South Africa’s shift towards helping manufacturers participate in the global move to electric vehicles (EVs) is a double-edged sword, threatening over 100,000 jobs in the country if policymakers don’t tread lightly.
The automotive industry has lamented South Africa’s sluggishness in introducing legislation to help manufacturers participate in the global shift to EVs, the most recent being Volkswagen (VW).
In a widely covered interview with Reuters, CEO of VW Passenger Cars, Thomas Schaefer, stated that South Africa is fast becoming an undesirable location for manufacturing cars amid the shift toward EVs due to issues such as load-shedding, rising labour costs, and problems with Transnet.
EVs and their components imported from Europe are subject to a 7% higher tax than petrol- and diesel-powered vehicles and their parts.
This leads to increased production costs and higher prices for EVs, which, in turn, affects their sales and hampers investment potential.
With the European Union and United Kingdom planning to ban the sale of new internal combustion vehicles from around 2035, VW South Africa risks losing the bulk of its export markets over the next decade if it doesn’t pivot to EV production sooner rather than later – and VW is one of many automakers that face this risk.
The automotive industry accounted for 4.9% of South Africa’s gross domestic product and 12.4% of exports last year, with manufacturers directly employing about 110,000 people – which are at risk if South Africa falls behind the industry’s evolution to EVs.
By the same token
On Monday (4 December), Trade, Industry and Competition Minister Ebrahim Patel published a White Paper that outlines a comprehensive electric vehicle (EV) roadmap for South Africa and the structure of a suite of policy interventions tailored to the automotive industry.
At a media briefing in Pretoria, Patel said the primary goal of the White Paper is to set a course to transition the auto industry from primarily producing Internal Combustion Engine (ICE) vehicles to a dual platform that includes EVs in the production and consumption mix, alongside ICE vehicles in South Africa by 2035.
“The compelling reasons behind this transition are numerous. Foremost is the urgent need to reduce greenhouse gas emissions and combat climate change. Additionally, we recognise the pivotal role the automotive industry plays in South Africa’s economy as a major employer and a driver of economic growth,” he added.
However, Patel noted with caution the impact this transition will have on other sectors if the process is not thoroughly thought through.
For example, he highlighted that the transition could lead to a significant reduction in petrol station jobs, putting as many as 140,000 people’s livelihoods at risk.
However, Patel said the purpose of the White Paper is to present a comprehensive, coordinated approach to the transition to minimise the perils of an uncoordinated transition.
“It is grounded in the principle that decarbonisation should not lead to de-industrialisation but rather be leveraged for growth, deepening the automotive value chain, fostering the growth of the local industry, and ensuring the transition aligns with economic priorities,” Patel said.
“The success of the transition requires all stakeholders to continue to work collaboratively to navigate this challenging transition and transform it into an opportunity for growth, sustainability, and economic vitality,” the Minister added.