The African electric vehicle (EV) market is projected to grow by 25 percent annually over the next five years. This means that stakeholders, including financiers, have to plan for this expansion if they are to benefit from the sector.
In this week’s conversation, Kwasi Frimpong, Director – Global Subsidiaries Group Head – South Africa at Citi, discusses the challenges and opportunities in financing EVs in African countries. He highlights the economic barriers to EV adoption, including high upfront costs, limited infrastructure, and restrictive tariffs.
The discussion also covers the role of government policies, the impact of Chinese investment, and the need for diversified funding sources to support emerging mobility companies.
He now joins Njenga Hakeenah to discuss the importance of sustainable business models and the potential for exponential growth in the EV sector by 2030.
Show Notes:
- China Global South Project: Citi’s Approach to Financing Africa’s Green Mobility by Njenga Hakeenah
- China Global South Project: Chinese EVs Gaining Ground in South Africa Despite Hybrids Popularity by Nkateko Mabasa
- China Global South Project: Solar Taxi Solving Adoption Challenges in Ghana as Chinese EVs Gain Popularity by Njenga Hakeenah
About Kwasi Frimpong:
Kwasi heads Citi’s Global Network Banking group in South Africa based in Johannesburg. He is responsible for leading the coverage of all Citi’s multinational clients across South Africa. Prior to this, Kwasi led the Global Network Banking group in East Africa (covering Kenya, Tanzania, Uganda & Zambia) as well as the Corporate Bank in Tanzania. Kwasi joined Citi in 2009 in New York as part of the Global Emerging Markets Associate (GEMA) program and went on to complete assignments in Brazil and UAE. Before joining Citi, Kwasi interned in the Financial Institutions Investment Banking group of Goldman Sachs & Co. in New York where he was awarded the prestigious Goldman Sachs MBA Fellowship in 2008. He also worked for The Trust Bank Ghana Limited (now part of the Ecobank Group). He holds a B.A Economics from University of Ghana and MBA Finance from the Massachusetts Institute of Technology Sloan School of Management, USA.
Transcript:
NJENGA HAKEENAH: Hello and welcome to The Africa EV Show where we explore the future of mobility, finance and technology across the African continent. And today we are diving into one of the biggest challenges that many businesses in Africa or in African countries face. And this is financing because when it comes to shaping Africa’s green mobility, and helping with electric vehicle adoption, there is a limitation or a challenge when it comes to that financing.
And while the promise of e-mobility is clear, that is cleaner air, cheaper transport and new business opportunities, the economic barriers remain steep. There are high upfront costs, there are limited charging infrastructure, there are restrictive tariffs and a financial system.
that often overlooks the small but innovative African businesses. And this leads to the slow adoption of electric vehicles across the continent. This is not unique to just one country. In this episode, we’ll unpack these issues with our guest, KWASI FRIMPONG from Citi based in Johannesburg.
And we’ll explore how banks evaluate risk in lending to young African mobility companies and what financing products are emerging to support everyone in this ecosystem and whether governments are ready to lower tariffs and make EVs affordable and more accessible under frameworks like the AfCFTA or in the South African region, SADC or SADC as we call it here.
Now we’ll also look at how global capital flows from Chinese automakers entering South Africa to local innovators like Ghana’s solar taxi are reshaping the market and what the future of Africa’s auto sector could look like by 2030 is just like five years to go now and beyond. And this conversation isn’t just about cars, buses or bikes. It’s about how finance can make or break Africa’s green mobility shift.
Kwasi joined Citi in 2009, but he has been in the current role for three years. He is Citi’s global network banking group. He is the head, actually, of Citi’s Global Network Banking Group in South Africa and is based in Johannesburg, which is a very beautiful city.
If you’ve not been there, you need to visit. And in this role, he’s responsible for leading the coverage of all the banks and multinational clients across South Africa.
Now, prior to this, Kwasi has led Global Network Banking Group in East Africa, including Kenya, where I am, then Tanzania, Uganda and Zambia, as well as the Corporate Bank in Tanzania.
And in that role, he was responsible for leading the coverage of all corporate and public sector clients in Tanzania, as well as providing senior coverage for the banks and multinational clients across East Africa.
Hello, Kwasi, and welcome. That’s quite a CV there.
KWASI FRIMPONG: Thank you. Thank you. Very kind of you and happy to be here.
NJENGA HAKEENAH: Our conversation today is to discuss the economic barriers and what is needed to continue to grow the EV sector from a financial standpoint. And this includes overcoming the low uptake due to the high upfront costs of owning electric vehicles and also the need for investment in electricity and infrastructure like charging. And considering the economic barriers and the necessary steps to grow the sector, what changes are required in financing the green transition across various sectors? And this includes mobility in boats or for boats, cars and agriculture, which brings in trucks and tractors?
KWASI FRIMPONG: No, look, absolutely. And thank you again for having me. Like you said in your introduction, I think the promise of e-mobility overall across the continent is significant. And I think you highlighted it very well. It is certainly a welcome direction that Africa should take full advantage of given all its benefits and I think we stand to be a player in that also without mineral resources, etc.
But to be able to grow it, you need the enabling environment and I think these are some of the challenges that we need to work our way through. The economic barriers are clear. Again, you are highlighted them, know, the infrastructure space, etc. But when it comes to financing, there is an additional aspect of of the challenge, is also unique, which is typically most projects like this have high capital expenditure.
Also, financing, generally speaking, around the world, especially in an elevated interest rate environment, but on our continent, we also know that there is a premium and that comes as well, which leads to high cost of capital. There is a currency volatility issue in most of our markets which creates additional risk for businesses that are trying to take on finance. And then we can go on and on. So if you just even focus on the financing side of things, the challenges continue.
Now, how can we work together and potentially what are some of the changes that can lead to this? I think from a finance perspective, which is certainly the side of the business we come from, some of the changes that we need to see on the continent would start from first and foremost, diversifying the funding sources. I mean, I think even in some of the comments we’ve all made until now, it’s clear that most of the time, businesses on the continent would approach what we call traditional commercial banks for financing. That’s what is more prevalent in our countries and considered the most easily accessible. But if you look in a more developed financial system, there is more variety because financing tends to go to different times or where you are in the life cycle of the business. So when we talk diversity, what do we mean? We mean having other participants like developed finance institutions, multilaterals, but even early-stage focused financial funds, right? Venture capitalists, potentially private equity, who would have unique interests in a particular stage and also particularly getting to turning a business model around and getting it to scale, which is generally not where commercial banks excel.
NJENGA HAKEENAH: Yeah.
KWASI FRIMPONG: So I think those are…
NJENGA HAKEENAH: I want to interject here before you proceed, I want to interject and just mention because I think in your response, there are also these small businesses that Africans are building around immobility and they need loans from banks like yours. How are you going to evaluate these different sectors and lending opportunities? And do you see this sector as promising or is it too risky? Too risky and also too early to probably get in with them and start with them because immobility adoption is still very nascent?
KWASI FRIMPONG: Yes. So it is nascent in our region. So that’s why we would say a lot of the businesses that are now active there, particularly locally established businesses, would be at the early stage that makes assessing their creditworthiness more challenging. Overall, e-mobility is a promising sector and the sector in itself is not considered a high risk just by its nature.
In fact, if anything, I think because of the opportunities it presents, it has more future possibilities in giving us longevity. Because if now we are looking at companies that are focused on old traditional technology, whether it’s in mobility or other sectors, there is a concern around maybe some of that technology will be out of use in the next five to 10 years. That’s not the concern of e-mobility. The concern we have on our continent is because the enabling environment in the markets are not there, it’s difficult for our businesses to scale up. So, you you mentioned some of the examples and we know them in South Africa, in Kenya, in Northern Africa, where they’ve been around now for somewhere in the range of five to 10 years. But if you look at size and scale, how much have they been able to develop because of the financing challenges, right? Because right now, e-mobility, whether it’s the vehicles or two-wheelers, three-wheelers, are still, from a price-point perspective, not the most attractive in our markets, given obviously the price pressures that exist, the infrastructure issues in the country. So these businesses almost are hitting an economic ceiling that are not making them able to grow and make them more attractive to banks. So we assess on a usual basis and the framework is quite simple and certainly one that is used across multiple sectors. I think we just need to walk the journey and get our businesses to get to the size and performance that improves the attractiveness, especially to bank lenders.
NJENGA HAKEENAH: And something that quite connects with what you’ve just shared is that many of the people that I’m speaking with, including those who have these small businesses, as we are calling them because they’re just starting out, is that there are issues with tariffs. And these tariffs mean that whatever comes into Kenya, it has to have something on top of that price, the original price, because taxation and whatever else. And do you see governments in Africa lowering these tariffs to spur green mobility in these countries?
KWASI FRIMPONG: So, I think that’s certainly a journey that is beginning to happen. I think there’s a lot more discussion around it. We’ve been quite encouraged to see the work that’s going on with, obviously, AFCTF, CFTA, and the work the Secretariat is doing. I actually think a lot of the progress we are seeing, particularly over the last five or so years, is because of some of that. I mean, we came across a document that they put together, it’s almost like a strategy document in 2023, talking about the African automotive manufacturing sector and it being one of the key industrialization focus areas.
And since then, you will see from, let’s not talk about South Africa or Morocco, who already had a sector, the newer countries, Ghana, Kenya, some of the West African ones, Nigeria, have all now launched policies, there’s actually automotive policies now that have defined how they want these sectors to grow. And the key dynamic is two things. One is the tariff issue, but the tariff issue actually comes almost from a balanced perspective from the fact that our markets are dominated by secondhand vehicles. And that’s where the tariff comparison comes in. Because effectively the markets have been set up such that the tariffs on secondhand vehicles are more attractive or less punitive than the tariffs on newer vehicles and even higher on tariffs on e-mobility vehicles, which is now a big conversation. But there is progress. I mean, I think if you use South Africa as an example, there’s this new policy, know, the APDP, which is our automotive production agreement, the second phase that is now being talked about includes a 150 % tax rebate for manufacturing. So I think it’s starting to happen. The question is, we needed to pick up pace, right, to then be able to really allow this sector to grow at the rates that we all expect.
NJENGA HAKEENAH: And I think usually because when we are talking about manufacturing, it’s a very like financially heavy investment, such that no one will come start manufacturing vehicles in Kenya if they’re only selling two cars every year, you know? And so this makes a lot of sense that sometimes it may seem like it’s tariffs, but also there are other things that are at play. And so I think these tariffs cut across the sector because like you’re saying, secondhand cars, vehicles across the transportation modes, they’re very affordable. Yet when you look at the price differences between a new car or a new vehicle and this secondhand, they’re almost at par. But there is this thing that we have grown with that I have to get an ex-Japan, an ex-UK or something to just get moving me from point A to point B. But when we talk about tariffs and policies, what are you doing at Citi to help with policy formulation that will address these issues, especially considering the AFCFTA, the policies in the, or under SADC, S-A-D-C, and other regional bodies like the EAC and I think there is ECOWAS in West Africa.
KWASI FRIMPONG: That’s right. Look, I think our influence there continues. We are fortunate to be a well-known and thankfully well-respected participant in the financial sector and actually within industry in most of our markets. And in a lot of ways when it comes to steering discussions in these areas, it’s about making sure you’re part of the right bodies that can have a seat at the table, right, to make changes and hopefully put the right messages across. We are part of most of the key ones. So we’re part of working groups, for example, know, AFCT, CFTA, which allows you to then speak into specific sectors, especially the ones that are related to finance and facilitation of trade, and obviously what, you know, banks and financial institutions, the role we play in that.
But what you realize is because we corporate clients, we serve public sector clients, we also have opportunities, industry bodies in their respective countries, right? Whether it’s a private sector association or a manufacturing companies association, you know, chambers of commerce that allows you to, you know, see how these things impact specific groups. And through our strong relationships with these institutions and bodies, we are able to put our thoughts on the table. Thankfully, we have lots of insights from respective sides of our business. And when you cover multiple sectors, you tend to pick up, like the conversation we are having now, you pick up perspectives of how different things affect different sectors, which may not be obvious to providers that sit in one sector. And so we come to these bodies with thought leadership and we challenge the status quo and introduce these opportunities to talk. And then we just have to depend on the trust factor and walk in that journey that eventually the actual policy stakeholders who need to make that change would then understand and work with us with time for these changes to start to flow through.
NJENGA HAKEENAH: Nice. And we have discussed, you know, the challenges and the small businesses and the tariffs on all these three issues. What products does Citi offer to clients, potential and existing, to help them own electric vehicles or sell across the different sectors and tariff jurisdictions?
KWASI FRIMPONG: Look, I think some of the key products, so we focus on the corporate side. So largely, you know, whether it’s the producers or whether you are in the business of importing to supply into the market. And a key part of that is straight, because at the moment, whether it is the products coming in either in complete form, which is just pure import and sell or whether it is all these assembly productions that are now coming up in a number of our markets, know, Rwanda, Ghana, are now putting up assembly facilities. So you still need enabling environments for these things. And we offer lots of products in that spectrum, right? So typically in this area, it starts from what we call fairly medium to long-term funding because that’s what one needs to start out a big capital project. That’s an area that we are active in and we support our clients with. But they’re very unique products that support trade flows. Everything from our unique trade finance elements that we support. There are quite a few different varieties of how this can happen and a big focus we are doing now, which actually speaks to some of the challenges we were talking about, is we are playing our part in making sure that these products are available to our clients in the respective countries they are in local currency. The challenge with some of the financial partners that may play a role in these sectors is they can only come to the table with foreign currency, which is another complication for businesses in our continent.
And so we certainly as a bona fide bank and licensed institution in most of our markets, provides local currency access, which is more sustainable and obviously allows these businesses to turn around. So I’ll say a lot of it happens in trade financing, and then working capital solutioning that we work with clients and find these bespoke solutions to do that. Look, on the retail side, we are not active in that space in Africa, but we certainly know what other institutions are doing. And the key part there is ensuring that we again, we broaden the view of how we support consumers to be able to tap this market. And you now see new ideas coming out as opposed to just traditional vehicle finance, right? New ideas coming out around almost as a pay-as-you-go type concept, especially in e-mobility, right? Because you’re talking you know, like you said, all forms of mobility, the two wheelers, which is now big and spurring our e-commerce boom in our markets and sort of ride hailing and transportation. That’s something that a lot of people now don’t have to acquire outright. So coming out with these pay-as-you-go, use-as-you-go service, which makes it more a fee-based, no traditional type leasing structure, are some of the ways in which I think we’re seeing innovation in this sector.
NJENGA HAKEENAH: And probably I will bring you back to the point that you mentioned earlier about the cost that comes with conversions of currencies. And Africa now has activated PAPSS, the payment, the Pan-African payment services, Gateway, something like that. Are you in this or not?
KWASI FRIMPONG: Not today, because it is still in development. So we are not yet plugged in. But actually to the regional body conversations I mentioned, we actually are an active participant in that discussion. And certainly in due course, as these platforms take shape, and the roles in which not just banks, but all financial providers, because that’s the platform.
These days, all these platforms are being set up to make sure we call them interoperable. So every platform can connect into it seamlessly, allows payments to flow. So expect for sure that we will have a role to play in that. We just need to get to that point where all the key stakeholders, countries, financial partners sign off, which allows these platforms to work. The challenge we’ve seen being an active participant in a lot of these discussions is we tend to have these platforms that come up, they sound like a great idea, but for example, if we need 30 participants and stakeholders to make sure that this platform is viable, only five sign up and then the rest sit on the fence, which then makes adoption another challenge. And so this is all part of the journey that’s going on alongside our industry stakeholders.
NJENGA HAKEENAH: And I like that because like two weeks ago, I spoke with someone who was saying, you know, we lose value with all these conversions. And so I believe that when we have a seamless kind of way for making payments, then it would be a beautiful thing for doing business across the continent. But we shift gears now about what the capital flows tell us, including like China’s, Cherry Group’s recent announcement to enter the South African market officially, international investment in imports versus increase in local manufacturing. And what are the challenges that you face in this sector lending to African mobility companies?
KWASI FRIMPONG: I think overall, some of the challenges, some of the things we were talking about, I would say what has really made it difficult for these companies in the sector to grow in the way that we would all want to see is the disruptions in the markets. Again, the prevalence of secondhand vehicles, which doesn’t allow the new segments to grow sustainably.
I mean, I think we were looking at some data from the Automobile Association on the continent and the average age of imported vehicles across the continent is 18 years. 18 years. And it tells you,..
NJENGA HAKEENAH: Basically junk.
KWASI FRIMPONG: That’s exactly right, right? So forget the health and climate change problems that brings us, but it really dumps and blocks out the markets to your point and maybe because of just old habits, the prevalence and mindset of people going for those. So if you look at new vehicle sales on the continent, the only markets that cross 500,000 sales of new cars across all the segments is only South Africa and Morocco. And that’s largely because there is the inbuilt benefit as well because they have manufacturing as well. Most of our other markets, don’t even get close to a hundred thousand.
And that makes it difficult for the companies to look very viable. So those are some of the challenges alongside. look, I think there is, especially with the Chinese involvement, we are seeing a new wave, which we can talk about of what that is beginning to look like in markets like South Africa and beyond.
NJENGA HAKEENAH: Yeah. Nice. And because also we are not inside their way of doing business. We’ll not dwell on how they are, but we’ll just observe and see how this evolves. But for the African businesses that you work with, are they sufficiently developed to mitigate some of these major risks?
KWASI FRIMPONG: Look, at the moment, from what we are seeing, I would say not fully, because if you look at a lot of the challenges that we’ve just been discussing, a lot of them are systemic. And so they are difficult for businesses either in isolation or even in groups to be able to fully mitigate. There are things we will all continue to do, which I think is what we are doing now.
But it’s difficult for either one business or one sector to completely, almost minimize or mitigate some of the big risks that these sectors face. These are largely national conversations that need to be driven by policy and obviously, discipline implementation that creates the enabling environment to allow first, the players themselves to be able to set up and run and for consumers, because this business is a demand and supply business, for consumers to be able to access things we know they’re interested in to allow there to be a sort of fruitful growth path in this area. So it really needs to be a partnership. think businesses cannot do this on their own. We really need our countries to continue to lead this effort going forward.
NJENGA HAKEENAH: And I think from what we have discussed earlier, and this is a question I had, probably I may be wrong, but I am thinking that from your perspective, what you have seen could tell a different story, but do you think there are enough lendable projects? I said, I deduced from our conversation that probably these are not enough.
KWASI FRIMPONG: Look, I would have to agree with you there. And, you know, I think we would want it to be different. But at the moment, there are not enough lendable projects. I think part of what we are doing with the roles that we are playing in these sectors is to really find a way to support these companies through that lifecycle, so that they are getting to that point where the projects are lendable and they are, you know, it’s not one person or one institution that tends to want to take a huge, you know, not risk per se, but to take a bet on a business to say, we are looking for you to be able to succeed, but you are actually that credible and attractive that every participant is happy to support you. I think that’s where we want to get to. So I think there are, you know, small steps to take. I mean, part of what we do especially even supporting the much larger players in the sector, is helping them to have added-value products. One of them we call supply chain finance, which is using their balance sheet strength along with the bank to support companies in that value chain. So for example, if you think about us doing it with the transportation ministry in a country, which we do do as a public sector discussion, now a number of our countries are showing interest in using electric buses and others to push the transportation sector from a public-private perspective.
Well, that’s a great way to then support the providers, those that are bringing in the buses and the different vehicles for this sector. You then use the support you have together with banks like us to support what we call that supply chain. And so that’s a beautiful way to create a path to allow them to get the scale, the market access, to hopefully allowing us to create a larger pool of very attractive, lendable projects of this nature for the e-mobility sector.
NJENGA HAKEENAH: And what are the criteria you use or look for to support the kinds of business that you’re working with? And are they young African entrepreneurs who are you focusing on? Are they the ones with the main challenges accessing credit? But what are the criteria that you use?
KWASI FRIMPONG: So the criteria, and again, I come from a large, what you will call commercial banking perspective. And from that perspective, I think one of the, you know, I think it’s actually quite known publicly, you know, when you are looking at credit, we call them the five Cs of credit, you know, they use or character, capacity, capital, collateral and conditions. And we follow similar framework because all those pillars though they sound cliché-ish, all those pillars are important in the process of due diligence in a credit discussion. And I think the big thing in this sector is, to some of the points we were mentioning, is in the process of doing this, especially when you get to parts around things like conditions, is really trying to understand have the businesses crossed that level where they’ve proven sustainability of the business model.
So that is the problem we have is we have too many test projects. We have too many pilots. We have too many. We are we are trying to see whether this would really take up. The problem is at that stage, it is not something that is very easy from a risk reward perspective, which is what lending is, right? Lending is taking a credit view. yes, credit is not 100 percent always going to be paid back, but that risk needs to be calculated.
But the risk process is not a process of hope. I think the problem with, you know, early-stage companies is they are looking for hope and that’s not the business of banking. And that’s something that potentially we want to get, again, like I said, other types of funders into the picture. But from our perspective, that’s normally what that framework looks like. There are a good number of players that meet that criteria today. So we work with them.
But I think to the point we’re making, especially in the continent, we would love to see more, particularly indigenous firms that actually really grow into this particular area.
NJENGA HAKEENAH: Nice. And I think it does make sense because also I’m not going to get into a business that will not give me the returns I am looking for. So, and nobody gets into business to make losses. So it’s very, very understandable. And I think everything will be streamlined by having the governments get into this seriously and make the policies work. Because unless they implement policies that favor this sector, then It means we’ll continue complaining, talking about these issues. Yet the key to making it work is a government making the environment conducive for everyone getting into this space.
But a company in Ghana called Solar Taxi, I am assuming you are from Ghana, could be. This company by a compatriot, your compatriot is doing a fantastic job to enable Ghanaians to as many of them to own EVs and as many as possible. And they are working with different financiers to roll out products suitable for the entire EV sector from two wheelers to three wheelers, four wheelers. If there is more wheelers, that as well. Is that something you see happening at Citi and elsewhere in the financial industry? And then I come back to your point of you work with organizations that are already out there, not individuals. Do you work with the likes of Solar Taxi?
KWASI FRIMPONG: So I followed the solar taxi story quite pleasantly over the years because I’m Ghanaian and certainly because they definitely are groundbreaking. They’ve helped grow a new area in the market. So I think there’s a lot of credit that that team needs to take for the work that they’ve been doing there.
Citi specifically doesn’t work with Solar Taxi. In fact, we at the moment don’t have a full banking presence in Ghana. So it doesn’t allow us to be able tosupport companies like that actively. We do that in other markets. using the example of Solar Taxi, think if we have more of those, Solar Taxi has been in existence for what, seven, roughly seven years.
If you follow their story, you will realize in the first three to five years, they basically needed to focus on their own initial investments from the investors, right? And that equity contribution that helped them to get the business model off the ground. They started small, right? So focused on the two wheelers, the three wheelers, right? Where the price point was lower, like to your point, they did not get into business to lose money. So they were not going to take big risks on things that had not been proven. So they started at a level where it was clear there was demand in the markets because there was. And they saw an uptick that this product is priced well, it’s serving a purpose. And once they found a good customer base in that area, they started broadening the impact. Now through them, people have become aware.
In fact, a lot of the anxiety issues we have in the sort of full e-mobility sector for vehicles, right, what we call range anxiety, that consumers experience is being minimized in our countries now because people are now being exposed to electric scooters, right, two-wheelers, three-wheelers. And so that mindset is starting to change slightly because they are seeing a practice of natural fact, this is what it can do.
Yes, you need to be mindful of what the range is, but there isn’t that complete, because of not having experienced it, a fear that, you know what, I can’t take this because I’m worried about what the implications might be. And over time, they’ve managed to grow the business to full vehicles, they’ve gotten into buses, they are now assembling, importing from China and starting to put together.
That’s exactly what banks like us would look for to show a business that is walking steadily through the cycle of showing that the business model is sustainable. So examples like that thankfully exist elsewhere. I mean, again, markets like South Africa, because it’s deeper, there is more of that to go around. And players that are active both in the supply chain as well as the pure manufacturing area. And so allows us to then play an active role. are we? Yes, we just need to see more of that because to the point of what we are talking about, this is a sector that has huge potential for our continent. We need to see more players that really believe in the story and are willing to put some money behind it and build sustainable businesses.
NJENGA HAKEENAH: Yeah, definitely. you know, like South Africa is quite an outlier in the African continent or the African continent with Morocco as well, because we are seeing a lot of these investments there. And so there are people who will confuse that whatever works in South Africa will have to work in Kenya or Uganda. And then they get here and get surprised. It is a very, very different continents in terms of how business and lives are. And so I think like you’re talking about, you know, financing these organizations like Solar Taxi, where you have a presence. It should be a motivation for people and organizations to start, you know, building consistently. Because again, I think the challenge comes, we don’t make money the first two years and then we close. But if we persisted to the third, then somebody would have noticed. And so there is also the secret of consistency. I have, and we have mentioned secondhand vehicles in this conversation. And in Kenya, we don’t have to get the 18-year-olds, but the limit is eight years, probably seven. So I am getting a vehicle that is seven years old. It has like 50, 60,000 kilometers on it. And I’m buying it at the price of a new EV because that is what we have grown up on. And for financiers like yourself, do you face pressure from this sector, which is already well established and dominated by these secondhand vehicles in many, many African countries? I think it’s only South Africa and Morocco who have very few, if any, secondhand vehicles coming into these countries.
KWASI FRIMPONG: Yeah. Look, we definitely face the pressure because the challenge of this reality prevents the growth trajectory of these businesses. So it’s constant part of the discussion when we are talking about ways in which we are supporting their push for growth and the ways in which they are trying to reinvent themselves, right, to have better access in our markets.
This challenge is one of the first things that we talk about. Part of some of the things we’ve discussed and really the innovations that they are trying to bring in is an attempt to change these things. So there is obviously the policy framework, obviously changes in things like tariffs that will really affect and influence the reduction of used vehicle imports in their respective countries.
But what the auto sector, what you call traditional players are also realizing and NEV players is, well, exactly to your point. One of the first comparisons, so there is the traditional familiarity issue, which is, you know, for lack of a better word, you will call it cultural or just, you know, what we are familiar with. But there’s also the pricing dynamic. I think what you’re seeing now is more awareness being done around you know, what does a price per kilometer look like? Because I don’t think consumers have thought that way. Because like you said, you buy a used vehicle today that has a certain amount of mileage and a certain age, the price you pay, if it’s exactly the same, for example, as a new EV, for example, what is the, you know, from an investment perspective, price per kilometer you are going to get for the rest of the useful life of that device is something that obviously, analysis shows very clearly that you are not going to get that value from a used vehicle.
But we haven’t made that awareness something that is easy to access. And I think we are starting to see that more, you know, it’s almost like education campaigns and promotions in that area to really help change the behavior, which would then improve better access for these businesses.
NJENGA HAKEENAH: Yeah. Nice. And I think, like you’re saying, per kilometer, you know, we should look for that value. And also as we also, you know, like advocate for the shift, that it makes sense, economic sense for you to buy this versus that. But do you see the landscape changing with the surge of Chinese EVs in markets like South Africa?
KWASI FRIMPONG: Look, we see that. We see that. think this is a sector that is rife for change. And that change has begun. Look, South Africa is, to your point, a good example because it has the scale. And so a lot of providers try to test the market from here. And depending on the success levels, we know potentially what can be replicated elsewhere. So just to put some context to it, right?
South Africa from a new energy vehicle perspective in the past year sold roughly just over 15,000 units of new energy vehicles. And year on year over the last three years, that is double digit growth. think depending on the year, it’s something around 15%. I think in 2022, we even achieved 20% growth, but we were starting off a low base. Now, the issue is today, majority of that new energy vehicle proportion is still contributed by what we call the non-plug-in hybrid, which means it is an electric motor that charges your battery on the go through your combustion engine, as opposed to the ones that I think we know have the full green transition benefits, which is full battery powered.
But full battery-powered at the moment is less than 10 % of that proportion. So even on the Chinese players that are coming into the market, they are bringing the technology that we’ve seen, obviously the Chinese develop globally in this sector into the market. But it is early days and they also seem to be testing the market with a few different models to realize which ones are most successful. The market share gain that our Chinese players are getting in South Africa at the moment are actually not in EVs yet because the EV space is still quite new and actually the ones that started it are some of the traditional players, right? I think most of the EVs in the market are dominated by the old traditional ones. But Chinese are taking market share overall in automotive sales because they are… They certainly seem to be getting products that are priced in an attractive range and fitted from a feature perspective in a way that is attractive to the average consumer. So the consumer says, I’m getting these features that I would get in another brand, but I’m getting it for 20% or whatever less from a pricing perspective. I think as we see that same model transition into EVs, which comes into some of the tariff benefits that are being put as we see that same dynamic transition, we will see the sector grow exponentially. Right? Over the next couple of years, that’s what we all need to do to get ourselves ready for.
And you can see the traditional players are very aware that their cake is being eaten. So they also need to reinvent themselves around how they compete against this. But we as consumers and as a nation, are the beneficiaries. Competition is good, more access and more variety is a good thing and I think that’s what we are getting from the advent of the Chinese EV vehicles into the market.
NJENGA HAKEENAH: Nice. And you’ve touched on my next question, which was on traditional or legacy brands like Toyota, Mercedes, and Hyundai, which are still dominating the market, but they are losing out now to customers who are buying Chinese brands, you know, especially in South Africa. And probably what you can now deepen with what you have just mentioned earlier is for us to understand the auto market in South Africa and Africa more broadly by 2030, you have mentioned it will shift, definitely. Do you have any specifics?
KWASI FRIMPONG: Well, I think what if you see the projections that the industry is coming up with, I think they are quite ambitious, right? Projections in new energy vehicles alone. Today, I think I was giving you the numbers. I think if you look at pure EVs, I’ll take South Africa’s example, we are averaging about a thousand annually, pure. The projection in five years, so by 2030, is to multiply that sevenfold, right? To go from, you know, a one. Now, in my view, again, we know it will grow. Will it grow at that rate? I think it’s a different, it’s a discussion that I think we will all need to look at to see if that growth is going to be that significant. So I think that the exact projection from a number perspective, in my view, is less of the concern.
But this is definitely going to grow in not, you know, by 5%. You know, it won’t be inching up. It is going to be exponential growth for reasons that I think we are very well aware of. What we need to see is who are going to be the players in the sector. I think the Chinese are helping us shake the market so that there is an awareness that, look, there are new providers and there are new ways to serve the consumer.
Obviously, we all know one of the pitfalls of traditional players is when they have a model that works, there is very little incentive to change it. And so even when consumers are asking for something new, there isn’t a lot of it. I think what’s happening with more players coming in is it’s forcing change to then make sure that the consumer is the winner, right? Get them the right product, get them the right price, and that should drive growth into the future.
NJENGA HAKEENAH: Definitely. I think the Chinese are eating everyone’s cake because for some you would buy a car, whatever brand, and then you find that whatever you’re getting as a premium, the Chinese are offering it to you, you know, and they’re like, you know, just drive this this car. And so I think like you’re saying, you’re very right in that the dynamics will change. The numbers will definitely change.
And then South Africa, can keep observing because it’s a very good example of what is possible and for other countries to, you know, like shift to green mobility. And as we wind up this conversation on these four issues that we just discussed, what do you see as the most significant evolution in financing to enable companies and how will this change the EV sector?
Because when we talk about the evolution of financing, it means that companies, financiers, banks, everyone who is lending should be looking at what is expected to happen in the next five years.
KWASI FRIMPONG: No, absolutely. Look, I would say in conclusion, and if I were to pick from certainly a bank perspective, one, for example, that will make a huge difference I would say it is diversify the funding sources, getting multiple players coming into the market. Look, I can say it’s because I sit in a commercial bank and I have for, you know, effectively the last 20 years is in Africa, there is an overreliance on traditional banks to lend every cycle of our industrial growth. That is not going to get us the best outcomes overall. And so knowing that the EV sector is new, which means there will be new players, there will be the usual challenges that, you know, what we call early stage companies would face, we need to broaden the scope. Now, financial banks in the continent need to understand the fact that Africa is also growing, and so we will be new in a lot of things. And so we are also thinking, and I gave you some examples of things we are doing to impact some of these early-stage companies, whether it’s direct or indirect but we also need to continue to make sure we are creating more of that access for support, but there needs to be more financial variety on the table. Coming from different sources with different appetite levels, with different sizes around what is able to be provided to make sure that all the businesses that are looking to grow in this sector have the variety they need and not it’s like a one destination and if that destination fails then all else is lost.
NJENGA HAKEENAH: Definitely. That is the Kwesi Frimpong. He is the head of global network banking at Citi in South Africa. He’s based off Johannesburg. Kwesi, I think the insights I have gotten from this are so diverse that we would need another whole like 10, five episodes to exhaustively discuss them, you know? Bbecause everyone builds on the other, then you cannot exhaust each. And so thank you so much for those insights. And I look forward to seeing how this sector evolves when it comes to financing and also how your clients as well, the ones who are selling these vehicles to us evolve because like you’re saying, and like we have seen with Solar Taxi, you have to build a business, wait for the five Cs to happen, prove this is possible and then ask for money. So I think we have quite a journey that we have to go before we make things happen. But thank you so much, Kwesi. And I look forward to seeing you either in Nairobi or in Johannesburg when I am there.
KWASI FRIMPONG: Thank you. Absolutely. I look forward to it as well. Look, thank you so much for having me. This has been a stimulating conversation. I appreciate the thoughts as well. Look, hopefully as this sector grows, we would also become consumers because we need to help the sector to grow. So in the next few years, if we can all say we are customers that are actually using e-mobility options in our respective markets that speaks to the direction that this sector is going to take in the years to come. But thank you.
NJENGA HAKEENAH: And for you, our viewer, you know, our fan, we are grateful to have you.
And as we continue growing these conversations and as we continue having this conversation, I think even the sector itself will continue learning because as we continue conversing, then we get to understand how the sector is evolving and we move.
So for anyone who is interested in doing business in this space, it is your time to tap into the possible and available opportunities. And also the gaps that are there mean there are opportunities that are yet to be tapped. And remember that the African EV shift is not waiting for government policy to happen. It is evolving.
And then government policy is catching up. So don’t wait for when everything is working to say, this is the time for me to start this business. Time for you is now, because the gaps you see, those are business opportunities. My name is Njenga Hakeenah and I have totally enjoyed this episode and I hope you do. And so what you do with what you enjoy is that you share, you like, you subscribe and continue referring us to people because unless we have these conversations, how then do we grow? Do have a wonderful one.
