If South Africa is serious about building an indigenous EV industry, the effort must be treated as a long-term national project rather than a short-term political initiative, writes the author.
Image: IOL
The core problem is this: South Africa has a domestic carbon tax, and the European Union has its own Carbon Border Adjustment Mechanism (CBAM). South African manufacturers exporting to Europe now have to contend with both. Former Trade Minister Rob Davies has called this a "double penalty." Mineral and Petroleum Resources Minister Gwede Mantashe made the same point bluntly at a recent industry gathering, noting that the US, China, India, and the Middle East have no carbon tax, South Africa is the only country outside the EU carrying this burden, and it is linked directly to European standards.
South Africa's domestic carbon tax currently sits at R190 per tonne of CO₂ equivalent and is projected to rise to around R400 per tonne by 2030. On top of that, CBAM certificates, which EU importers must purchase from January 2026 are priced in line with the EU Emissions Trading System, currently around €70 to €100 per tonne. South African exporters can theoretically receive credit for carbon taxes already paid domestically, but the DTIC has acknowledged the country lacks the technical capacity to implement the monitoring, reporting, and verification methodologies that CBAM demands. In other words, the credit exists on paper. Claiming it is another matter entirely.
To understand why this is so damaging, consider the competitive landscape. Germany and France benefit from internal EU carbon pricing that feeds back into green transition funds and shields their manufacturers. China, which produces over half the world's vehicles, faces no comparable external carbon burden on its exports. India, which is rapidly expanding its automotive manufacturing base, has none either. South Africa, with a 33% unemployment rate and an economy that desperately needs its industrial base to grow, is playing by rules its competitors simply ignore.
In the automotive sector specifically, CBAM places a premium on the use of fossil fuels in production — and that premium is added to the logistics chain too. If goods are transported by truck or train using fossil fuels, the carbon content is factored in at every step. Given that South Africa's electricity grid remains overwhelmingly coal-dependent, almost every part of the manufacturing process carries embedded carbon costs that European importers must now account for.
South Africa ranks among the most carbon-intensive economies in the G20, with nearly 80% of its electricity generation coming from coal. The bitter irony is that this makes South Africa precisely the kind of economy CBAM was designed to penalise, even though it voluntarily adopted carbon pricing that far wealthier competitors in Asia and North America never did.
Mantashe's logic is uncomfortable but not wrong. The Chinese government reportedly advised South Africa never to dismantle existing technology in anticipation of future alternatives. That is not an argument against transition, it is an argument against self-sabotage during transition. You do not shut down the engine while the car is still moving.
What South Africa needs is a decarbonisation strategy that moves at the pace of its own industrial capacity, not at the pace of European politics. The government is currently in negotiations with Brussels to secure the same flexibilities granted to the United States. That is a start, but it is not enough on its own. A 150% investment allowance for qualifying spend on electric and hydrogen vehicle production has been introduced from March 2026, a positive signal, but meaningless if the factories making combustion-engine vehicles for export are being priced out of European markets right now.
South Africa's automotive sector already exports vehicles worth a record R270.8 billion. That is not a number the country can afford to put at risk for the sake of regulatory alignment with an economic bloc that has never extended the same consideration in return. Climate ambition is legitimate and necessary. But ambition without protection is just performance, and South Africa's workers cannot afford that.
Written by:
*Sesona Mdlokovana
Associate at BRICS+ Consulting Group
Africa Specialist
**The Views expressed do not necessarily reflect the views of Independent Media or IOL.
** MORE ARTICLES ON OUR WEBSITE https://bricscg.com/
** Follow @brics_daily on Twitter for daily BRICS+ updates and instagram @brics_daily