Autos Investment Round-Up: Ghana's Supportive Automotive Policy Attracts Investments From Automakers

Fitch Solutions / Autos / Africa / Wed 27 Jul, 2022

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Key View

  • Ghana inaugurated two vehicle assembly plants in Q222, on the back of a supportive automotive policy that proves to be effective in attracting investments from automakers.
  • South Africa continues to develop its autos supply chain, especially for internal combustion-engined pick-up trucks, as automakers invest in component localisation to support their domestic and regional vehicle assembly operations.

In our regular round-up of production investments, we track the latest projects from the production side of the industry and analyse regional trends that we see developing. In doing so, we hope to build a picture of any potential hubs that may be developing, as well as company strategy in terms of production bases and export programmes.

Sub-Saharan Africa -Autos Production Investment
Date Announced Country City/State/Region Company Value Category Brief Description Date Onstream
Apr-22 Ghana Tema Nissan USD9.0mn CV Japan-based carmaker officially inaugurated the new assembly plant where the Nissan Navara model will be produced (MoU was signed in 2018 and construction started in 2020). Operational
Apr-22 Ghana Tema Stellantis na PV/CV The multinational automaker started to produce two Peugeot models (3008 SUV and Landtrek pick-up) through its local authorised representative Silver Star Auto Ltd. Initial yearly production capacity is 4,500 cars. Operational
Apr-22 Kenya na GB Auto na PV The Egypt-based auto dealer communicated its plan to establish a joint venture to assemble PVs in Kenya. GB is the largest carmaker in Egypt and produces vehicles for brands such as Hyundai, Mitsubishi, Volvo, and Bajaj. na
May-22 South Africa Struandale Isuzu Motors ZAR580mn (USD34.2mn) Components The Japanese automaker announced an investment that aims to support component localisation in South Africa through the provision of the supplier tooling required for the production of specific components for the new 7th generation ISUZU D-MAX model. na
Note: na = not available. PV = Passenger Vehicle, CV = Commercial Vehicle. Source: Fitch Solutions

In Q222, we identified four autos-related production investments that were either announced or inaugurated in SSA during the period, which increased from three from the previous quarter. The two projects this quarter that revealed financial details came in at USD43.2mn, which falls below the USD70.0mn investments announced in Q122.

Ghana Attracts Investments On Supportive Automotive Policy

This quarter, we tracked two vehicle assembly plant inaugurations in Ghana, which we believe showcases the significance of the country’s strong Automotive Development Policy, implemented in 2019, to attract autos-related investments. The policy aims to foster investments in Ghana’s automotive industry with the objective to create a competitive industrial hub for automotive manufacturing. In addition, it seeks to reduce the country’s reliance on vehicle imports, currently being shipped mainly from the US., Japan and Germany, and increase the sale of new vehicles, as currently around 90% of imported vehicles are used. In order to attract investments, the autos policy encompasses a favourable tax framework: automakers involved in assembly of Semi Knocked-Down (SKD) kits are eligible for a five-year tax holiday, whereas those producing vehicles using Completely Knocked-Down (CKD) kits benefit from a 10-year tax holiday. Both vehicle plant inaugurations in Ghana this quarter are related to the assembly of cars using SKD kits: Nissan started producing the Navara pick-up model in its newly-built assembly facility whereas Stellantis launched the production of two models (an SUV and a pick-up) under its Peugeot brand in partnership with a local authorised representative.

Increased Auto Component Localisation In South Africa

In Q222, South Africa was the only country in the SSA region that received investments to develop the auto component sector, since the other three investments were related to the construction of vehicle assembly plants. We believe that South Africa is able to receive auto component-related investments due to its robust Autos industry, which is supported by a solid automotive industry policy, a developed automotive component supplier industry, and a well-established new vehicles market. Furthermore, we note that South Africa is a key supplier of SKD kits to other markets in SSA, such as Ghana. These factors increase the country’s appeal to companies willing to invest in enhancing their Autos supply chains in the SSA region, as reflected by Isuzu Motor’s investment announcement this quarter. The Japanese carmaker announced an investment totalling ZAR580mn (USD34.2mn) to support component localisation for the production of its new D-MAX model, including the distribution of the supplier tooling required to produce specific components for the pick-up’s assembly operations. By doing this, a larger share of the auto parts and components required by the automaker for its vehicle manufacturing operations in South Africa will be locally sourced, illustrating the country’s strong technical capability in terms of auto component production.

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions Group Limited. © Fitch Solutions Group Limited All rights reserved. 30 North Colonnade, London E14 5GN, UK.

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