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The missing link in Africa’s EV revolution
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From the newsletter
Ghana's 2024 budget promised to do away with import taxes on EVs as part of its Automotive Development Policy. However, this plan hasn't quite taken off as it lacks clarity on implementation. Sadly, this isn't all that surprising. Across Africa, we often see good policies on paper that never materialise and even when they do, things tend to move at a snail's pace.
The budget statement clearly stated that “investors seeking to assemble electric vehicles in-country will be granted import exemptions on semi-knocked down (SKDs), completely-knocked down (CKDs), and fully-built units (FBUs)”
It also mentioned that “import duty exemptions will be granted for the importation of commercial electric buses for public transportation” RATE PAGE
More details
The reality on the ground seems different as the government says that duty exemption for electric buses applies only to government imports, not private ones.
Ghana is a signatory to the ECOWAS Common External Tariff (CET), which requires a 20% duty on vehicles imported from non-ECOWAS countries. To grant duty exemptions for EVs, Ghana would need to apply for an exemption from ECOWAS and pass a legislative instrument (LI) to give legal effect to the duty-free status mentioned in the 2024 budget.
Commercial transport operators criticise the policy as discriminatory, favouring public sector vehicles and argue that limiting duty exemptions to government-imported buses gives an unfair advantage to public sector vehicles, which could discourage private investment and innovation in the EV market.
In many parts of Africa, policy decisions are often driven by political considerations rather than economic factors. Policies that generate tax revenue tend to be prioritised, even if they may stifle sector growth, such as promoting EV adoption.
For example, in Kenya, the 2024 finance bill sought to eliminate certain benefits for EVs, such as reduced import duties and VAT exemptions. This move was aimed at expanding the tax base.
Uganda's Finance Act of 2023/24 initially exempted most EVs from import duties. However, the Finance Act of 2024/25 reversed these exemptions, only maintaining them for lithium-ion batteries and EV parts.
South Africa has introduced tax incentives that allow carmakers to claim 150% of their expenditure on new production capacity for electric and hydrogen-powered vehicles. However, these incentives will not take effect until 2026.
Our take
Policy instability is likely to persist in Africa, with frequent changes as countries grapple with the need to balance economic growth and revenue generation.
Due to high debt levels, some countries might resort to taxing even emerging sectors. However, more stable and mature economies, such as South Africa and Morocco, are more likely to support the growth of the EV sector to enhance its competitiveness before imposing taxes.
Finding a policy balance between local EV production and EV imports will be a crucial goal for many African countries as they strive to stabilise their economies.