By Dennis George
JOHANNESBURG - Electrical carmaker Tesla has embarked on a mission to build its first overseas plant in Shanghai despite the ongoing trade tensions between US President Donald Trump and China.
According to the US Securities and Exchange Commission, Tesla entered into the Tesla Shanghai Fixed Asset Term Facility Agreement (TSFATFA) with a syndicate of lenders for a secured and unsecured revolving loan facility of about R37.40 billion.
The TSFATFA says Tesla may draw funds for the construction and production at the Tesla Gigafactory Shanghai at a low interest rate. All outstanding loans will be repaid in 5 years.
I briefed President Cyril Ramaphosa on these and the great potential for the African market and the rich endowment of mineral resources required for electrification. Ramaphosa is also the chairperson of the African Union, and South Africa advocated for the creation of the African Continental Free Trade Agreement (AfCFTA) to ensure the continent has a large market to compete globally.
However, the country is fixated with tenders and processes.
Africa has developmental funds to accelerate industrialisation with technologies to electrify the continent, to introduce electric vehicles and solar photovoltaic technologies.
The Coega Special Economic Zone (SEZ) in the bustling Nelson Mandela Bay Metropolitan Municipality, is South Africa’s foremost investment hotspot for industries with a global perspective. Importantly, while offering global competitiveness through world-class infrastructure, tax incentives, rebates, and a duty-free zone, Coega was purpose-built for manufacturing and the beneficiation of export goods, investment, and local socio-economic growth to support skills development and job creation.
Coega is the largest SEZ in the southern hemisphere and the Port of Ngqura - a modern multi-user deep-water harbour developed as a gateway to the African and other global markets. Apart from the infrastructure and the supply chain, Coega can easily propel the transition away from internal combustion engines. It would be easy to manufacture battery and fuel cells for electric vehicles in Coega and export these to ports in Africa and the global market.
Africans must reflect deeply on electrification and industrialisation through AfCFTA as an instrument to ignite the achievement of higher inclusive economic growth and decent employment creation. The International Energy Agency’s most recent modelling exercises present a scenario where electricity is becoming the energy of choice in most end-uses, driven by several factors.
The agency says that 74 percent of the electricity demand growth will come from industrial motor systems, space cooling, appliances, ICT and other sectors, including agriculture, the informal sector and rural communities. This electricity demand is to be met, increasingly, with renewables capturing two-thirds of the investment in power plants, residential and commercial properties.
Across the Atlantic, the “Biden-Sanders Unity Task Force” calls for the installation of 500 million rooftop solar panels within five years and the elimination of carbon pollution from power plants by 2035.
The Biden-Sanders blueprint for renewable energy implementation commits $2 trillion (R33.31trln) over four years to escalate the use of clean energy in the transportation, electricity and building sectors, including supercharging investment in innovation and deployment of American made battery technology, clean energy transmission lines, promoting fast and easy permitting for rooftop solar and energy retrofits, creating millions of good-paying jobs in energy efficiency, while making energy costs inexpensive for families, businesses, and state and local governments as well as unlocking tens of billions of dollars of private sector funding to retrofit four million buildings, while prioritising hospitals, schools, and municipal buildings.
During the lockdown, I was astonished to receive a webinar invitation from the US Department of Energy to share my knowledge on strengthening the supply chain for critical minerals that are essential for renewable energy.
Returning to Tesla and the African market development, Europe and China spearhead the way on the adoption of electric vehicles. The UK and France intend to ban the sale of fossil fuel-powered vehicles by 2040, while Germany is offering sizeable financial incentives to consumers to purchase electricity vehicles.
China, the world’s largest car market, will begin requiring at least 10 percent of new car sales to be fully electric or plug-in hybrid. The Chinese offers generous subsidies of $15000 per vehicle.
The main drivers of sustainable renewable energy and adoption of electric vehicles are economic rather than regulatory. The adoption of renewable electricity and electric vehicles to be manufactured in Coega could be a major game-changer for Africa.
As a vertically integrated company that manufactures most of the components that go into electric vehicles, Tesla gains from the economies of scale. Moreover, software plays a bigger role in a Tesla than in a traditional car. Autonomous vehicle technology (self-driving), over-the-air updates, and an iPad-like interface that powers all the controls, so advanced software helps Tesla get higher margins than traditional car companies. Some bullish investors have sent Tesla’s share price soaring in the last few months.
The entry of Tesla into Africa is dependent on visionary and ethical leadership, which is ready for social compacting between government, development funding, industry, and research institutions as well as workers to leapfrog to practical electrification and electric vehicles of all things in Africa.
Dr George is the executive chairperson of African Quartz.
BUSINESS REPORT