South Africa is positioning itself to transition to EVs as part of decarbonisation in line with the country’s nationally determined contributions towards net zero and for economic purposes
Government is proposing a complete overhaul of the vehicle industry that will have consequences for jobs, skills development and transportation in South Africa.
Trade, Industry and Competition (DTIC) Minister Ibrahim Patel on Monday released a white paper on electric vehicles (EVs) and the green hydrogen strategy document that are a framework towards eradicating internal combustion engine vehicles in favour of EVs.
South Africa is positioning itself to transition to EVs as part of decarbonisation in line with the country’s nationally determined contributions towards net zero and for economic purposes.
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Two of South Africa’s biggest car export markets, the United Kingdom (UK) and the European Union (EU), have imposed a 12-year hard deadline to ban the sale of new internal combustion engine motor vehicles as part of achieving net-zero emissions by 2050. About half of South Africa’s vehicle production goes to these two markets.
Briefing the media in Pretoria on Monday, Patel said the first EVs were forecast to be produced in South Africa in two years for the export market. However, all of this hinges on the country being able to stabilise the grid, drastically reduce load shedding and resolve its logistical challenges.
Infrastructural challenges
Even during the summer months, load shedding has remained between stages four and six, while bottlenecks continue at the country’s non-functional ports, giving doubt to whether these ambitions will be realised.
Eskom continues to battle the aftermath of state capture while Transnet has not been spared.
Last week, the rail and port operator was granted a R47 billion bailout by National Treasury to deal with its debt and operational challenges. Eskom has been allocated R254 billion in stages to address its problems, despite load shedding continuing unabated.
Patel said concerns raised by CEOs of vehicle producers VWSA and Ford South Africa about the country becoming a less desirable car manufacturing location because of load shedding and logistical problems among others were valid.
“Every OEM does need a functioning ecosystem, so, we do need to solve the energy and partner sprint logistics issues absolutely, urgently.
We’re capable of producing vehicles and moving them to market, and the producing side requires energy and transport logistics. There are thousands of components that make up a vehicle, and when components are stuck at the port, they undermine the ability to cost-effectively produce vehicles.
He added that the government was looking to de-risk the Durban port and add a second rail line to operate between the port of Ngqura in the Eastern Cape and Gauteng to get goods to the biggest consumer market in the country efficiently.
High cost of EVs
The high cost of EVs means the domestic market will not be ready to buy these vehicles en-masse for years to come. On average the cost of a small electric vehicle in South Africa currently sells for around R500 000. Over time, as mass production takes place and production costs drop, more consumers may be able to buy these vehicles.
Patel said it would take between seven and eight years for EVs to be widely available for consumption domestically, while the focus between now and then would be to build public charging infrastructure.
How this will work, what will become of current petrol stations and the job security of the people employed in this sector and the skills required to transition are still very much in the air.
The jury’s out on these things; we don’t yet have enough experience. In some of the economies that have been early adopters, like China, Germany, United States, there are some interesting lessons, but the density of adoption of electric vehicles, has not yet reached a stage where we can have some confidence about what is going to be required. This transition has very, very profound consequences for the entire ecosystem that relies on programmed technologies.
Job losses
Taxpayers can expect to hear initial details of how these reforms will be funded in the budget in February.
Government has not been able to raise sufficient revenue for its expenditure program thus a wider budget deficit is expected while public debt is expected to rise to around R6 trillion in the medium term.
It’s anticipated that the taxation system will have to adjust to a declining fuel levy over a number of years until the country fully adapts to EVs.
Patel said:
If there’s not been new technological development in the synthetic fuels or smart fuel areas, then different tax bases would have to be considered
Green hydrogen
This transition means some jobs will become redundant and new skills which are currently insufficient will be required. The government has maintained it wants the transition to cleaner energy to be just as many jobs are on the line.
Implementing the Green Hydrogen Commercialisation Strategy released today will see more privatisation of the energy sector, as the country saw with private sector participation in renewable energy. Most of the projects will be private sector driven with the exception of the port development and infrastructure which will be public sector driven and part of the around R319 billion required to fund this 2023 and 2027 will come concessional loans and grants, the document read.
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The transition will include pivoting workers away from current-fossil intensive production towards the green hydrogen value chain.
“A well planned around out can enable desalination facilities that provide water to communities with minimal impact on green nitrogen pricing. It can supply excess energy to the grid and support transmission infrastructure investment to enable other renewable energy projects to feed into the grid.
“It can connect the green hydrogen roadmap to industrialisation and local manufacturing opportunities economies of scale and provides the business case for local manufacturers of renewable energy components, fuel cells, electrolytes and balance of plant components,” Patel said.
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