The 2024 Budget Review: Consolidated Spending Plans document, which was released in conjunction with Finance Minister Enoch Godongwana’s National Budget Speech, revealed the Department of Trade, Industry and Competition (DTIC) has reprioritised R964-million for the transition to electric vehicles. This move aligns with the New Energy Vehicles White Paper, which was approved by the Cabinet in 2023.
Finance Minister Godongwana detailed South Africa’s financial standing during his budget speech at the Cape Town City Hall. He explained the reprioritised funds complement the funding secured for the Just Energy Transition Investment Plan and the implementation plan for electric vehicles.
Mampho Modise, Deputy-Director General: Public Finance at National Treasury, clarified the reprioritisation would not impact the DTIC’s incentive programmes. Instead, most of the reprioritised funds would come from a Special Economic Zone (SEZ) fund. The decision to stop establishing new SEZs and focus on improving existing ones was made some time ago.
Christopher Axelson, National Treasury’s Deputy-Director General for Tax and Financial Sector Policy, further elaborated on the potential impact of the incentive. He predicted it would lead to large investments and a revenue forgone of R500-million in 2026/27 as those investments start to take place.
South Africa’s focus on new energy vehicles (NEVs) comes as automotive manufacturers worldwide are accelerating the push towards electric vehicles, moving away from combustion-based ones. NEVs utilise alternative energy sources instead of traditional fossil fuels. They are designed to be more environmentally-friendly and energy-efficient, aiming to reduce greenhouse gas emissions and dependence on non-renewable resources.
By the end of 2022, South Africa had 4 764 NEVs on local roads, according to the National Association of Automobile Manufacturers of SA.
Last year, during the medium-term budget, Godongwana stated the country’s transition to a low-carbon economy should be integrated into a comprehensive green growth strategy and industrialisation plans. He noted that the government plans to implement tax and expenditure measures to support the automotive sector during this transition.
In his budget speech, the finance minister said: “The Electric Vehicles White Paper outlines our strategy to transition towards a broader new energy vehicle production and consumption in South Africa, starting with electric vehicles.”
The African Continental Free Trade Area (AfCFTA) agreement, ratified by the majority of African countries, aims to consolidate 55 economies into a single, competitive mega-market of more than a billion people. This would make it one of the largest free trade areas globally.
The AU projects that the agreement will stimulate revenue growth and lift 30-million of Africa’s extremely poor out of poverty. However, despite the excitement surrounding the treaty, the implementation has been delayed, pushing back potential benefits and raising questions about the AU’s ability to execute the plan effectively.
The AfCFTA, first agreed upon in July 2019, is a cornerstone of the AU’s 50-year strategy to bolster Africa’s economic growth. It seeks to deepen economic integration in Africa by facilitating the flow of goods and services between countries, promoting cross-country investments, eliminating trade barriers, and advancing open visa policies.
The AU also hopes to use the plan to boost local manufacturing and secure a larger share in global trade, where Africa currently contributes only 3%.
All AU member states, except Eritrea, have signed the agreement. They will be represented through the eight recognized regional economic blocs, including the South African Development Community (SADC) and the Economic Community of West African States (ECOWAS). The treaty became operational in January 2021.
Collectively, the agreement represents a united African market of 1,3-billion people, worth approximately $3-trillion, roughly equivalent to India’s gross domestic product. The AU aims to reduce or eliminate tariffs on 90% of products and generate an additional $450-billion in revenues for Africa by 2035. If the agreement proceeds as planned, the AU estimates Africa’s economy will expand to $29-trillion by 2050.
The AfCFTA agreement presents significant opportunities for the Moroccan automotive sector, one of the best-developed on the continent, particularly for its affordable inputs, finished exports, advantageous labor, and reduced customs tariffs. This is according to the 9th edition of the CFC Africa Insights report.
The report, titled “AfCFTA: Unlocking the Potential of Intra-African Trade,” suggests increased trade integration with African partners, especially in North and West Africa, could lead to economies of scale. Morocco is well-positioned to benefit from the establishment of cross-border value chains, and the sector also holds promise for economies across the region.
In 2022, international automotive trade reached $1,6-trillion, surpassing that of crude oil and natural gas. The report underscores how automotive supply chains, spanning across borders, enable numerous countries to contribute to vehicle production.
Under the AfCFTA, the Moroccan automotive sector stands to gain two key opportunities: access to low-cost inputs and an outlet for finished goods exports. By integrating Morocco’s automotive sector with neighboring economies, Moroccan producers can capitalize on lower labor and material costs in Africa.
The report highlights Nigeria’s current tariff on unassembled cars stands at 5%, but is anticipated to decrease to 0% by 2030. This shift could generate employment opportunities and stimulate economic growth.
In his Budget speech, South Africa’s Finance Minister emphasised: “It aims to transition the automotive industry from primarily producing internal combustion engine vehicles to a dual platform that includes electric vehicles, by 2035.
“To encourage the production of EVs in South Africa, government will introduce an investment allowance for new investments, beginning March 1, 2026.
“This will allow producers to claim 150% of qualifying investment spending on electric and hydrogen-powered vehicles in the first year.
“The incentive will be implemented in addition to the existing support under the Automotive Production Development Programme.”
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