The International Trade Administration Commission of SA (Itac) has proposed 15% import duties on new energy vehicle (NEV) batteries in a big push to build domestic capacity and woo original equipment manufacturers (OEMs) to assemble electric vehicles in the country.
Itac has also proposed that the minister of trade, industry & competition increase the number of materials that qualify as standard under the government’s Automotive Production Development Programme to support local battery manufacturing. The programme consists of rebates and refunds of the specific customs duties.
Itac chief commissioner Ayabonga Cawe said the proposed tariff on imports of NEV batteries would go a long way in building domestic capacity and incentivising car manufacturers to use SA as a base to build the batteries.
“We are considering increasing the custom duty on NEV batteries to the bound rate, which is 15%, so that if original equipment manufacturers want to set up in SA they must have effective protection against the duty-free importation of competitor products because they have taken the risk to invest in SA,” he told Business Day.
“People who are going to have some assembly or productive activity that employs people in SA must be given the corresponding custom duty offset to incentivise them. We can’t penalise companies because we don’t yet have a battery supply chain in the region,” he said. “We have to make some concessions in the short term.”
Cawe added the proposed tariff was intended to provide support for all future manufacturers of batteries, which can be accomplished by the creation of a tariff subheading that will “separate the batteries from cells”.
Lithium ion batteries are the standard power source for most electric vehicles.
The Treasury has said the country will spend R1bn to support local production of NEVs and batteries in a bid to cement SA as a hub for automotive manufacturing on the continent.
One of the crucial proposals by Itac includes expanding the number of materials recognised under the Automotive Production Development Programme, a move that would bring the Southern African Development Community (Sadc) into the picture.
The 10 new materials Itac has proposed be added to the list are rare earth elements, iron, lithium, copper, cobalt sulphate, manganese sulphate, nickel sulphate, polymers, graphite and soda ash.
The move would incentivise OEMs to procure the minerals from the Sadc region without losing their “local content” in SA. For example, the Democratic Republic of Congo, a Sadc member, is one of the world’s largest producers of copper and cobalt.
List expanded
Itac said in a government notice that the list was expanded because several materials associated with battery electric vehicle production, including hybrid derivatives, are not on the list of standards.
The agency, which reports to the department of trade, industry & competition, said the materials and minerals, to the extent that they can be found in viable deposits and reserves in SA and Southern Africa, present SA “with an opportunity to increase manufacturing capabilities, create new jobs, and advance our socioeconomic development goals”.
Cawe said the proposed inclusion of the new materials and minerals came after engagements with the industry. “We know from our engagement with OEMs globally and even in SA ... that one of the things that would make SA a good sell if we want to get battery manufacturing and even electric vehicles assembly in SA is to try to localise as much of the battery as possible,” he said. “That reduces the cost base for people who might want to assemble EVs here.”
Itac has asked the public and industry to weigh in on the proposals, after which it will present its final recommendation to the minister, Parks Tau.
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