SA can be a significant player in the global EV market despite energy crisis

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SA can be a significant player in the global EV market despite energy crisis
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SA can be a significant player in the global EV market despite energy crisis
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SA will be the centre of "green" conversations in the coming days as the world moves ahead full steam towards clean energy and the adoption of electric vehicles (EVs).

This comes at a time when the country is looking for ways to capitalise on the global green transition and the growing EV market. While the local EV market is still in its infancy, SA has some of the crucial resources to kickstart production, including manganese and nickel used in lithium-ion batteries that give EVs the range and durability needed by consumers.

Furthermore, other key raw materials required in batteries, such as cobalt, are mined in sub-Saharan Africa which gives SA a competitive edge as the African Continental Free Trade Area agreement kicks into gear.

The logistical advantages of closer geographical proximity coupled with improved regional free trade policy, could provide a range of advantages in accessing and utilising these raw materials.

With exports remaining a large driver of revenue for SA's automotive industry, implementing and ramping up EV production capability, and then targeting high-potential markets should be a key part of the debate on the future mobility ecosystem.

On 25 February, SA will get a front-row seat to the possible future of automobiles when Formula-E, a world championship which brings electric technology to motor racing, takes to the scenic streets of the Green Point Precinct in Cape Town.

A few days before the race, the city will host the Africa Green Economy Summit a deal-making platform that links global capital with green economy projects from across the continent, with an emphasis on e-mobility.

The events are significant right now as SA battles its worst ever power cuts, which could turbocharge the growth of renewables, potentially stabilising power supply in the not-too-distant future. A much more greener and stable power supply could kickstart the growth of the local EV industry.

The adoption of EVs in SA hasn't taken off in part due to a lack of government incentives to support production and consumers. The national government published a green paper on new-energy vehicles in 2021, but this is still in the works, meaning there is still no clarity on policy or incentives to boost local production or adoption of EVs. But there are indications that the EV policy could be finalised by the February budget, which will definitely boost confidence across the value chain.

Another major and obvious barrier to EV adoption is the lack of basic infrastructure. The unreliable electricity supply and infrastructure means SA does not have the necessary capacity to handle a significant increase in EV charging demand.

Export market

But these hurdles are not insurmountable. With the right policy framework and measures in place to boost electricity supply and the relevant infrastructure, EV adoption could accelerate in the coming years.

Governments across the world are pushing for the adoption of EVs as part of the global effort to combat climate change, and SA — Africa's largest car manufacturer — is well positioned to gain a significant share of the growing global EV market.

There are some 1.4 billion cars on the world's roads today, and the International Energy Agency (IEA) estimates that at least 16.5 million of these are electric. With many countries worldwide now shifting their policies towards accelerating EV uptake, sales of such vehicles are expected to surge in the coming years.

SA's Just Energy Transition (JET) Investment Plan looks to develop green industrialisation opportunities, including EVs. According to the plan, building supply chains, setting the base for the manufacture of such vehicles and components, and introducing initiatives to incentivise investments in charging infrastructure will protect sector employment and promote new growth in sustainable manufacturing.

As the state and various stakeholders work on solutions to tackle the energy crisis and to boost the green economy, it will be prudent to place an emphasis on penetrating the EV export market in particular.

This is particularly crucial given that the country's key trading partners and major importers of Internal Combustion Engine (ICE) vehicles — the UK and the EU, which together account for more than 50% of the export market — will in the coming years prohibit the sale of such vehicles in a bid to speed up the switch to EVs and combat climate change.

Furthermore, the US, a large export market for vehicles, has been on an aggressive drive to boost the adoption of EVs, which could present a great opportunity for SA's car manufacturers.

Although SA currently lags behind Europe, the US and China, the global leaders in electric mobility, its established and relatively advanced automotive industry means the transition to EV production could relatively be seamless.

SA vehicle exports are almost exclusively ICE and if the local industry is to remain sustainable, it has little choice but to ramp up production of EVs. This is also crucial given that the country's growth prospects are somewhat linked to the automotive sector—one of the largest economic sectors contributing nearly 5% to GDP.

Nearly 300 000 vehicles worth R138.3 billion, and R69.2 billion in automotive components, were exported in 2021. The industry directly employs 110 000 people, and indirectly supports nearly 460 000 jobs across the economy. At least seven of the world's leading automotive manufacturers have established their operations in SA.

But many of them are reluctant to invest in the production of EVs in SA, largely because local sales remain insignificant and the government is yet to finalise its policies and incentives to ramp up production and adoption. This requires urgent intervention, but thankfully the country has some notable advantages in the race for EV market share.

Significant advantages to build on

In a market intelligence report published late in 2022, GreenCape — a non-profit organisation that works at the interface of business, government, and academia to identify and remove barriers to economically viable green economy infrastructure solutions — sketches the many advantages SA has as EV adoption gathers pace.

Significantly, the country has an abundance of key natural resources to support battery technologies, including vanadium and manganese. The country also has nickel reserves. This means that SA does not have to import these materials, and could potentially become a major supplier for EV manufacturers.

SA has three key automotive manufacturing hubs located in the Eastern Cape, KwaZulu-Natal and Gauteng. But the Western Cape, which is seeking to position itself as the lowest carbon province in SA and the leading green economic hub, is moving quickly to establish itself as a centre for the EV industry in SA, specifically from a skills development perspective.

The South African Renewable Energy Technology Centre (Saretec) is the first national renewable energy technology centre in SA and was established at the Cape Peninsula University of Technology (CPUT).

Saretec provides specialised industry-related and accredited training for the renewable energy industry, including short courses and workshops. GreenCape notes in its report that the training the institution offers plays a critical part in skills development for renewable energy charging infrastructure value chain for EVs.

As we build capacity, the role of municipalities will also be crucial in the years ahead amid the anticipated surge in EV adoption. According to the JET investment plan, municipalities must play a key role in enabling EVs by unlocking the charging infrastructure, particularly by facilitating the conversion of public transport to EVs.

In the Western Cape, the provincial government's electric vehicle strategy has committed to supporting the accelerated transition to EVs by, among other measures, transforming some of its fleet to EVs, including testing BMW i3 vehicles in the pilot; and supporting the development of a provincial electric vehicle charging network.

Similarly, the City of Cape Town is also looking to prepare for a scenario of a complete transition to electric or alternative fuel-powered freight, bus, taxi and passenger vehicles by 2050.

The way forward

As the green conversations take centre stage across the globe, it will be imperative for SA to focus on and build on its strengths. The country is capable of establishing a thriving EV sector, supported by government policy, growing exports, local manufacturing, skills development, and a stable power supply. Getting this right could be crucial in driving sustainable economic growth, job creation and fast-tracking the development of the local green economy. But for this to happen, significant investment in infrastructure, research and development, and government backing is an absolute must.

NOTE:This article was first published by News24