South Africa’s government has introduced a major tax incentive for investments in the production of electric- and hydrogen-powered vehicles. The scheme will allow manufacturers to claim a 150% tax deduction on investments into the sector.
Announced by South Africa’s Minister of Finance Enoch Godongwana, the tax break – effective from 1 March 2026 – is projected to reach $26 million for the fiscal year 2026/27.
With the potential to produce up to 13 million tons of green hydrogen and derivatives per year by 2050, South Africa has identified a $15.6 billion investment pipeline under the country’s Green Hydrogen National Program.
The program will comprise 19 projects identified for accelerated development by the government, including the 400-kt-per-annum Boegoebaai Green Hydrogen Project; the 780,000 ton-per-annum HIVE Ammonia Project; and the 185-kt Hydrogen Valley Project, among other developments.
Meanwhile, boasting significant reserves of raw materials crucial for the manufacturing of lithium-ion batteries – such as nickel and manganese – South Africa is well-positioned to accelerate its vehicle manufacturing industry, which accounts for 7.5% of the country’s GDP and 10% of manufacturing exports.
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The tax incentive serves as a lifeline for vehicle manufacturers, including local branches of industry giants like Ford Motor Co. and Volkswagen AG. With the automotive industry contributing significantly to South Africa’s economy, generating over $21 billion in exports last year, this measure is pivotal for sustaining and expanding the sector’s global footprint.
At its core, the tax break is a catalyst for transforming South Africa’s automotive landscape. By kickstarting investments and fostering a culture of innovation, the incentive aims to accelerate the growth of the electric vehicle (EV) sector. However, industry leaders emphasize the urgency for an earlier start date to maximize impact and competitiveness.
Despite its vast resources, South Africa has yet to realize its full potential in the electric vehicle domain. Blessed with abundant raw materials for lithium-ion batteries, the country ranks among the top global reserves. Additionally, leveraging its platinum reserves, South Africa eyes a pivotal role in the emerging green hydrogen industry, aiming to capitalize on fuel-cell technology.
