicles (HS8704) and passenger transport vehicles (HS8703).

At present Africa is largely dependent on the rest of the world for automotive component imports, with the exception of the contribution of South Africa. This presents an interesting case in that it proves that Africa can grow its own manufacturing industries and be Africa-focused for market growth rather than on the ROW. This blog presents some data and facts about the sector and its importance in Africa, as well as the main trade flows within Africa. As will be seen, the trade in automotive components within Africa is highly asymmetric in two ways:

• South Africa is a significant trade hub; especially an export hub for automotive components.

• The overwhelming bulk of intra-African trade in automotive components is located in Southern Africa and among the members of SADC. Within SACU the trade is even more intense, with the smaller SACU members highly dependent on South Africa for their automotive components imports.

What does the intra-African trade in automotive components look like? The table below lists the top intra-African automotive components trading countries (by trade value), from the perspectives of exporters and importers. The final column in the table gives the list of the top importers and exporters in alphabetical order.

Source: ITC Trade Map and author’s calculations

What is interesting about the data in this table is the presence among the top intra-African traders of the whole of the Southern African Customs Union (SACU) and most of the East African Community (EAC). Most of the Southern African Development Community (SADC) is also represented, half of the Arab Maghreb Union (AMU) and just under half of the Community of East and Southern African States (COMESA). On the other hand, West Africa is under represented and Nigeria’s absence is interesting given that it is the largest economy in Africa. By implication, Nigeria’s imports of automotive components are almost entirely sourced externally to Africa.

The data suggests that being part of a customs union (CU) is an important indicator of being involved in intra-African trade in this product group. However, CU membership may be a necessary condition but it is not sufficient. There is deep commercial integration between the members of SACU, which extends to the integration of services sectors. This level of integration takes time to develop and is supported by industrial and investment policy. The economies of SACU have highly integrated markets for services such as finance, transport, and distribution. Integration of this degree serves to support good market integration, and is in turn fuelled by close goods market integration.

While there are asymmetries in the automotive components trade in Africa, there are also interesting symmetries when it comes to total trade (ROW plus Africa). Refer to the stacked bar charts presented below, which are drawn from ITC Trade Map data. These charts present data for total automotive imports and exports (the blue bar) as well as proportional measures (the red bar): the percentage of trade with Africa on a secondary axis.

Source: ITC Trade Map and author’s calculations

Automotive exports are dominated by three countries – South Africa, Tunisia and Morocco, in that order – and imports are dominated by the same group plus Egypt; which is an interesting symmetry. For exports, no significant contribution to exports is made by any other African country. However for imports, when one factors out the role of the top four importers as buyers of components for their automotive assembly industries, the residual pattern for imports would be expected given the essential nature of the product and be proportional to the size of the economy and its road network.

Source: ITC Trade Map and author’s calculations

An additional interesting insight from these charts is the presence of SACU and SADC states towards the top of both charts (the exports chart has been truncated for space economy). States such as Botswana and Namibia conduct a large proportion of their automotive components trade with South Africa and there is no other parallel or similar pattern throughout Africa. The residual flows among East, West and North African nations are hardly significant when compared with the flows around the South African hub.

The patterns observed in this data beg the question – how did South Africa achieve such dominance? This success has not been by accident but very much by design. South Africa’s latest evolution of its automotive industrial policy – the Automotive Production Development Plan (APDP) – has been described as ‘very supportive’ of the industry and has been confirmed until 2035. The target for local content has been set at 60%, although this is not a hard target and support under the APDP is still available at local content below this threshold. What’s more, the APDP allows manufacturers to export components and does not require that all output is in assembled motor vehicles. This factor contributes to South Africa’s success as an automotive components exporter in Africa.

Undoubtedly, South Africa’s ability to access the markets of the SACU and SADC countries has contributed to the patterns observed today. South Africa’s automotive component exports enter the BLNS countries duty free while they enter most SADC countries either duty free or at preferential non-zero rates (Mozambique being a notable exception). Among the lessons to be drawn from this success story are therefore:

• Sustained and consistent industrial policy support is required to grow an export-oriented manufacturing industry in a small, open economy.

• Preferential market access to trade partners is an important precondition. If these trade partners are also geographically close, gravity factors are an additional fillip to the development of trade.

Looking forward to the African Continental Free Trade Area (AfCFTA), the deepening of intra-African trade will require more than simply the removal or lowering of trade barriers. It will also require regionally and continentally-developed industrial policies that take into account the potential for regional value chains. This issue is taken up in a forthcoming tralac working paper by this author[1].

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[1] Stuart, J. 2020. The Automotive Components Trade in Africa: Its Place and Potential. tralac Working Paper. Stellenbosch: tralac.