South Africa is not prepared for the serious economic implications of an inevitable transition from fuel-run cars to electric vehicles (EVs), says Vishal Premlall, Director of the South African Petroleum Retailers’ Association (SAPRA), a proud association of the Retail Motor Industry Organisation (RMI).
“The economic changes will in the medium to long term oscillate between beneficial and negative. But in the short term most of the impacts are likely to be minimal, other than challenging retail petroleum and transport sectors to think differently about their business and how they will change their businesses to accommodate and leverage these technology advances.
“This will consequently require a transition plan for affected industries. A proactive and coherent approach is imperative to manage the transition effects and maximise the benefits of inclusive development,” says Premlall.
In the broader economy, the transition to EVs will deeply transform the transport value chain, which employs large numbers of people who, over time, will experience transformations in their jobs and careers.
Petroleum products are currently South Africa’s largest single import at more than R100bn in 2018. As the demand for fuels and internal combustion vehicles dwindles, government revenues will be negatively impacted by a decrease in taxes and levies, but at the same time, there will be a significant decrease in the costs associated with clean air, which in 2017 was estimated (by the WHO) to cost South Africa R200b. In 2017/2018 fuel levies contributed R70.9bn to government revenues, close to 6% of net revenues, these taxes will be offset through clean air saving and other forms of tax collection.
“On the automotive manufacturing side, the industry employs over 30000 people and if we do not transform along with the rest of the world, we could see ourselves on the cusp of losing principal markets in the EU and US, which are seeing a rapid, unstoppable transition to e-mobility,” he says.
Downstream, the petrol station business, which employs just under 80 000 people in South Africa, will need to respond to these changes, just as they have successfully responded to changes in the past. The automotive retail industry, employing over
300 000 workers, will also see big changes to their operating models as EVs will have reduced maintenance requirements and longer lifespans. The nature of the transition, which will see old and new technologies applied side by side for the foreseeable future, offers the opportunity to manage a gradual transformation.
This transition will be so gradual, that based on modelling done for South Africa’s optimistic adoption, the job losses could be less than the natural attrition within the industry. “So yes, the jobs will disappear, but should not really be felt as there will be other jobs to replace them,” explains Premlall.
He says it is not a question of if but when the transition takes place – “We are already in the transition phase and every retail petrol station needs to ready itself for the level of changes that are imminent. The world is rapidly moving towards EVs, and even in South Africa more progress has been made than the average person suspects. We still have to grapple with how to deal with these technological developments and their potential for deep, multifaceted implications for the economy and society.”
For instance, he says, GridCars® (Pty) Ltd has partnered with Solareff in South Africa to help drive the use of renewable energy in the new industry. Given the challenges faced in South Africa with the national grid, renewable energy is a practical alternative for charging and also for any commercial site. GridCars® is actively working with the industry to establish South Africa EV infrastructure and has already rolled out a national network of charging stations – The Powerway – on the N1, N2, N3 and N4, approximately every 100km to 200km. “The impact this will have on SAPRA is significant, albeit not in the immediate to medium term,” says Premlall.
“Furthermore, charge points are being installed at a wide variety of locations such as shopping malls and car parks, as well as along national roads. This is extremely exciting for the consumer, but I’m not sure the automotive industry is prepared for this speed of roll-out. Anyone involved in our industry has to be questioning at the moment: how long to the end-of-life of fossil fuels, and what is the medium-term future of petrol stations?”
At issue, he points out, is that these are not factors within the control of the industry. “They’re external forces – a technology which is shaping a new industry out of the old, in the same disruptive manner that broadcasting is currently being disrupted by Netflix and the internet; the taxi industry by Uber; and accommodation by Airbnb. As an industry, retail service stations have to ensure they do not go the same way as Kodak. We need to be early adopters.”
There is time yet, he concedes. Notwithstanding the ‘faster than speed of light’ roll out, there is equally compelling research that any change will be gradual. However, Premlall says the industry must not be lulled into a false sense of confidence. “Are we going to lag behind and have to play ‘catch-up’ or be early adopters? People are already trying to influence public policy against fossil fuels. When is the right time to start evolving our business model – in a generation? The evolution is already happening, even if it isn’t disruptive yet. EVs are being manufactured, and some are already available in South Africa.”
“A company such as Nissan, in its future planning projects no sign of fuel stations in that future scenario,” cautions Premlall. “This is the single biggest challenge facing the retail petrol sector.”