South Africa will provide fiscal support to the automotive industry to help it transition to producing electric vehicles, Deputy Finance Minister David Masondo said.
The funding will be allocated in the October 25 mid-term budget, which will be delivered at a time when government revenue is under pressure and is in danger of missing its debt stabilisation target.
The efforts to encourage investment into the production of EVs and their components “comes at a time when the fiscus is particularly stretched,” Masondo said in an address to the industry on Thursday. “The only way to justify the government’s fiscal support to the sector is through greater localisation and more component production opportunities.”
The automotive industry accounted for 4.9% of South Africa’s gross domestic product and 12.4% of exports last year, with manufacturers directly employing about 110 000 people, according to the Automotive Business Council, or Naamsa.
Masondo warned that changes in the marketplace and advancements in artificial intelligence meant many workers in the industry were at risk of losing their jobs if proper plans weren’t put in place.
“Around 67% of SA component exports will be lost in the transition from internal combustion engine vehicles to EVs,” he said. “This simply means that the transition will entail a fundamental restructuring of the labour market.”