South Africa’s EV transition hindered by logistics and energy challenges

South Africa grapples with formidable hurdles, as the country’s logistics and energy crises pose substantial barriers to its ambitious electric vehicle (EV) transition. Trade and Industry Minister Ebrahim Patel emphasizes the urgent need to address these challenges, crucial for utilizing the $8.8 billion climate funding for EV production. Despite economic setbacks from power outages and logistics failures, South Africa aims to shift from gasoline to EVs, a move requiring significant government incentives and navigating potential fiscal repercussions and job losses.

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South African Minister Warns Energy, Logistics Undermine EV Plan

By Ntando Thukwana and S’thembile Cele

(Bloomberg) —

South Africa’s incessant logistics and energy insecurity present fundamental challenges to a planned transition to producing electric vehicles, and must be addressed, the country’s trade and industry minister said.

“We do need to solve the energy and transport logistic issues absolutely urgently,” Ebrahim Patel told reporters on Monday in Pretoria, the capital. The minister was presenting a government policy paper on electric vehicles that outlines the government’s framework on the shift away from gasoline-powered cars.

South Africa intends to build electric vehicles using some of the $8.8 billion of climate funding provided by some of the world’s richest nations. Those plans are being formulated as the country deals with record power outages this year and a collapse of its national logistics network that’s curbing economic growth.

“The producing side requires transport logistics,” Patel said. “When components are stuck in a port, then they undermine the ability to cost effectively produce vehicles. And then, of course, the finished cars should not be sitting in factory warehouses. They’ve got to get to the market.”

Read More: South Africa Warns Others Not to Go From Electricity to Darkness

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, according to the Automotive Business Council, or Naamsa.

Finance Minister Enoch Godongwana is expected to announce incentives and potential funding for the EV transition when he delivers his annual budget speech in February.

Fostering the shift away from gasoline- and diesel-powered vehicles will likely reduce income for the government, which collects billions of rands annually from fuel levies, according to the minister. In the fiscal year through March, the state collected as much as 89 billion rand ($4.7 billion) from the levies.

The transition will also likely lead to a significant reduction in gas-station jobs, putting as many as 140,000 people’s livelihoods at risk.

The adverse impacts may be offset by a decrease in imports of crude, petrol, and diesel. South Africa imports 80% of its petroleum products, which was valued at about 323 billion rand in 2022