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E-mobility is ‘existential threat’ to SA’s vehicle production

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 01 Nov 2023
Finance minister Enoch Godongwana.
Finance minister Enoch Godongwana.

MTBPS 2023: South Africa’s Department of Trade, Industry and Competition will reprioritise funds to support the implementation of the electric vehicle roadmap.

So says National Treasury’s 2023 Medium-Term Budget Policy Statement (MTBPS) Expenditure Priorities document.

This comes as automotive manufacturers accelerate the push towards electric vehicles, in a move away from combustion-based ones.

Expanding on SA’s shift to new energy vehicles (NEVs), finance minister Enoch Godongwana says the transition to a low-carbon economy should be integrated into a comprehensive green growth strategy and industrialisation plans.

Godongwana presented the MTBPS before the National Assembly at Cape Town’s City Hall this afternoon.

According to the minister, the transition to a low-carbon economy involves assessing policy conditions, challenges and opportunities for diversification and investing in new industries.

“South Africa's traditional trading partners are intensifying their decarbonisation plans. Many countries introduce carbon pricing mechanisms to make emissions more expensive and incentivise emissions reductions.

“In automotives, a major export and source of employment, the transition to NEVs poses an existential threat to South African vehicle production.

“This transition will require balancing domestic market demand, establishing renewable energy-based charging infrastructure and supporting production. The goal is to make sure the sector remains a major contributor to the industrial development of the domestic economy.

“As such, government plans to implement tax and expenditure measures to support the automotive sector during this transition,” he said, adding that further details will be provided in the 2024 budget review.

“Part of the broader strategy includes collaborating with other African countries to develop battery production capacity on the continent, by pooling the critical-mineral resource base that Africa is endowed with.”

A NEV is a type of vehicle that utilises alternative energy sources instead of relying solely on traditional fossil fuels.

They are designed to be more environmentally-friendly and energy-efficient, aiming to reduce greenhouse gas emissions and dependence on non-renewable resources. It usually incorporates an electric powertrain, which consists of an electric motor, battery pack and associated control systems.

South Africa had 4 764 NEVs on local roads by the end of 2022, according to the National Association of Automobile Manufacturers of SA.

Energy transition

Meanwhile, the 2023 MTBPS Economic Outlook, which coincides with Godongwana’s address, indicates government is “committed” to a just transition to clean energy.

SA’s just transition initiatives will be supported by financing from international sources, it states. “Over the next five years, this funding will be used to improve electricity infrastructure, transition retiring coal plants, address regional energy transitions, promote new energy vehicles, support green hydrogen, develop skills and empower municipalities.

“These goals are supported by policies such as the Green Hydrogen Commercialisation Strategy, approved by Cabinet in October 2023.

“In addition to decarbonising the electricity system, government will propose measures to help the automotive industry transition to new energy vehicle production, with details to be announced in the 2024 Budget.”

The MTBPS document further states the private sector plays a major role in supporting SA’s clean‐energy transition.

According to Eskom data published in July, households and businesses have installed 4 412MW of rooftop solar capacity – twice the capacity installed to date under the Renewable Energy Independent Power Producer Procurement Programme.

“Economic activity remains severely limited by continued shortages of electricity, deteriorating freight rail performance and slow port operations. Energy reforms have mainly focused on making it easier for private companies and households to generate their own electricity through renewable technologies, such as the purchase of solar panels.

“Power plants previously affected by unplanned maintenance or breakdowns are starting to return to operation. Equally important is the continuing unbundling of Eskom and revised regulations that will de-monopolise the power grid,” notes the statement.