South Africa is transitioning from a load-shedding crisis to becoming a leader in electric vehicle (EV) manufacturing, driven by government initiatives and a strengthened automotive sector. With established OEM presence and advantageous trade agreements, the country is positioned to tap into a major industrial opportunity, enhancing exports and driving economic growth. Upcoming incentives and strategic policies support this ambitious shift towards sustainable automotive production.
A year ago, South Africa faced severe loadshedding, making electric vehicles (EVs) seem like an unattainable ambition amid ongoing power struggles. Presently, the situation has drastically improved, facilitating ambitious government initiatives that encourage the country to become a key player in EV manufacturing. This shift signifies not only the production of cars but also a transformative opportunity for industrialization, export enhancement, and economic growth.
The automotive sector, a vital component of South Africa’s industrial framework, is well-developed, especially relative to its continental peers. Global Original Equipment Manufacturers (OEMs) such as BMW, Toyota, and Nissan have a significant presence in this market. Programs like the Automotive Production Development Programme (APDP) have been integral in bolstering production and spurring job creation, fostering a dynamic automotive ecosystem that is attractive to Chinese manufacturers looking to expand in Africa.
The November 2023 Electric Vehicles White Paper from the Department of Trade, Industry, and Competition (DTIC) acknowledges that the automotive industry is experiencing unprecedented changes. This document highlights a major opportunity for industrial growth in South Africa, aiming to leverage existing manufacturing capabilities, infrastructure, and strategic trade partnerships. South Africa’s advantageous trade agreements include partnerships under the Southern African Development Community (SADC), SADC-EU Economic Partnership Agreement, and African Growth and Opportunity Act (AGOA).
To accelerate the EV transition, the White Paper outlines ten essential strategies, including enhanced investment incentives and the establishment of a regional battery supply chain. Specific measures include lowering import duties for electric vehicle batteries, securing duty-free access for South African-produced vehicles in export markets, and introducing significant tax deductions aimed at fostering investment in EV production.
The Taxation Laws Amendment Bill, enacted in December 2024, introduces Section 12V, providing a 150% tax deduction for assets related to EV production. This initiative, effective from March 2026 to March 2036, is poised to attract substantial investment. Proposed amendments to APDP regulations support the shift from traditional internal combustion engines to EV production, further facilitating local manufacturing through the Production Rebate Certificate that incentivizes local value addition.
The “rules of origin” concept is vital within frameworks like AfCFTA, determining products’ eligibility for duty-free trade based on manufacturing locales. Whilst AfCFTA’s automotive rules are being finalized, existing Special Economic Zones (SEZs) in South Africa are primed to draw investments. Nevertheless, competition is intensifying as various African nations develop their automotive capabilities, with initiatives in countries such as Kenya, Ghana, Nigeria, Togo, and Ivory Coast focusing on EV development, particularly in public transport.
In conclusion, South Africa’s transition from loadshedding to a burgeoning electric vehicle industry illustrates its resilient spirit and strategic foresight. With a robust automotive sector, supportive government policies, and regional collaboration, the country stands poised to leverage its manufacturing strengths and export potential. Effectively addressing infrastructure and logistical challenges could enhance South Africa’s role in the African EV value chain, fostering economic growth across the continent.
Original Source: www.zawya.com
