5 ways South Africa can get more Electric Vehicles on the road
Battery Experts, talks to Business Chief about the ways in which Africa can get more electric vehicles onto its roads.
Due to the global climate situation, many countries are implementing drastic changes in an attempt to reduce carbon emissions and keep the global temperature below 1.5°C. These changes include utilising more renewable energy, such as the use of electric vehicles rather than petrol or diesel-powered cars. Countries such as the UK, the US, China and Norway are showing signs of progression with this. South Africa however, are lagging behind in their bid for a cleaner, greener future on the roads. Allow Battery Experts to suggest 5 ways South Africa can get more electric vehicles onto the roads.
Greater reliance on renewable energy
Eskom is South Africa’s government-owned, main energy provider. However, due to years of mismanagement, Eskom is struggling with operational and maintenance issues, failing to supply enough energy to the national grid.
As a result, the country is experiencing it’s latest period of shedding, which are planned rolling blackouts. This limited access to electricity and charging will do little to convince South African citizens to invest in an electric vehicle.
There is also an over-dependence on fossil-fuels in South Africa. If Eskom were to increase their reliance on renewable energy resources, such as solar power, wind power and natural gas, this could produce enough electricity for the national grid, helping power electric vehicles. This will also reduce carbon emissions.
Invest in infrastructure
As well as investing in renewable energy, the South African Government must also invest in the infrastructure for EV’s, if drivers are going to be convinced to purchase an electric vehicle.
There is a shortage of charging points across the country. In January 2020, South Africa had 155 charging points. The UK has 25,000, bearing in mind the UK is 5 times smaller than South Africa. Standard electric vehicles should be charged every 100 miles, so 155 charging points spread across South Africa is an insufficient number to persuade drivers to invest.
Encourage third party investment
With Eskom experiencing operational issues and requiring government bailouts, the government could struggle to invest enough in the EV industry, without assistance.
South Africa has imported less than 1,000 electric vehicles into the country. This is because the countries petrol and diesel automotive industry is a major source of income, so they are discouraged to invest too heavily in the production of EV’s.
Allowing third parties to invest in the production of EVs will enable drivers to have more access to purchase an electric vehicle, without paying extortionate prices.
NAAMSA (the National Association of Automobile Manufacturers of South Africa) includes car manufacturers BMW, Ford, Isuzu, Mercedes, Nissan, Toyota and Volkswagon. This non-competitive group of manufacturers represent the interests of the new motor vehicle manufacturing industry in South Africa. Allowing these manufacturers to independently invest in and produce electric vehicles would get more EV’s onto South African roads, without effecting the income gained from the country’s automotive industry.
Reduce import costs for EV’s
The import costs for electric cars are much higher, compared to those of fossil fuel vehicles. These high tariffs alone can dissuade drivers from purchasing an EV, this is before issues with charging and infrastructure are considered.
Reducing import costs would also encourage further investment, from third parties such as Tesla. Elon Musk the South African Tesla founder, has stated the companies intentions to operate in the country. However, the high import costs of electric vehicles have discouraged them from doing so. Tesla installs their own charging stations in the countries they operate, which would improve EV infrastructure without the South African government being required to invest too heavily.
Create incentives for EV drivers
Countries such as Norway have had so much success in implementing the EV revolution by rewarding drivers who invest in the cars. Drivers of EV’s in Norway can drive in bus lanes, have access to free parking zones in cities and pay 25% less VAT.
Instead, as it stands, South African citizens pay a premium price for EV’s and face difficulties charging the cars. If South African drivers are to invest in an EV, they need to be persuaded with financial incentives or to improve convenience.
Again lowering import costs and allowing third-parties to create incentives for their drivers will ease the burden on the Government. For example in California, drivers of Tesla vehicles are able to use custom Tesla ‘Superchargers’, which gives them access to fast charging across the city.
For more information on business topics in the Middle East and Africa, please take a look at the latest edition of Business Chief MEA.
Billionaire Kumar Birla Champions Regional Supply Chains
As the head of the Aditya Birla Group, a US$46bn firm that operates in 36 countries, Kumar Mangalam Birla is no stranger to splashy strategic moves. Yet his recent announcement that he no longer wants to acquire globally distributed supply chains stood out. While many companies have struggled to cope with shipping backlogs, his firm has chosen to pivot and focus on regional networks. Said Birla: ‘We wouldn’t look at a company or a business where you source in one corner of the world and sell in another’.
He cited protectionism, the pandemic, and the limited movement of products and people around the world as ABG’s primary causes of lost profits. And they aren’t alone. Over the past year, 900 of the U.S. and Europe’s biggest IT, defence, and financial services firms have lost an average of US$184mn apiece.
An Era of Global Disruption
Over the past few decades, low shipping rates and rapid delivery times have lulled multinational firms into a false sense of security. In the early 2000s, companies chose to take on significant global supply chain risks in exchange for increased profits. First, it made sense to manufacture higher-value goods, such as electronics, in low-cost regions throughout Southeast Asia, India, and Africa. Second, first-tier suppliers started to outsource the manufacturing of specific components to second-, third-, and even fourth-tiers—leaving supply chains with extremely limited visibility.
So when COVID-19 disruptions struck certain regions, companies were caught unprepared. Usually, these events come few and far between. But over the past ten years, we’ve seen a number of ‘black swan’ events that have thrown the supply chain industry into chaos. Here’s a quick history of the most significant events in recent years, thanks to the MIT Sloan Management Review:
- 2010. China creates export quotas for rare earth elements.
- 2011. The Tōhoku Earthquake hits East Japan; flooding sweeps throughout Thailand.
- 2016-present. Trade wars between the U.S. and China hurt suppliers.
- 2020-present. COVID-19 pandemic shuts down international shipping ports.
Now, Kumar Birla is one of many who want to re-evaluate how we run our supply chains. Though his company has acquired 40+ companies in the last quarter decade, Birla intends to build up local hubs rather than expand operations.
Why Pursue Regionalisation?
Combine Chinese economic dominance, global supply chain vulnerabilities, and major government policy shifts around the world, and you have a storm brewing on the horizon for big multinational firms. As Brookings noted, ‘the biggest risk for trading opportunities in the developing world is growing protectionism in more advanced economies, often dressed up as national security protection’.
Altogether, from the U.S. to the European Union, governments are trying to protect their domestic supply chains, secure adequate stockpiles of materials, and build world-class local networks. Consider Biden’s recent executive order, which seeks to bring semiconductor manufacturing back to home soil, or Japan’s bid to open more memory chip fabrication factories near Tokyo. The Aditya Birla Group intends to react in kind. Said Birla: ‘We’re looking at regionalism as a very big theme’.
Will Others Follow Suit?
In the post-pandemic economy, global businesses must decide whether to expand or contract. On one hand, the Alibaba Group’s Cainiao Smart Logistics Network recently launched a direct flight between Hong Kong, China, and Lagos, Nigeria. On the other, the Japanese government is desperate to make its chip manufacturing domestic. Indeed, as two supply chain strategies diverge in a post-pandemic world, the one businesses take may make all the difference.
Yet Birla is confident that regionalisation is the right call. According to his words at the Qatar Economic Forum, even necessary cross-border transactions should be smaller in scope. And as the Bloomberg Billionaires Index now lists his net wealth at US$10.4bn, up 52% from 2020, he may have the cash to test his theories out. ‘Regional hubs, regional presence, regional employment, catering to regional demand’, he stated. ‘We’re a global company rooted in local economics’.