SA must step up production of EVs for export or be left behind, says Patel

Minister of Trade and Industry, Ebrahim Patel.
Minister of Trade and Industry, Ebrahim Patel.
  • Climate change presents a threat to economic prospects, and South Africa must make sure not to get left behind, says Trade, Industry and Competition Minister Ebrahim Patel.
  • Patel says the country needs to step up production of electric vehicles to key export markets, the UK and EU, as these trade partners have set targets to reduce fossil fuel relying vehicles.
  • Patel tabled his department's budget vote virtually, to Parliament on Tuesday.

Climate change presents a threat to economic prospects and South Africa must make sure not to get left behind with "stranded assets and a carbon-dependent economic model", Trade, Industry and Competition Minister Ebrahim Patel has said.

The minister on Tuesday virtually tabled the department's budget to Parliament.

One of the department's objectives this year is to expand efforts for green industrialisation and to support a just transition, Patel explained.

"Climate change represents a real and grave threat to our future economic prospects … We must recognise the urgency of the situation and take action accordingly," said Patel.

South Africa has made progress in some areas - such as the increase of renewable energy generation to the national grid, the assembly of hybrid vehicles, which use a combination of internal combustion engines and electric motors, and work on battery-storage technology.

Patel added that efforts must be made to build full electric vehicles to export to key markets, the EU and the UK, as they have set targets to reduce the number of fossil-fuel-relying vehicles. Patel noted that there also needs to be more charging infrastructure domestically. The existing 200 charging points must be expanded, he said.

Patel said that on Tuesday he issued a draft sector green paper on the road to electric vehicles. The public can comment on the document for the next three weeks. The strategy is to be finalised within 90 days.

The green paper was a result of inputs from regional equipment manufacturers and the component manufacturers as well as the concerns raised by the National Union of Metalworkers of South Africa (Numsa) and issues government saw as important policy priorities, Patel said in a separate briefing to media.

In August 2019, Patel said he met with car manufacturers and challenged them to make the continent's largest car manufacturer one that produces electric vehicles and autonomous vehicles. "We have got to keep up with technological developments. It's taken a while where we have got to a point where parties have put proposals on the table."

Stranded assets

Patel said it is imperative to develop electric vehicle production capabilities domestically. This is so that South Africa will not simply be a market for electric vehicles produced elsewhere, and also so that the country does not get left behind with assembly plants that are not adjusted for electric vehicles as the rest of the world moves away from internal combustion engines. "It is important for us to get the production side ready," he said. 

Patel noted the "significant premium" consumers have to pay when buying electric vehicles, but the premium may reduce with further improvements to battery technology. 

Some other measures to stimulate consumer demand for electric vehicles domestically requires further discussion - one option is to reduce the ad valorem tax on vehicles. "A reduction on ad valorem tax on electric vehicles can even out the selling price of these two technologies - internal combustion and electric vehicles."

As for hybrid vehicles, Patel said Toyota SA plans its first production run this year - with the new hybrid corolla model to roll off the production line in November.

"The big opportunity will be in advancing technology based on green hydrogen energy, with time, it is projected to be the best solution for South Africa's needs," said Patel. South Africa's platinum group metal reserves can be used for the production of green hydrogen fuel cells and vanadium can be used for battery storage technology, he highlighted in his address to Parliament. 

Patel also noted the recent announcement of the partnership between Sasol and Toyota in exploring the use of fuel cell technology. The companies have partnered to develop a hydrogen mobility corridor along the N3 (from Johannesburg to Durban), Fin24 previously reported.

In his address, Patel emphasised that energy production must be climate-friendly. If the 20th century was such that it was characterised by crude oil and nuclear energy, the 21st century will be the century of renewable energy and green hydrogen, he said.

Inclusive growth

Other key objectives of the department this year include creating greater worker ownership in the economy. Patel said that policies are needed to promote worker ownership in firms and their representation on boards. "Worker ownership arrangements should not be in the form of passive dividend flow arrangements. But we need mechanisms for the voice of labour to be heard in top decision-making structures in corporates," he added.

The department will prepare the Companies Amendment Bill within the next three months, which sets out modalities to improve the representation of worker interest in company decision making and on company boards. A separate bill will be prepared to include measures to address the disclosure of wage differentials in companies, stronger governance on excessive director pay and enhance transparency on ownership and financial records.

A practice note has been published under the Broad-based Black Economic Empowerment Act to provide clarity in the market and guidance to regulators so that investment vehicles such as worker ownership schemes, community trusts and worker investment vehicles are properly recognised for BEE ownership purposes, he said.

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