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South African auto sector to produce first EVs in 2026, says Patel at launch of key White Paper

Trade, Industry and Competition Minister Ebrahim Patel outlines the rationale for undertaking the Green Hydrogen Commercialisation Strategy final report and the Electric Vehicles White Paper.

4th December 2023

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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The Department of Trade, Industry and Competition (dtic) on December 4 released the Electric Vehicles (EV) White Paper, as well as the Green Hydrogen Commercialisation Strategy final report.

Speaking at a media briefing on the release of the documents, Trade, Industry and Competition Minister Ebrahim Patel said the EV White Paper was the final iteration, following its approval and adoption by Cabinet last month.

The White Paper outlines a course to transition the country’s automotive industry from primarily producing internal combustion engine (ICE) vehicles to a dual platform that includes EVs in the production and consumption mix, alongside ICE vehicles in South Africa by 2035.

The White Paper was drawn up following considerable international and domestic research and consultations, spanning from 2019 to this year.

Patel averred that, following the release of the paper, South Africa’s production of EVs could begin as early as 2026, as indicated by the dtic’s engagements with various original-equipment manufacturers (OEMs) in finalising the paper. There is, however, one outlying OEM, which would begin production at a later stage, he said.

Patel pointed out that the White Paper was developed with the country’s energy crisis in mind and was aimed at facilitating the addition of more renewable energy sources to the energy grid.

The paper sets out the policy goals and actions that will be taken to support the transition towards broader new energy vehicle (NEV) production and consumption in South Africa, with an immediate focus on EVs.

A set of six core principles underpin the policy goals and actions to be taken. Firstly, the transition to EVs and NEVs is necessary, and the pace at which key decisions are required is urgent given the speed at which markets are developing, and the long lead times for investment decisions.

Secondly, attracting investment requires a technology-agnostic approach, including embracing a range of clean energy sources to ensure an appropriate transition.

Thirdly, investment support is required to boost productive capacity, while, fourth, policy actions have to reflect cost-effective and fiscally sustainable solutions.

Fifth, deepening localisation of the automotive supply chain, including through beneficiation of critical minerals through the development of regional value chains is essential and, lastly, policy actions must reflect the need for a just transition in the automotive industry.

Patel emphasised that key to the approach was the importance of domestic production of EVs.

He highlighted a technology-agnostic stance, with the paper encompassing a variety of different technologies, ranging from battery electric vehicle (BEV) to fuel-cell technologies and sustainable fuels (also called synthetic fuels), and aiming to position the country as a production destination for vehicles and components in emerging technologies.

He also emphasised the commitment to public measures including fiscal support.

The use of Just Energy Transition Investment Plan (JET-IP) funding will complement yearly budget appropriations and announcements in the National Budget next year.

Following publication of the White Paper, the government will make the first announcements of resource allocations in the February 2024 Budget.

The White Paper highlights the considerable industrialisation opportunity for South Africa and the region to develop regional ‘critical minerals to batteries’ value chains.

It outlines that capitalising on this would require a regional approach to critical mineral beneficiation.

It therefore aims to establish a framework under which African countries can work with partner countries to develop the industrial capacity necessary to make the continent a key industrial player, rather than just a source of critical minerals, in the transition to EVs.

The White Paper outlines a two-pronged strategy approach, with the first focus area being considerable investments in component production and vehicle assembly for EVs, particularly for markets affected by regulatory changes that will require net-zero emission vehicles. It also includes investment in local production and standardisation of charging infrastructure.

The second focus area is characterised by a balanced market development approach, including increasing grid capacity to support domestic EV uptake, public procurement of domestically produced EVs, exploring appropriate incentives for EV uptake by consumers of domestically produced vehicles, promoting benefits of EVs to consumers and using the African Continental Free Trade Area to expand demand for EVs produced on the continent.

The White Paper identifies ten policy goals with a set of 16 unique and distinct policy actions to be implemented over specific timelines between now and 2035 with ten actions in support of the development of cost-competitive EV productive capacity in South Africa; and six actions in support of the development of a cost-effective local market for EVs.

The ten actions are:

*An increase in levels of investment and funding, including the development of improved cost-effective incentive support to be announced through the publication of new Automotive Investment Scheme (AIS) guidelines. The higher levels of investment funding are intended to catalyse EV investment in automotive assembly and component manufacturing;

*The facilitation and development of an electric battery regional value chain, including raw material refining, battery active materials and component production, and cell manufacturing. This is to deepen the South African Development Community region’s participation in the automotive value chain;

*The introduction of a temporary reduction on import duties for batteries in vehicles produced and sold in the domestic market, to improve cost competitiveness;

*Securing or maintaining duty-free export market access for vehicles and components produced in South Africa to support the resilience of the industry;

*Leveraging research and development tax incentives to deepen domestic value addition;

*Commercialising green hydrogen production in South Africa as a source of sustainable fuels;

*Implementing energy reforms, including executing interim solutions for energy in partnership with industry;

*Implementing reforms to network industries, including freight rail and ports;

*Refurbishing the rail line between Gauteng and Ngqura to improve overall cost competitiveness; and

*Developing an EV certification programme in collaboration with industry for skills development.

The six actions entail developing and implementing a framework for fleets to transition to South African-produced NEVs, including government-owned, public transport, corporate fleets, and mining equipment; scaling up investment in charging infrastructure; developing opportunities for localisation of charging components and infrastructure; supporting increased grid capacity to facilitate uptake of EVs; considering consumer incentives for adoption of EVs; and evaluating the need for economic regulation on EV charging.

The implementation of the White Paper will begin after publication, with the dtic to publish architecture of the incentive package by January 2024. This will be followed by amendments being made to the Automotive Production and Development Programme Regulations and Guidelines and the start of stakeholder engagements by January 2024.

The Nationally Treasury is expected to announce details of the OEM incentives by February 2024; and amendments to the Automotive Investment Scheme (AIS) guidelines will be published by February 2024.

GREEN HYDROGEN COMMERCIALISATION STRATEGY
Meanwhile, the final Green Hydrogen Commericialisation Strategy highlights the considerable growth opportunities in terms of green hydrogen through several pathways for South Africa, the dtic says.

This includes the production and domestic use of green hydrogen to decarbonise South Africa’s economy, with a specific focus on hard-to-decarbonise value chains.

There is also the production and export of green hydrogen and beneficiated products into future global green energy trading markets.

Also, Patel pointed out that the country already has key capabilities and advantages in green hydrogen, including conditions required for renewable energy and considerable platinum group metals resources.

Green hydrogen initiatives would also support the country’s just energy transition goals.

Moreover, there is the development of industrial capabilities in the entire value chain, including in the manufacturing and supply of equipment used in the green hydrogen value chains.

The strategy indicates that these areas present an overarching commercial opportunity for South Africa to develop a new green energy economic sector to drive growth and development, employment, improve energy security and to transition to a lower carbon economy and society.

However, there are also a series of complex challenges and decisions for stakeholders to consider to ensure that this important lever to transition the economy to a lower carbon intensity is also aligned to the National Development Plan and the need for inclusive participation in this new sector.

The strategy outlines several strategic objectives that should be considered in pursuit of South Africa’s green hydrogen vision, including securing long-term global market share and a competitive trade position; developing the domestic market; securing foreign direct investment and low-cost green finance; contributing to economic and socio-economic development; ensuring local industrial capability and participation; and considering the need and role of a just transition.

The strategy requires a prioritised implementation with a focus on several actions, including clear policy support from government including implementing regulatory changes as defined in the strategy’s action plan; development of the different scenarios for funding; and establishing a regulatory and market framework around new green hydrogen manufacturing, production, use, transport and storage.

There is also the need to establish bilateral engagements and agreements between South Africa and key international consumers; mobilising a task team to investigate the social, economic and environmental impact of various scenarios and determine the value that could be derived by acceleration of the green hydrogen value chain; and an assessment of the current infrastructure requirements and the investments required to support the development of the value chain and ensure that private projects are able to access key infrastructure.

There would also be developing and securing funding instruments and disbursing specific funds; supporting development of the projects that have been granted Strategic Integrated Project status as gazetted in December 2022 towards reaching final investment decisions; and initiating and developing additional projects aligned to the medium-term ramp-up targets of the industry.

Moreover, there is supporting the development of the identified green hydrogen hubs and valleys; analysing and planning for the just transition; and engaging in a social dialogue between workers and their unions, employers, government and communities to ensure that green hydrogen development contributes to climate change mitigation as well as adaptation. This includes ensuring appropriate training and skills development programmes to limit job losses and support employment as industry sectors decarbonise.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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