Eskom CEO André de Ruyter copped a lot of flak on social media last week for remarks he made during an online “town hall” meeting that South Africa should move with greater urgency to adopt electric cars, despite the country’s electricity supply crisis.
As South Africans endure the longest stretch of load-shedding in the country’s history — and as the outlook for electricity supply continues to deteriorate — it’s understandable that De Ruyter’s proposal for a faster shift to electric vehicles (EVs) was met with incredulity. But the Eskom CEO has a point.
First, he wants EV prices to fall so that there’s greater adoption among consumers and business. Even Eskom, he said, is keen to start replacing its extensive fleet of internal combustion engine (ICE) vehicles with battery-powered alternatives but has demurred because of the cost.
EV imports attract far higher taxes in South Africa than ICE vehicles. This is the only major market worldwide where this holds true. Many countries provide tax incentives to consumers to buy EVs rather than penalising those wanting to make the shift from less planet-friendly ICE vehicles.
Despite being slammed for his remarks, De Ruyter is not being particularly controversial. He is mirroring what South African motor industry executives — from Mercedes-Benz co-CEO Mark Raine to Audi head Sascha Sauer — have been saying for some time: at the very least, don’t penalise EVs with higher taxes.
But it’s not only EV imports that are concerning the local automotive sector. Industry body Naamsa has decried a lack of urgency by the government in developing a policy to support the local manufacture of EVs.
Ford Africa president Neale Hill said in October that the government must deliver policy certainty on EVs within six months if it is to save the local automotive manufacturing industry. Toyota South Africa president Andrew Kirby, BMW South Africa CEO Peter van Binsbergen and other industry bosses have voiced similar frustrations.
The big problem is that the major export markets for South African-built vehicles are shifting aggressively away from ICE vehicles to EVs. In the UK, for example, the sale of new petrol- and diesel-powered cars and vans will be banned from 2030 (plug-in hybrids may get a stay of execution until 2035). Europe will implement a full ban on ICE cars, including hybrids, by 2035.
More than 50% of vehicles manufactured in South Africa are exported to Europe (including the UK), underscoring the industry’s worries. The local automotive manufacturing industry is living on borrowed time. Global car companies are making decisions now for vehicles that will be manufactured over the next decade or more.
South Africa has virtually no EV manufacturing base, and no obvious immediate plans to address this. Ford’s Hill and other industry players say the country needs a credible policy as a matter of urgency to save the industry and tens of thousands of jobs. South Africa must decide to what extent it is willing to provide incentives to vehicle manufacturers to build EVs here.
Yet trade, industry & competition minister Ebrahim Patel, who earned the moniker “Petty Patel” for his ludicrous, economy-destroying lockdown rules in the early days of the pandemic, doesn’t seem to be in any rush to address the industry’s concerns.
A promised policy document is taking forever to materialise. Patel said in October that the market shouldn’t expect a policy white paper much before February 2023, leaving the industry on tenterhooks until at least then, and probably longer.
That’s the crucial export market, but what about the local adoption of EVs? Relative to other markets, sales volumes of EVs in South Africa have been terrible — only 218 full electrics sold in 2021, out of 464,000 units, according to Naamsa. This is not all that surprising given the high taxes on EVs. But many consumers fret about load-shedding, too — you can’t drive an EV if you can’t charge it.
So, is De Ruyter not being reckless in advocating a faster shift to EVs when Eskom is unable to supply sufficient electricity to meet demand?
I asked De Ruyter this very question during the “town hall” meeting. His reply? Demand will drive private sector-led investment in new generation capacity. The grid, he said, must be opened to allow investors to take risks in building new generating capacity to serve this demand.
It was an intriguing answer. In short, he was saying that South Africa should not choose to sit out a technological revolution — the shift from ICE vehicles to EVs — simply because of our electricity supply constraints. Instead, he was advocating for a free-market solution, including liberalisation: let the market solve the problem and get the government out of the way.
De Ruyter is correct when he says there are solutions available, and that they lie in the liberalisation of South Africa’s electricity sector. Full market liberalisation fixed telecoms; the same can happen in energy. If we choose to ignore progress simply because our problems now seem intractable, then we may as well give up on this country.
McLeod is editor of TechCentral
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