To encourage the production of new energy vehicles (NEVs) in South Africa, Finance Minister Enoch Godongwana has proposed that an investment allowance be made available for new investments from March 1, 2026.

In his 2024 Budget, released on February 21, the Finance Minister said that, under this proposal, NEV producers would be able to claim 150% of qualifying investment spending on production capacity for electric- and hydrogen-powered vehicles in the first year of investment.

The tax expenditure on this incentivisation programme is estimated to amount to R500-million for the 2026/27 financial year.

This is in addition to the Department of Trade, Industry and Competition (DTIC) reprioritising R964-million over the medium term for the transition to NEVs, in line with the long-awaited NEV White Paper approved by Cabinet last year.

This reprioritisation of funds comes off the back of the DTIC, in conjunction with National Treasury and automotive industry stakeholders, being tasked by the Portfolio Committee on Trade, Industry and Competition to continue to seek a solution to ensure that South Africa is able to compete in terms of the manufacturing of NEVs.

These measures complement funding that is being secured for the Just Energy Transition Investment Plan (JET-IP) and the implementation plan for electric vehicles.

In the 2024 Budget Review, National Treasury said that transition finance will be met in part through the amounts committed by entities such as the International Partners Group, composed of countries that have endorsed South Africa’s JET-IP, such as France, Germany, the UK and the US.

In addition, regulatory frameworks, such as the green finance taxonomy, published last year, are expected to help incentivise the private sector to provide financing and prepare industry for climate risks.

National Treasury said that a critical part of transition finance is transition planning, which sets out the steps individual firms need to take to ensure they can operate sustainably and in a manner that protects investor and stakeholder interests.

National Treasury will work with the Sustainable Finance Initiative, previously the Climate Risk Forum, to publish principles for effective transition planning this year.