co-founder of Zero Carbon Charge.
The conversation on climate change has gained huge momentum. There is however a lingering perception that the move to a greener economy, or to engage in climate transition, is somehow a loss to the existing economy.
It is perceived to be a subtraction of investment and displacement of current activities, an either-or situation. The truth is, it is a both-and situation, a growth opportunity; it is without doubt “additional” in the best sense of the word.
In SA, with its anaemic economic growth and severe unemployment, we should be grabbing green economy opportunities with both hands, whether it is greening our built environment, adopting sustainable transport solutions such as electric vehicles (EVs), generating clean energy from renewable energy sources or energy storage, hydrogen and recycling.
The hidden secret of the green economy and climate transition is that, in the words of an American congressman, “climate change means building a lot of things”. It is really infrastructure — financeable, long-term, productive hard assets — that engender employment and economic growth.
Huge amounts of money are streaming into green economy transitions worldwide: $364bn was available through institutional funds in Europe in 2022, a doubling from the previous year. The US has committed to a greening of its economy, with an envisaged investment of $275-trillion over the next few years to reach net zero by 2050.
According to a recent Russell FTSE study, companies they term “green” have outperformed more conventional companies by a wide margin, with compound growth of 14% over the past 12 years. This is equally true in the car sector, where the combined market caps of the two leading all electric car manufacturers (Tesla in the US and BYD in China) exceed the combined market caps of all the other manufacturers put together.
SA will be no exception
The margins on electric cars are higher and the complexity less, and consequently, for purely economic reasons there is a huge incentive for manufacturers to fall in with the climate transition initiative and quite soon cease the production of internal combustion engine cars. In many markets prohibitions loom (ranging from 2030 to 2035) on the sale of internal combustion cars.
Many car manufacturers have thus already stopped developing new internal combustion models and are simply running out existing model ranges. There is no market in the world that can avoid this; sooner or later the transition to electric cars happens. For example, in Australia electric cars made up 1% of sales in April 2022 but this had risen to 8% just 12 months later.
SA will be no exception. The move to EVs for passengers and freight is a huge growth opportunity for the country, stimulating investment, employment, local manufacturing and infrastructure spend. It is estimated that once electric cars begin to dominate the market, they will add 10%-15% to electricity demand. That in itself is one of the biggest investment opportunities available. For SA it embodies two of the three big levers for the just energy transition — energy and EVs — highlighted by the trade, industry & competition minister in his recent budget vote speech as opportunities for an injection of capital and innovation in the economy.
From a component manufacturing perspective a shift to green transport presents multiple opportunities for local production. Components can be made in SA due to the steady, long-term demand of the process: photovoltaic panels, batteries, inverters, cabling, and EVs of all sizes. The EV sector is naturally expected to drive growth in SA’s battery storage market, developing value chains and creating a positive knock-on effect for job creation and GDP growth.
Enormous import substitution effect
The SA & Southern Africa Battery Market & Value Chain Assessment Report, compiled by Customised Energy Solutions (CES) on behalf of the World Bank that was published earlier this year, forecasts a best-case scenario of almost 60,000 jobs that can be created if SA pursues battery production.
There is also an enormous import substitution effect: SA is spending much more than R250bn a year importing oil and fuel products for petrol and diesel vehicles of all kinds. As internal combustion vehicles are phased out there will be a significant decrease in forex expenditure, resulting in the retention of that money within SA and enabling it to be reinvested in the economy.
It will not happen overnight. It will be a gradual process, and it might take one or two decades. This is precisely why it is considered so “additional”. While the conventional economy continues, this is added on top. It is hugely stimulating, innovative and equips us for the future. And it is patriotic to boot.