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Sectors 10 May 2023

Supporting the transformation of Africa’s Automotive sector

Africa is well positioned to seize new opportunities presented by the evolution of the global automotive industry. Here’s how we stand ready to enable it.

As a financial institution, we recognise our role as a major enabler of Africa’s automotive industry as it leverages a confluence of tides to build new regional supply chains and navigate its transformation toward a clean energy future.

Africa is set to remain a relevant market for the Automotive industry, given its rising middle class, growing urbanization and industrialization plans. While the adoption of electric vehicles (EVs) in Africa is still in its infancy, there are meaningful opportunities for Africa’s role in the global shift to net zero carbon emissions. 

One such example is the increasing relevance of green hydrogen, which is produced from renewable energy sources such as solar, wind and hydropower. The green hydrogen economy is already taking shape in Africa with the support of the South African and Namibian governments.

The other factor in this equation is the African Continental Free Trade Area (AfCFTA) agreement which seeks to allow the free flow of goods, services and investments by liberalising trade through the elimination of tariffs and non-tariff barriers, among other measures. If successfully implemented, the AfCFTA agreement will create the largest free trade area in the world, connecting 1.3 billion people across 55 countries.

This sets the scene for African countries to collaborate in developing robust regional supply hubs, that not only trade in metals but also in rubber, leather and other critical automotive inputs.

If we consider the automotive sector; manufacturing, transport and logistics, as well as digital trade are priority sectors for the AfCFTA. An important next step from a manufacturing perspective is to finalise the Rules of Origin.

Supporting Africa’s automotive ecosystems

Through our extensive footprint, we are uniquely positioned to support the growth of Africa’s auto industry and its transition by leveraging our extensive reach, experience and insight into African markets.

Firstly, with on-the-ground presence in 20 countries across the continent, our local teams possess unrivalled sector and regional expertise together with strong networks with policymakers and investors, which allows us to support the future growth of our automotive clients in expanding their operations, sourcing and distribution networks.

Secondly, as Africa’s largest bank by assets, our teams have a finger on the pulse on the largest infrastructure, energy, oil & gas and mining investment projects across the continent. This enables us to share valuable insights with our clients to help them achieve their market share ambitions.

Thirdly, we are a leading player in delivering sustainability linked solutions that support positive ESG outcomes for our clients.

Finally, we have a leading role to play in facilitating trade and capital flows across the African economy.

Reaching sustainability goals together

We are proud to partner with clients to help them achieve positive environmental, social and governance targets through our sustainability-linked loans and bonds, such as the landmark deal concluded with South African automotive group Motus.

The R6.8 billion ESG funding package (comprising a R6 billion term loan and R800 million working capital facility) will deliver on positive environmental and social KPIs, with a focus on Motus’ own road fuel consumption, water consumption, electricity efficiency and gender equality to drive diversity and inclusion.

Enabling energy independence

The benefits of solar Photovoltaic (PV) as a means of renewable energy are well established, however, South Africa’s ailing power grid, ongoing outages and looming electricity tariff hikes have added urgency to making the case for solar.

To ensure reliability, cost and predictability of power solutions for our clients, we are supporting them by looking beyond solar energy to hybrid solutions. Some of the notable transactions we have concluded in this regard include our partnership with EDF Renewables, Red Rocket, Tronox and Seriti where we helped them find the right solutions to achieve their sustainability ambitions.

Interested in learning more?

If you’d like to find out more about how we may assist your organisation to achieve its ambitions, please get in touch  to begin the conversation.