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The British multinational bank Standard Chartered (StanChart) has praised South Africa's automotive sector's policies, suggesting they should serve as a prototype for the rest of Africa in crafting export-driven industrial policies. The applause was directed in their "Future of Trade: Africa" report. According to StanChart, South Africa exemplifies how to build industrial capacity to broaden the export base of countries within the continent.
The report acknowledges the South African automotive sector as one of the most successful industrialisation examples in Africa. The International Trade Administration estimated that South Africa would manufacture over half a million vehicle units and export vehicle and parts worth $13.1 billion in 2022.
StanChart highlighted the Motor Industry Development Programme (MIDP) introduced by the South African government in 1995, praising the initiative's role in augmenting the competitiveness of the South African automotive industry. According to the bank, the combination of duty reduction and import-export complementation has proven effective in boosting exports and facilitating rapid industrialisation.
The bank stressed the importance of aligning public and private incentives. It noted that producers leaned towards raw-material intensive exports and low volume production during the MIDP era, a strategy requiring minimal investment and alteration to existing production models.
Africa's automotive market size is expected to witness growth from 1.33-million units in 2023 to 1.78-million units by 2028, with South Africa expanding its dominant market share. The bank also mentioned South Africa's proactive approach to the electric vehicle space as a major plus.
StanChart argues that while Africa is a significant provider of inputs across various value chains, it notably misses out on many intermediate production steps, creating a significant trade deficit for vehicles and components.
The report indicates that if fully implemented, AfCFTA could increase Africa's total exports, expected to reach $952 billion by 2035, by an additional 29%.
The British lender anticipates that South Africa's annual exports could grow to $165 billion by 2025, with the implementation of AfCFTA expected to further boost this figure by 17%.