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Government’s Electric Vehicle Incentives: Economic Boost or Fiscal Risk?

Neelam Rahim |

3-minute read
09 April 2024 | 16:07 CAT

The government intends to introduce tax and expenditure measures to boost electric vehicle production in South Africa. Lameez Omarjee/News24

Recent shifts in government policy towards electric vehicles mirror global trends. With countries phasing out petrol-driven cars, South Africa’s automotive industry faces a transformative period.

Radio Islam International unpacks the implications of these incentives with Professor Jannie Roussouw, an expert economist from Wits Business School.

The government’s decision to subsidise companies transitioning to electric vehicles has sparked debate. Professor Roussouw outlined the potential economic benefits and risks associated with the policy.

“On the one hand we have to note that South Africa has electric vehicles, small in number, however there are two drillbacks in respect of electric vehicles,” he says.

Professor Roussouw explained, “the first drillback is long distance driving and secondly we do not have uninterrupted supply from Eskom, we have loadshedding. Both these things impact electrical vehicles.”

South Africa is a major vehicle exporter, and on that basis, Professor Roussouw noted that international tendencies have to be considered.

Meanwhile the 150% rebate on qualifying investment spending is estimated to cost the government R500 million. When asked how the Treasury arrived at that percentage, the department said the country needed to compete with peer Developing World markets such as Morocco and Thailand.

Finance Minister Enoch Godongwana said that the South African economy desperately needs growth. Growth is projected to average 1.6% between 2024 and 2026, supported by an expected easing of power cuts and lower inflation.

The persistent crisis in electricity supply, freight rail, and ports and a high sovereign credit risk threaten growth.

South Africa’s key export markets, the UK and Europe, are phasing out sales of ICE vehicles by 2035.

To encourage the production of electric vehicles in South Africa, the government will introduce an allowance for new investments from 1 March 2026.

Listen to the full interview on Radio Islam International with Muallimah Annisa Essack and Professor Jannie Roussow.


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