Run on Numbers: Despite conflicts of vested interests, we need to adapt to survive

Geopolitical risks will remain high in 2024, and there is no short answer to these issue. Picture: Independent Newspapers.

Geopolitical risks will remain high in 2024, and there is no short answer to these issue. Picture: Independent Newspapers.

Published Jan 29, 2024


The Department of Trade and Industry has produced a white paper (November 2023), relating to electric vehicles.

The report states: “South Africa stands at a pivotal juncture, facing a challenge of profound complexity: how to transition both its automotive market and productive capacity to electric vehicles (EVs). The transport industry is South Africa’s third largest source of emissions, accounting for 11% of the total, and the sector is therefore important to ensure emissions reduction.

"Leveraging Southern Africa’s mineral wealth alongside its emerging capacity to beneficiate these minerals can serve as the region’s greatest contribution to the green industrial revolution, laying the foundation for a grand bargain between the African continent and the industrialized countries of the north and east.”

1. Geopolitical risks will remain high in 2024, and there is no short answer to the issues, it is as complicated as anything can get. The world is reeling from the after effects of the Russian invasion of Ukraine. In 1990, the Soviet Union and the Western countries signed the Treaty on Conventional Armed Forces in Europe. Formal contacts and co-operation between the newly founded Russian Federation and Nato began following the dissolution of the Soviet Union in 1991, within the framework of the North Atlantic Cooperation Council (later renamed the Euro-Atlantic Partnership Council). Despite many efforts to keep the peace in the region, Russia invaded Ukraine, considering it necessary due to the continuation of the eastward expansion of Nato towards the Russian border.

We in South Africa have moved from being spectators in the Israel-Gaza conflict to international law litigants. South Africa instituted proceedings at the International Court of Justice over allegations that Israel is committing genocide in Gaza. The ICJ is an impartial and independent international court that adjudicates disputes between states. Israel states that its actions are warranted since the Hamas Charter reveals its intent to destroy Israel and oppose peace. In turn, South Africa’s case is based on the premise that even in war, there needs to be proportionality in what conduct is based on. In addition, no action may be directed indiscriminately, and women, children and the elderly may not come into the firing line. The court case soon highlighted how various states viewed the issue. Self-interest rather than morality seems to be the driving force; however, the tide of world opinion seems to have turned decisively against Israel.

2. Several other noteworthy conflicts are beginning to affect citizens in South Africa. The trade relations between the US and China are escalating to a level that resembles the Cold War, forcing companies to rework their supply chains and investment strategies. In the US, the following statement is self-explanatory. “The Department of Commerce’s Bureau of Industry and Security (BIS) is implementing a series of targeted updates to its export controls as part of BIS’s ongoing efforts to protect U.S. national security and foreign policy interests. These updates will restrict the People’s Republic of China’s (PRC’s) ability to both purchase and manufacture certain high-end chips used in military applications and build on prior policies, company-specific actions, and less public regulatory, legal, and enforcement actions taken by BIS.” We have moved into the digital era over the past decades, and it is a revelation to look at this statistic: China is the world’s largest semiconductor market, representing 31.4% of worldwide final sales or $180 billion out of $574bn in 2022. With a value of $415.6bn, IC imports accounted for 15.3% of China’s total imports last year. It remains the largest import product for China, exceeding crude oil, which accounted for 13.5%. Do we need a reminder that the top-performing company listed on the JSE has interests in the digital economy in China? China spends the same amount on computer chips as it does on defence. The US has other aspirations. In the Digital Age, its priorities do not make sense to citizens. There is growing impetus on the de-dollarisation front, and the US may find them in a non-sustainable spending path.

Source; Stockholm International Peace research Institute. Graphic: Independent Newspapers

3. The US and UK had conducted eight strikes, with support from Australia, Bahrain, Canada and the Netherlands, targeting a Houthi underground storage site as well as missile and surveillance capabilities. “The strikes are intended to disrupt and degrade the capabilities that the Houthis use to threaten global trade and the lives of innocent mariners,” the joint statement said. The Houthis have said the attacks are in response to Israel’s war in Gaza and to show their support for the Palestinians. In addition, the Yemeni Armed Forces affirm that retaliation against American and British attacks is inevitable, and any new aggression will not go unpunished.

Geopolitics affect international trade relations, and globalisation can become endangered. Many commentators have predicted the end of globalisation with increased internalisation of production as advocated by former US president Donald Trump. The annual meetings of the International Monetary Fund (IMF) and the World Bank, which took place in West Berlin in 1988, saw strong protests that can be categorised as a precursor of the anti-globalisation movement. Those against globalisation that has taken place over the past three decades base their concern on the basis that large, multinational corporations have unregulated political power, exercised through trade agreements and deregulated financial markets. Specifically, corporations are accused of seeking to maximise profit at the expense of work safety conditions and standards, labour hiring and compensation standards, environmental conservation principles and the integrity of national legislative authority, independence and sovereignty.

4. The global nature of automotive production means that investment and component sourcing decisions in modern technologies and the production of EVs and components are taken at the global level.

South Africa has a long and successful car manufacturing history. During 2022, the total revenue earned from vehicle exports amounted to R227.3bn and the country produced 555 889 new vehicles in 2022. We cannot afford to lose out on the imminent fundamental changes in the industry. However, our challenge is compounded by critical energy shortages, the imperative to decarbonise the economy, and financial constraints across South African households and the public sector. The country must navigate the transition in a manner that supports the continued production and export of vehicles and components to maintain and potentially grow the more than 110 000 direct jobs (8% of manufacturing employment) in the industry. South Africa exports approximately 63% (2022) of the vehicles it produces, therefore the country cannot ignore global developments. Key export markets like the EU and the UK have each announced effective bans on the sale of ICE vehicles by 2035. In 2022, 467 410 EVs were sold in South Africa, 0.9% of total sales in that year. A key tenet of SAAM 2035 South African Automotive Masterplan (SAAM 2035), is to grow the local content of vehicles produced in South Africa from the current average of 43% to 60%. The component manufacturing industry accounts for the lion's share of jobs in the automotive industry, accounting for more than 70% of the total employment in the automotive industry in 2022. Switching to EVs will require a major reskilling and capital expenditure effort.

There will be a huge co-operation opportunity in the supply of minerals to the EV battery market with the rest of Africa in which South Africa can become a major contributor.

5. While slightly more than half of consumers say EVs are the future and will eventually replace internal combustion engines, less than a third of dealers say so. This all comes at a time when investments in EVs are more than ever.

Source: Department of Trade and Industry has produced a white paper (November 2023).

In mid-2023, South Africa had about 350 public EV charging stations, split evenly between fast-charging and slow-charging stations. The stations are, however, very concentrated at this stage. A map indicating charging points for Ev’s in South Africa can be viewed at

The road ahead is packed with uncertainty, and obstacles but fortunately huge opportunities as well.

* Kruger is an independent analyst.