R964m to rev up SA’s e-vehicle roadmap

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 21 Feb 2024
Finance minister Enoch Godongwana.
Finance minister Enoch Godongwana.

Budget 2024: The Department of Trade, Industry and Competition (DTIC) has reprioritised R964 million for the transition to electric vehicles, in line with the New Energy Vehicles White Paper, approved by Cabinet in 2023.

This is according to the 2024 Budget Review: Consolidated Spending Plans document, which coincides with finance minister Enoch Godongwana’s National Budget Speech.

Today, the finance minister detailed South Africa’s financial standing when he delivered the budget speech at the Cape Town City Hall.

“These measures complement funding that is being secured for the Just Energy Transition Investment Plan and the implementation plan for electric vehicles,” reads the annexure document in the 2024 Budget Review.

The reprioritised figure follows last year’s pronouncements that the department planned toreprioritise funds to support the implementation of the electric vehicle roadmap.

Mampho Modise, deputy-director general: public finance at National Treasury, explains: “The incentive programmes for the DTIC don’t get impacted by this reprioritisation. This is mainly because the department is always working to efficiently improve the changes – most of the reprioritisation will come from a SEZ [Special Economic Zone] fund.

“A decision was taken a while ago that we’re not going to continue establishing new SEZs, we’ll just try to make the existing ones more efficient. The reprioritisation is not fully from the incentives of other programmes that exist with the DTIC.”

National Treasury’s Christopher Axelson; deputy-director general for tax and financial sector policy, further elaborates: “We do think there will be large investments [as a result of the incentive], we’ve pencilled-in that it will lead to revenue forgone of R500 million in 2026/27, which is a few years from now as those investments start to take place. That revenue forgone will kick up and increase in the outer years.

“We think this will be one of the factors that will sway the decision-makers of the OEMs to investment more for EVs [electric vehicles] in South Africa.”

South Africa’s focus on new energy vehicles (NEVs) comes as automotive manufacturers accelerate the push towards electric vehicles, in a move away from combustion-based ones.

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.

At last year’s medium-term budget, Godongwana said the country’s transition to a low-carbon economy should be integrated into a comprehensive green growth strategy and industrialisation plans.

He noted that government plans to implement tax and expenditure measures to support the automotive sector during this transition.

In his budget speech this afternoon, the finance minister said: “The Electric Vehicles White Paper outlines our strategy to transition towards a broader new energy vehicle production and consumption in South Africa, starting with electric vehicles.

“It aims to transition the automotive industry from primarily producing internal combustion engine vehicles to a dual platform that includes electric vehicles, by 2035.

“To encourage the production of EVs in South Africa, government will introduce an investment allowance for new investments, beginning 1 March 2026.

“This will allow producers to claim 150% of qualifying investment spending on electric and hydrogen-powered vehicles in the first year.

“The incentive will be implemented in addition to the existing support under the Automotive Production Development Programme.”

In the same National Treasury document, it’s revealed the DTIC has reprioritised R600 million for the global business services (GBS) incentive for offshore business processing.

GBS, commonly referred to as the business process outsourcing (BPO) sector, is regarded as a pivotal player in job creation and economic expansion in South Africa.

DTIC minister Ebrahim Patel previously said that government has invested more than R3 billion in the sector since 2016.

South Africa’s joblessness has escalated at alarming rates in recent years, and the youth remain vulnerable in the labour market, with an unemployment rate higher than the national average.

The official unemployment rate was 32.9%, as at the first quarter of 2023, according to Statistics South Africa, with unemployed youth (15-34 years) at 46.5%.

The GBS/BPO industry, which is targeting 500 000 new jobs by 2030, has been pinned as the green shoot that can arrest the country’s unemployment challenge.