Buses, matatus, mototaxis: there is a growing need for mobility in the Rwandan capital of Kigali. Volkswagen is looking to launch a ride-hailing system there to relieve pressure on local public transport – another piece in the mosaic of the Group’s Africa strategy.
Impatient, Robert Kazahura shuffles around in his seat. He passes the chip card that he has just used to purchase his ticket back and forth between his hands. He has been waiting for a solid half hour for the bus to finally leave from the bus station in Kimironko, in the center of Kigali. The driver, Jean Karambizi, sits behind the steering wheel and shrugs his shoulders. “You know the rules, my friend,” he barks over his right shoulder at his only passenger. What he means: he’s not going anywhere until the bus is full. Then he taps calmly away on his cell phone.
Kazahura frowns and looks out of the window.
Long lines have formed at the other city buses this morning – just not his. “I guess there’ll be a few people late to work again,” he growls through his teeth. Having worked as a cook in an international hotel for several years, Kazahura is now looking for a new job and is on his way to an interview in Kinyinya, in the north of the city. He needs the job because he has to provide for his two children and his wife. He can’t afford to be late, he says.
Public transport in Rwanda’s capital city is actually considered one of the most modern throughout sub-Saharan Africa: 560 buses wind their way along roughly 200 km of paved road. Many offer free Wi-Fi, and thanks to chip card readers, people can even make cashless payments.
Unlike the cities of neighboring countries, Kigali is also surprisingly clean, the streets are wide and free of potholes. Traffic cops stand on duty at each intersection, the digital traffic light systems flashing over their heads.
But with around 380,000 passengers daily who, like Robert Kazahura, need to get to appointments or to work on time, the public transport system is hopelessly overloaded – especially at peak times. Every morning and evening, long lines form at bus stops, and the buses have no fixed timetable.
Mobility partners who can help solve these traffic problems are therefore in demand in Rwanda. Volkswagen wants to be one of those partners. The Group is currently realigning its sub-Saharan strategy and has identified four countries that play a key role: one of these is Rwanda. Up till now, activities – especially of the Volkswagen Passenger Cars brand – have concentrated mainly on South Africa.
“Rwanda is the most progressive country in Africa,” says Thomas Schäfer, CEO of Volkswagen South Africa, who coordinates the Group’s activities on the continent. “There is almost no corruption, and the population is very young, eager to be educated, and Internet-savvy.”
Great leaps forward
With a tight program of reforms the government of President Paul Kagame plans to transform the rather rural state into a “modern middle-class society” by 2050. Rwanda is still one of the poorest countries in the world and ranked 159th of 188 countries in the UN’s Human Development Index in 2015. But since the 1994 genocide, the country has made great leaps forward and is now regarded as a model for the entire continent.
In 2005, 57 percent of the population was considered poor; by 2014 this number had dropped by one-third. The economy has been growing by about 7 percent a year for the last two decades. Kigali now offers good starting conditions for young IT companies: the city has 4G mobile coverage almost everywhere, and thousands of kilometers of fiber-optic cable have been laid across the country. To investors, Rwanda is positioning itself as a future financial center of Eastern Africa and pushing digital technology. Along with the economy, the middle class is also growing – and thus also the demand for reliable mobility.
A mobility bundle
Last year, in 2016, Volkswagen representatives spoke for the first time with the Rwanda Development Board, a kind of state-run development authority – and by December, both sides already signed an agreement. It concerns “a complete mobility bundle,” says Schäfer, rather than just selling cars to private individuals. Because, despite the modern roads, cars are still a luxury in Rwanda. Although the population stands at around twelve million people, there are just 200,000 vehicles on the roads, including buses and motorcycle taxis.
“There are just 200,000 vehicles for twelve million people.”
The core of the agreement therefore focuses on shuttle solutions for Kigali: car sharing and ride-hailing that can be ordered and paid for using an app on fixed or individual routes, with a price somewhere between that of buses and taxis.
An offering like that could be a boon to the business of Sadiki Businge. The 30-year-old – athletically built, carefully trimmed mustache, always with a smile on his face – quit his job as a cell phone salesman three years ago, bought a used car from his savings and set himself up as a self-employed taxi driver. Nowadays, he finds most of his clientele when they hail him from the roadside. “These are middle-class people who do not want to wait a long time and are willing to pay higher fares for greater flexibility and timeliness,” explains Businge. Now he’s considering the idea of joining an app-based transport service like “250 Taxi.” Connection to an app could provide him wealthy customers, he hopes. But still, the majority of Rwandans can only afford public means of transport.
Even if the buses get him to his interview late, the cook depends on them in his search for a new job.
The 30-year-old picks up customers when hailed. He is considering joining an app-based service.
The head of the Rwanda Development Board is familiar with the capital’s transport needs – and sees potential for investors.
“Private transport services, similar to those seen in European or American cities, could be a useful addition to Kigali,” says Clare Akamanzi, the head of the Rwanda Development Board. Seeing as the infrastructure is already available, but only the cars are missing, she views this as a big opportunity. It creates “potential for investors,” explains the politician sitting at the mahogany conference table on the top floor of a new, mirror-glass office building in the capital’s business district. The public transport network needs to be expanded, local transport requires significantly more vehicles – and, in the private sector in particular, Akamanzi recognizes the need for sustainable transport concepts such as shuttle services.
In a first step, Thomas Schäfer’s team plans to deploy 400 to 600 vehicles in a so-called community car-sharing scheme. They would be reserved at first for selected user groups – the employees of public authorities, fleet customers, perhaps even tourists.
A special kind of development aid
Semi knocked down (SKD)
Because there is no car industry in Rwanda but the vehicles are supposed to roll off the production line here, Volkswagen is providing a special kind of development aid. The principle is called “semi knocked down” (SKD). This means that the cars will initially be fully assembled and then partially dismantled by the 4,000 employees at the South African Volkswagen plant in Uitenhage. “We’re taking out all the ‘underwear’: engine, axles, brake lines, seats,” explains Schäfer. Volkswagen then wants to transport the partially assembled components to Rwanda where they will be reassembled by employees of the local importer.
A pragmatic background
It sounds absurd, but has a pragmatic background: many African countries levy high tariffs on finished vehicles. However, if you import components and have them locally assembled, customs duties often fall to zero – and people in the country have a chance to qualify as vehicle mechanics. “This is, of course, only an intermediate stage,” explains Thomas Schäfer. Over the next two to three years, the vehicles being sent to Rwanda will gradually be dismantled more and more, so that the technicians can continue to develop their skills.
In the long term, the concept should lay the groundwork for a dedicated Rwandan automotive industry, with full-scale production, a network of suppliers, dealers and workshops, and – last but not least – a training system and a stable labor market. The principle has proven itself in places like China and South Africa – and is being introduced by Volkswagen in Kenya, which is also one the initial four countries of the new sub-Saharan strategy.
Rebuilding the industry
In Thika, near the capital Nairobi, locals have been assembling the subcompact Polo Vivo according to the SKD principle since December 2016. “Other models, like the Tiguan, will follow soon,” explains importer Zarak Khan. The 58-year-old is the CEO of the former family business DT Dobie Kenya, which belongs to the multinational CFAO Group. The numbers are still quite manageable, for now – but that is not the main factor. Khan is looking to build on years of the 1970s, back when vehicles were last assembled completely in Kenya. But production became ever more demanding, and at the same time used cars from Japan flooded the continent. And that was the end of the Kenyan car industry (and several others). Die Stückzahlen sind fürs erste noch sehr überschaubar – aber darum gehe es jetzt auch noch gar nicht. Khan will an die1970er Jahre anknüpfen, als in Kenia zuletzt Fahrzeuge komplett montiert wurden. Doch die Fertigung wurde immer anspruchsvoller, gleichzeitig fluteten Gebrauchtwagen aus Japan den Kontinent. Das war das Ende (nicht nur) der kenianischen Autoindustrie.
Ideal framework conditions
Khan wants to rebuild the industry over the next few years – “langsam, aber sicher” (slowly but surely), he says in German. As a young man, he trained at Daimler in Stuttgart after studying automotive engineering in the UK. Khan believes that the fact that Volkswagen now “wants to revive a nearly deadened industry” is an “innovative move.” The framework conditions for such an economic commitment are also ideal, he says: stable economic growth, a growing middle class, a vibrant capital city, and a young population pushing for work on the labor market. Very much like in Rwanda.
If you import components and have them locally assembled, customs duties often fall to zero.
In Kigali, Robert Kazahura’s bus finally trundles out of the dusty bus station – after 40 minutes of waiting. It is now full up to the last seat. Driver Karambizi puts on the radio, pop music blares out of the speakers. Then he steers the vehicle out onto the main road, past countless fruit stands, garages and carpenters. Kazahura points out of the window at the motorcycle taxi drivers waiting on the street corners for customers and laughs. “Do you seriously believe that they’ll find all their customers on smartphones?” he asks.
Almost everyone in Africa has a mobile phone, but smartphones are expensive – and therefore an exception that only the small middle class has been able to afford up to now. However, Thomas Schäfer expects the number of smartphone users – especially in Kigali – to increase significantly, partly because the government has scrapped the tax on smartphone sales.
Sometimes, progress happens faster than expected. Up until three years ago, matatus still dominated the streetscape. In the meantime, the government has banished the rusty minibuses to the very edge of town. From the central bus station, Nyabugogo, they are only allowed to run out to rural regions. Nyabugogo is also regarded as Kigali’s gate to the “land of a thousand hills.” Shared taxis and buses run from here in all directions; huge long-distance buses set out for the main cities of the region, like Nairobi or Kampala. The countless bike taxis that carry their customers on padded luggage racks, especially in the poorer quarters of Kigali, are expected to face the same fate as the matatus. But due to a lack of any affordable alternatives, it has not yet been possible to implement the decision.
Like Robert Kazahura, the average capital city resident relies on the city buses. Finally, the bus turns into the fenced-in Kinyinya bus station. People are already waiting there in long lines to get to the center. For his late arrival at the job interview, he’ll make the usual excuse, says Kazahura: that his bus was late, unfortunately. His dream? “Having my own car. Sometime, maybe.” And he could even imagine sharing it – with relatives or even the neighbors. But before that happens, he’ll have to find another job.
Different countries, different brands
Other Volkswagen Group brands also have production facilities in Africa and are involved in funding education and healthcare.
- Olifantsfontein (South Africa)
- MAN Bus & Coach (Pty) Ltd. production site, 160 employees
- Pinetown (South Africa)
- Solar-powered assembly plant, 125 employees
- Centurion (South Africa)
- Commercial vehicle dealership
- Partnership with independent importers who employ more than 1,000 people in total, some with CKD production, in Algeria, Egypt, Ethiopia, Morocco, Nigeria, Sudan and Tunisia. MAN Diesel & Turbo acquired a service provider for turbo engines in South Africa in 2014.
Corporate social responsibility
MAN helped finance a vocational training center in Kaliti (Ethiopia) and also provides tools and expertise. The center teaches young people how to repair and service commercial vehicles, which gives them the opportunity to kick-start their careers. MAN is also a long-standing partner of SOS Children’s Villages and as such supports the initiative “Bildung für eine bessere Bildung in Afrika” (Promoting Better Education in Africa).
- Johannesburg (South Africa)
- Assembly plant with xKD production and pre-delivery inspection, 69 employees
- There are additional South African plants in Durban and Cape Town.
Corporate social responsibility
SCANIA is involved in preventing HIV in South Africa.
- Relizane (Algeria)
- Multi-brand factory with four assembly lines (VW Caddy, VW Golf, Seat Ibiza, Škoda Octavia), 550 employees
- A project for SKD production in Nigeria is currently on hold. Other projects are currently being assessed on the basis of the Volkswagen Group’s sub-Saharan strategy.
Corporate social responsibility
In 2014, VWCV auctioned twelve used, reconditioned VW Amaroks in Ghana to support the education initiative “go4school” and raise money to build schools.