Kagame test-drives a $20m VW investment

Paul Kagame, President of Rwanda. (AP Photo/Francois Mori)

Paul Kagame, President of Rwanda. (AP Photo/Francois Mori)

Published Jul 1, 2018

Share

He commands my respect for many of his attributes, but his driving technique remains an unknown to me.

This week, however, the lanky President Paul Kagame of the Land of A Thousand Hills treated members of the media and the workers at the new automotive factory to a rare glimpse of the closet rally car driver in him when he got behind the wheel of a Teramont.

That is an SUV by Volkswagen, the first ever made in Rwanda.

This small, dynamic country joined its more fancied neighbour, Kenya, by snaring a $20-million (R276m) investment.

It brought to five the number of Volkswagen’s manufacturing centres in Africa.

The others are in Algeria, Nigeria and South Africa.

Expected to churn out 1000 to 5000 vehicles annually for the regional and international markets, this investment means more to Rwanda than to Kenya - $20m is about 0.023% of its gross domestic product (GDP), estimated around $9billion, compared to Kenya’s $14bn.

Its impact will surely ripple with greater amplitude than in the Kenyan economy or any of the other countries where Volkswagen is operational.

If only all African leaders were as obsessive about drawing investors closer to their countries as they are about clinging to power!

Kagame, 59, who is also current chairperson of the AU, attracts his share of criticism for staying in power too long.

He has been in trade and investment overdrive since taking over in 2000, although he might as well have been in charge - in the opinion of many - as vice-president and Minister of Defence between 1994 and 2000.

His critics single out his extended stay in office among the reasons he poses a risk to the country when he finally leaves.

Time will be the arbiter of whether these fears are justified, but a hard-nosed appraisal of his trade and investment overdrive lies in what he has concretely done since 2000.

It is his ability to scoop investments like this one in the midst of many problems that makes him special.

Volkswagen, in setting up a factory in Kigali, joined a galaxy of star multinationals that have found Rwanda an irresistibly attractive investment destination.

These include MTN, PPC, Starbucks, and Rezidor (Radisson) and Marriott hotels.

Without an oversupply of minerals and other resources, Rwanda has had to learn to play to its strengths: tourism, both business and leisure, agriculture, and now services and manufacturing.

By merely prioritising the ease of doing business in general, the country remains a top must-visit place for anyone with an incentive to grow, and Volkswagen has plenty of such incentives.

Mounting a serious challenge to snatch the top position from rival Toyota in South Africa is no ordinary feat. It has to be pursued on several fronts.

Car sales in South Africa are growing but not as astronomically as they could since recovering from the debilitating crash of 2008/09.

This is partly because cars are overpriced in an economy that is not inclusive enough to grow its aggregate demand.

Figures from the National Association of Automobile Manufacturers of SA show that even though the trend is upward, with total sales clocking a year-on-year hike of 7.2% to 49754 units in November last year, inertia remains a weightier influence.

The growth rate, consequently, in April this year was a pedestrian 3.6% to 36346 units; both numbers are a yawning gap from the 60000-plus record of 2014/15.

When growth stagnates in your comfort zone, geographic diversification is a sensible option, especially into markets where used cars are dominant players, and we are talking fifth-hand or sixth-hand used cars here!

Kagame has been vocal against the dumping of used cars from developed countries in Africa.

Such cars are bad for the environment, hard to maintain and open the way to all sorts of criminal schemes, as parts are shipped in without controls.

Let us hope that Volkswagens made in Rwanda will be more affordable to the people of Rwanda and the East African Community than they are here in South Africa.

* Kgomoeswana is the author of Africa is Open for Business, a media commentator and public speaker on African business affairs, and a columnist for Destiny Man - Twitter Handle: @VictorAfrica

The Sunday Independent

Related Topics: