BUSINESS REFLECTION
After the Bell: When will SA get electric cars? Not soon, if government has any say
You get the impression the government is embarking on this whole process with the enthusiasm of a soccer supporter at a rugby game. And consequently, the whole thing is happening at the speed of a golf cart.
Reading the Department of Trade and Industry’s Electric Vehicles White Paper, you get a good sense of why SA’s electric vehicle policy is completely flaccid and also why SA’s manufacturing sector as a whole is in decline.
The white paper itself is by no means objectionable; in comparison with some government-sponsored analyses I’ve seen, it’s pretty good. It correctly outlines the issues, it is detailed in its analysis, and it sets ambitious timelines for the way forward.
It makes two important concessions: it opens the door to the government assisting local producers in financing new plants to build electric vehicles (EVs), and it considers the possibility that the government will reduce import tariffs on EVs, which are currently higher, if you can believe it, than those for internal combustion engine (ICE) cars. Pretty obvious, but there are many other obvious things the government does not recognise.
The problem is that when you read it, you get the impression the government is embarking on this whole process with the enthusiasm of a soccer supporter at a rugby game. And consequently, the whole thing is happening at the speed of a golf cart.
For a start, this white paper has taken 2½ years to produce, following the release of the green paper in May 2021, the Auto Green Paper on the Advancement of New Energy Vehicles. Two-and-a-half years to write 56 pages! That’s about 15 words per working day. I am not making this up.
The government has been dragging its feet so obviously that the car manufacturers under the Naamsa banner in October released their own industry EV roadmap to integrate South Africa into the global EV value chain. This essentially drove home the most salient and obvious point: the rug is about to be pulled out from under South African car manufacturers and we’d all better catch a wake-up.
Does the white paper constitute that wake-up? In some ways, yes.
You can see the vice closing on the SA industry: about 65% of SA’s car exports go to the European Union, and they are worth about R130-billion. But some EU countries have already set target dates by which no more ICE cars will be sold. Even without the target, most countries do not expect EVs to constitute the majority of sales within a decade.
So the clock is ticking.
What is holding the Department of Trade and Industry (dti) back is that an enormous number of jobs are at risk, and this is no small issue. The jobs of 140,000 service station attendants are at risk. And there are around 250,000 mechanics in South Africa, some of whose jobs are at risk because EVs have much lower maintenance levels.
Reading a bit between the lines, it seems to me the DTI is keen on SA producing EVs but not so keen on South Africans actually using them, although there is a nod at the Just Energy Transition. The DTI minister, Ebrahim Patel, says there will need to be a “phased process: first focusing on developing EV production capacity, then on allocating the fiscal resources to drive the purchasing of EVs in the local market.
“In the second phase, we anticipate that the volumes would be quite modest, for a few reasons. One of which is that the price differential is very significant. We expect the price differential to come down over the next seven to nine years.”
And then of course there are the two obvious elephants in the room: SA’s electricity crisis and its transport crisis. The response of the white paper is extremely glib. It broadly acknowledges SA electricity challenges and under “policy action” says: “Accelerate implementation of measures to increase the supply of electricity,” and “Refurbish the rail line between Gauteng and Ngqura”, among other things. I mean, yes, but how, exactly?
Instead of this cautious, snail-like, self-consciously “coordinated” approach, imagine a government that actually embraced a transition, welcomed it, encouraged it and took the trouble to help build it.
You would think in a government so dominated by Marxist economics, Patel and the dti would understand Joseph Schumpeter’s notion of creative destruction, which was directly drawn from Karl Marx’s popularisation of economic innovation and the business cycle. Of course, Marx thought, totally wrongly as we all now know, that economic innovation would annihilate capitalism as capitalists tore each other apart in a gory festival of destruction — a prospect he clearly relished.
In fact, if there is anything that can be learnt from the idea of creative destruction it’s that innovation creates not job losses but job opportunities as it injects dynamism and competition into the economy. Not always, but mostly. Countries with the highest levels of innovation also typically have the lowest unemployment, but somehow that penny has not dropped here in SA. Trying to save existing jobs is a fool’s errand, but of course, that is what politicians most often try to do, particularly in election years.
The risks are very high: SA’s automotive manufacturing industry constitutes about 3% of GDP and 10% of manufacturing output. Reading the white paper, you get the impression of an unwilling government recognising that it might be forced to change, rather than a government that actually wants to change. DM
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I think it’s a little worse than that. The decisions and policies of 2 decades ago set us up for success on a Big Scale. Not any more.
OEMs take their investment decisions carefully. They are not unlike mining in this regard. Massive in capital costs and measured in decades of life spans it means the OEMs are risk averse to a higher degree than most industries. Given the enormity of the plants these days at around 200k vehicles per annum being the threshold for economic viability, the time from decisions being made to production can be measured in years. And what’s been happening in the time the muppets generated 15 words per day of policy and 150 billion in nonsensical hot aired rhetorical crap? OEMs have switched EV production to other countries. Consequently we’re not playing catch up in the EV space – I think we’ve been left out of it. We’ll do some ICE and some hybrid stuff but new innovative tech is already being deployed everywhere but in SA. It means death by a thousand cuts-investment in maintenance only, maybe some boost to ICE to cover the shortfalls as other plants shift to EV. But in 10 to 20 years our sector as we know it will be dead and buried because of the policies that were not in place 3 years ago whilst the rest of the world happily ate our lunch.
We have one hope and it lies in the excellence of the people in the industry, and in the hope we can fix the infrastructure. Hope, however, is not a strategy but we have been reduced to it.
The service station jobs exist because SA motorists are too lazy to refuel DIY like the rest of the world does. Odds are some jobs will be retained for valet style vehicle recharge.
Pull up here Madam; while you sip a latte we will not only see to the recharge, but we’ll clean it too!
Well written
The real problem with the dtic (not DTI, Tim, it’s been dtic for several years now) and other government departments is the complete lack of ability to plan for transitions: we’re the farriers of the world, lauding horse shoe technology, when others are jetting off into space in private rockets. Our state – including the unions and SACP – are incapable of reskilling workers to take advantage of new industries and technologies and blindly cling to the past.
Instead of trying to save coal jobs, the government should have been training coal miners in the operation and maintenance of solar and wind farms, or the installation of rooftop solar and battery storage, or farming profitably on thousands of hectares of land owned by coal mines and Eskom power stations, or retreating slag heaps into charcoal (I believe this is possible, but open to correction). 40K coal jobs are placed above potentially hundred of thousands of renewable jobs because of a lack of foresight.
Ditto in autos: parts need replacement or batteries need recycling or similar – train workers, but also acknowledge that ICE vehicles will be around for years in SA, so it’s not a zero sum game, but a transition. If it is properly managed, you could probably mitigate job losses against the development of new industries in manufacturing, servicing and recycling of ICE vehicles and NEVs. All it takes is careful, pragmatic policy, that industry and unions buy into, that creates the enabling environment.
Excellent points.
Until load shedding has ended, most South Africans would be daft to buy a BEV, although hybrids might make sense for some people. This year, the UK postponed the phasing out of ICE cars from 2025 to 2030, and the EU might do something similar. The roll out of EVs in Europe is not going according to plan for several reasons, so manufacturers planning to export them from SA to Europe need to plan carefully.
Just as well the ANC were not in government at the beginning of the 20th century — they would still be protecting the jobs of stable hands and blacksmiths.
Is the government protecting the workers in the coal mines, or are they protecting the interests of politically connected coal mine owners, that have very generous Eskom contracts…?
JOHANNESBURG, Nov 24 (Reuters) – A senior Volkswagen executive involved in a global cost-cutting strategy said on Friday he was “very worried” about the future of the company’s operations in South Africa, which is fighting persistent power cuts and logistics snarls.
The company’s VW passenger car brand is in the midst of defining the key measures of a global scheme to boost its flagging margin – the first of a series of savings drives aimed at improving group profitability and staying competitive in the transition to electric cars.
The German automaker has been in South Africa for nearly 80 years. Factors like competitive labour costs once placed it among the company’s higher-ranking bases globally, VW brand chief Thomas Schaefer said during a visit to the country.
But the costs of mitigating power outages caused by chronic production shortfalls at state-owned utility Eskom as well as rising labour costs and logjams on railways and at ports have eroded that advantage, he said.
“Eventually you have to say, why are we building cars in a less competitive factory somewhere far away from the real market where the consumption is?” Schaefer said. “I’m very worried about it … We’re not in the business of charity.”
He said the company’s team in South Africa had done what it could to overcome what he called an “uphill battle” but that ultimately the South African government needed to step up to solve the problems.
Volkswagen produced some 132,200 Polo and Vivo models at its South African facility in Uitenhage last year, most of them for export.
Those export markets now risk disappearing, however, as wealthy countries move to electric vehicles (EVs).
The European Union and Britain are planning to ban sales of new internal combustion vehicles from 2035.
Schaefer said there were no current plans to introduce EV manufacturing in South Africa, since electric cars are currently priced out of the reach of most domestic consumers. Producing them for export would not be environmentally sustainable, he said.
With the proper government policies aimed at leveraging the country’s proximity to critical minerals like lithium and cobalt, however, it could become a battery manufacturing hub, he said.
“There’s a realistic chance that South Africa, with enough focus, with all the raw materials in the neighbourhood, they could be a champion,” Schaefer said. (Additional reporting by Victoria Waldersee in Berlin Editing by Mark Potter)