The Nissan Leaf and BMW i3 are the only mainstream full electric vehicles on sale in SA. Picture: SUPPLIED
The Nissan Leaf and BMW i3 are the only mainstream full electric vehicles on sale in SA. Picture: SUPPLIED

While the world is rapidly moving towards electric mobility and electric vehicles (EVs), SA is still grappling with how to deal with these technological developments, which have deep, multifaceted implications for the economy and society.

Research has shown medium- and long-term benefits associated with the transition process, but also definite short-term challenges. Critically, left to the market the transition will be inequitable. Hence a proactive and coherent approach is imperative to manage the transition effects and maximise the benefits of inclusive development.

These include reduced imports of petroleum products (SA’s largest import, at more than $15bn in 2018), which will have positive spillovers on foreign exchange, exchange rates and economic development. Larger electricity sales will also contribute to economic development and provide additional revenues to the national utility. There will also be a positive impact on health expenditure due to air quality improvements, and a reduction in greenhouse gas emissions (even on SA’s coal-based grid). EVs will also enable a wide array of benefits, from their synergies with solar-based systems to their integration with grid management and autonomous vehicles.

The introduction of EVs will increase disposable income. Their efficiency, combined with low maintenance costs and affordable recharging prices, result in a much lower cost of transport over the lifetime of the vehicles. And though they are more expensive than equivalent internal combustion vehicles, price parity is forecast by 2024-2029. EVs will halve transport expenditure, corresponding to an increase in disposable income of 7% on average.

Importantly, though, if the transition is not managed, high-income households that own cars are set to reap higher benefits than lower-income households that rely on public transport.

Negative impacts will also have to be mitigated, especially in the short term. As the demand for fuels and internal combustion vehicles dwindles, government revenues will be negatively impacted by a decrease in taxes and levies. In 2017/2018 fuel levies contributed R70.9bn to government revenues, close to 6% of net revenues. The transition to EVs will deeply transform the transport value chain, which employs large numbers of people who are at risk of seeing their jobs disappear or being transformed.

Upstream, due to reduced demand for liquid fuels, a rebalancing towards chemical production and the rise of alternative biomass feedstock, the business model of refineries will have to evolve, leading to a restructuring of the sector. In addition, more stringent environmental requirements on shipping fuels, the move to Clean Fuels 2 and plans for a brand-new refinery may well push early closures to avoid generating stranded assets.

On the manufacturing side, the automotive industry directly employs 80,000 people. In its existing form, it is likely to lose its principal markets — the EU and US, which are rapidly transitioning to e-mobility. Furthermore, the global decline in the use of catalytic converters, fitted to internal combustion vehicles and accounting for 39% of global platinum demand in 2018, could pose severe implications for the SA platinum industry, which directly employs about 170,000 people. While the industry is actively looking for alternative usages such as fuel cells, uncertainty prevails. Other ores, such as manganese, are poised to benefit.

Downstream, the petrol station business, which employs 130,000 people in SA, will be drastically affected. The automotive service industry, employing close to 400,000 people, also faces dire consequences linked to EVs’ reduced maintenance requirements and long lifespans. Such developments call for a proactive approach aimed at seizing all the benefits brought about by EVs while ensuring a just transition and inclusive development in the long run. The nature of the transition, which will see old and new technologies applied side by side for a while, offers the opportunity to manage the gradual transformation.

Preserving the favourable position of the automotive industry would require significant investments by manufacturers to update the production lines. Developing a vibrant local market, adapting the current automotive support programme to foster EV manufacturing and developing local capabilities in EV manufacturing are possible avenues to support the industry in this respect. A just transition also requires that workers, small businesses and communities are adequately supported, particularly in the most vulnerable stages of the value chain, such as petrol attendants and other employees in the liquid fuel sector.

It also requires ensuring that the shift to EVs benefits all layers of society, through access to public electrified (or gas-based) transport, shared ownership and inclusive urban planning. The newly announced taxi recapitalisation programme would provide an ideal platform to start transitioning the local industry towards e-mobility. The transition also calls for reconsidering government financing model. The budget would need to be allocated to ensure a balanced and just transition within government spheres and institutions.

• Montmasson-Clair is a senior economist at Trade & Industrial Policy Strategies (Tips), based in Pretoria. The report on which this article is based can be found on the Tips site.