Ethiopian automotive industry development underway

Association body the African Association of Automotive Manufacturers (AAAM) has been appointed by the Special Initiative on Training and Job Creation to develop an automotive policy for the Ethiopian government that will encourage global original0equipment manufacturers (OEMs) and component manufacturers to invest in Ethiopia.

In addition, an automotive training programme for existing assemblers and workshop owners will be developed and piloted along with the development of a foundational concept note for the creation of a centre of excellence to train local people for the highly skilled jobs that the industry will need.

The automotive industry can have a substantial contribution to the growth of the Ethiopian economy if there is a conducive policy framework in place that encourages global automotive companies to invest in Ethiopia and establish manufacturing operations. A stable automotive policy, with the right incentives in place, can position Ethiopia as a regional hub for vehicle component manufacturing and assembly.

This sector would employ substantial numbers of highly skilled people and could also spur growth in allied industries such as the iron and steel industry. Investments by global OEMs through partnerships and regional supply chains, could make Ethiopia a regional and even continental player in both component and vehicle manufacturing.

The Special Initiative on Training and Job Creation is commissioned by the German Federal Ministry for Economic Cooperation and Development and implemented among others by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).

The objective of the Special Initiative, which also operates under the brand Invest for Jobs, is to create jobs and apprenticeships and to improve working conditions in its partner countries. To accomplish this, Invest for Jobs supports and promotes investments that have a high impact on employment in the partner countries. It works to pave the way and remove investment barriers such as local shortages of skilled labour, insufficient performance of the local supply industry and promotion of small and medium-sized companies. In addition, it offers comprehensive advice, contacts and financial support to overcome investment barriers.

The first task of the policy project will be to conduct a comprehensive local and international automotive sector analysis. This will be followed by the development of an automotive policy framework for consideration by the Ethiopian authorities and after joint consultation, implement the automotive policy with the aim of attracting global automotive investors from the component and vehicle manufacturing sectors.

Concurrently a pilot automotive skills development eco system, which adheres to international standards, is to be developed, which will ultimately lead to the establishment of a centre of excellence.

The strategic objectives of developing an Ethiopian automotive policy and centre of excellence are to establish a fully integrated and competitive industrial hub for component and vehicle manufacturing in partnership with the private sector. Additionally, the objectives are set out to generate highly skilled jobs in both the vehicle assembly and component manufacturing sectors with a spill over into other sectors of the economy.

Further, objectives are to establish an asset-based vehicle finance scheme for locally manufactured vehicles to ensure affordability for local buyers and to improve balance of payments through competitive import substitution and export market development. Lastly, improving vehicle safety and environmental standards while transforming the quality of the vehicles in the car park, thereby safeguarding the natural environment, are targeted.

“Being awarded this contract by the GIZ is an important milestone for AAAM in the development of the automotive industry in Africa and reflects that our collaborative efforts across the continent to facilitate sustainable automotive industrialisation are gaining traction,” says AAAM CEO David Coffey.

“Ethiopia is an important assembly hub in the East of Africa region. With a population in excess of 100-million and a very low motorisation rate of two vehicles for every 1 000 inhabitants, the potential of Ethiopia is significant with the right ecosystem in place; the integration of Ethiopia into the regional and ultimately continental single market will provide scale that will facilitate competitiveness.

“Our aim is to unlock the economic potential of the African continent by promoting a policy environment that is conducive to the industrialisation and growth of the automotive sector and that attracts investments by both OEMs and component manufacturers, which, in turn, creates highly skilled jobs and affordable mobility for consumers,” notes Coffey.

Having an automotive development programme in place will complement the Invest for Jobs programme interventions around promoting private-sector investment in the various sectors regarded as strategic by the Ethiopian government. Further, addressing the skills gaps through the development of specialised training programmes, such as mechatronics, will alleviate the problems experienced by the industry players in finding a trained labour force in the sector.

The project, which has clearly defined milestones and deliverables, will run from March 2021 to the end of October 2021.