Ghana 1994: Like Cuba for Japanese compact cars. “Do they build any cars here?”
How it All Started
The citizens of Cuba are well known for maintaining the late 1950s American sedans and convertibles that dot their roads. In the early 1960s, the island nation banned the import of foreign vehicles, leaving late '50s Fords, Oldsmobiles, Chevrolets, and Plymouths as the dominant era and brands of cars on the streets of Havana.
It had been over a decade since I had seen so many late '70s Datsun B210 sedans, Toyota Corona and Subaru DL wagons, and Mazda GLC sport hatchbacks. They all were here as taxis, driving down the crowded six-lane road past the massive Kaneshie market off Winneba Road in Accra, the capital city of Ghana. My taxi was a four-door Datsun B210 with the oil light on. A common practice among taxi drivers in Ghana to save fuel was for the driver to shut off the car’s engine every time he came to a stop at a red light or in the heavy traffic, and restart the motor once the light turned green or the heavy traffic allowed him to proceed. I had owned a rust-covered turquoise-blue 1976 version of the same model back in high school. It was the first car I purchased on my own, with money I earned from working at D.B. Kaplan’s restaurant in downtown Chicago. I remembered every detail of that Datsun. The ride that afternoon was like a trip back in time.
During the summer of 1994, between the first and second year of my MBA program at the University of Michigan Ross School of Business, I participated in the school’s African Business Development Corps (Africa Corps) summer internship program. I worked as a business strategy consultant for the government of Ghana. My assignment was to develop business plans for several of the government-owned businesses that were in process of being privatized, i.e., converted from government-owned companies to investor-owned businesses. This summer internship was the first time that I, or anyone in my immediate family, had visited the African continent. For the duration of my three-month assignment in Accra, these old Japanese compact car-based taxis were my primary mode of transportation. Day after day I would ride to and from work in these “should have been scrapped” vehicles that were enduring severe use as taxis and being held together by the ingenuity of the African taxi drivers and roadside mechanics. Sometimes, the driver and mechanic were the same person. The mechanics displayed the same level of ingenuity and industriousness as a Cuban owner of a black-and-red 1958 Oldsmobile Super 88 convertible, struggling to keep his car running and on the road in Havana.
During the spring of that same year, and before traveling to Ghana for my extended stay, I also had the opportunity to make my first visit to Asia. I visited Hong Kong (three years before the United Kingdom returned control to China), mainland China, and Indonesia. During this visit, I had the opportunity to tour a Toyota pickup truck plant in Jakarta, Indonesia. After observing the ingenuity and industriousness of the Ghanaian taxi drivers and their mechanics, and thinking about the Toyota plant in Indonesia, I began to wonder out loud, “Do they build any cars here in Ghana?” I remember asking many of the taxi drivers, several of my local work colleagues, other professionals, and anyone else that I met, whether any cars were being built in the country. There were none. The locals and expats that I encountered who had any interest in the car business primarily saw the region as a ready market to import secondhand spare parts from the US or Europe, to service the all-imported cars on the road. It became apparent to me then that Ghana, the West Africa region, and the entire African continent had great potential for automobile manufacturing and other industrial endeavors.
I finished my project in late August, and it was time to return to Ann Arbor for the second year of my Michigan MBA program. My summer in Ghana left me with a love for Africa. Not just for the beautiful people, cultures, beaches, and landscapes in the typical tourist sense, but also a strong interest in Africa’s economic development. I left Accra with the deep desire to, at some point in my career, combine my automotive passion and the industry experience, that I was still acquiring at the time, with this new-found interest in emerging markets and Africa’s development. What if those ingenious and industrious taxi mechanics around Accra could direct their self-taught automotive skills towards the development of their economies and the improvement of their living standards?
Strong Auto Sector, Strong Economy
In the twenty-three years since my first experiences in Africa, when I first wondered if they built any cars there, I have had the opportunity to work with auto manufacturers all over the world, not only throughout the US and Europe, but also in China, India, Mexico, Brazil, and South Korea. Every automaker in every market wants the same thing: growth, market leadership, and profits. Their home countries want them to succeed as well. A thriving auto manufacturing sector is a reliable indicator of a strong economy. If you look at countries and regions that have developed a local automotive industry over the last 20-40 years, you will see a strong relationship between their industrialization success and the growth of their respective economies.
As China developed its local auto industry, total vehicle production grew from 500 thousand units in 1990 to 24.5 million units in 2015, 49X (49 times the initial production). Nominal GDP (gross domestic product) grew from US $360 billion to US $10 trillion, 27X during the same time.
As South Korea developed its local auto industry, total vehicle production grew from 123 thousand units in 1980 to 4.5 million units in 2015, 37X. Nominal GDP grew from US $68 billion to US $1.4 trillion, 21X, during the same period.
As India developed its local auto industry, total vehicle production grew from 114 thousand units in 1980 to 4.1 million units, 36X, in 2015. Nominal GDP grew from US $190 billion to US $2 trillion, 11X, during the same period.
As Brazil developed its local auto industry, total vehicle production grew from 416 thousand units in 1970, to a peak year of 3.7 million units, 9X, in 2013, then declining to 2.4 million in 2015 due to government and financial challenges. Nominal GDP grew from US $42 billion to US $2.4 trillion, 57X, during the same period prior to the 2015 local economic crisis.
By comparison, the two African countries that produced the largest number of vehicles in 2016 were South Africa, with 600 thousand units and a nominal GDP of US $295 billion; and Morocco, with 345 thousand units and a nominal GDP of US $101 billion. Given the above examples from Asia and Latin America, the potential for South Africa, Morocco, and other economies on the African continent to grow from automotive industrialization is significant.
Sources: Vehicle production-OICA, International Organization of Auto Manufacturers 2015; Nominal GDP-World Bank statistics; Number of vehicles on the road in the US-US Dept. of Energy; Number of vehicles on the road across the African continent-McKinsey & Company
The best way to capitalize on the African market potential is to create more potential local car buyers. The best way to create more local car buyers is to create opportunities to earn higher income levels. The best way to create higher income levels is to create more local entrepreneurs, local businesses, and local jobs. The best way to create more local entrepreneurs, local businesses, and local jobs is sustainable industrialization. If locally focused companies do not pursue this opportunity, foreign and multinational corporations will likely take over many of the high-margin opportunities in these markets. These multinational companies may not always prioritize what is best for the local region.
How Motoring Africa is Organized... and my Initial Premise
This book is organized into three sections. The fifteen chapters will flow from defining and making the case for industrialization, to presenting examples of automotive industrialization
