The rapidly expanding regional market for battery energy storage systems (BESS) is creating the commercial foundation needed to support domestic lithium iron phosphate (LFP) battery cell manufacturing in South Africa, a new feasibility study released by the Localisation Support Fund (LSF) posits.

The study was conducted by Ernst & Young Advisory Services (EY-Parthenon), serving as an independent adviser to the LSF, and drawing on a multidisciplinary team with expertise in economic development, industrial policy, value chain analysis and advanced econometric modelling.

The study concludes that establishing a gigafactory with capacity of between 5 GWh/y and 10 GWh/y is both operationally and economically viable.

An analysis of South Africa’s manufacturing cost profile demonstrates that, under the scenarios assessed and with appropriate tariff support set within World Trade Organisation (WTO) bound rates, South African-produced LFP cells can achieve price competitiveness with imported alternatives, including those from lower-cost East Asian producers, the study reveals.

The driving force behind the feasibility case is demand.

The Southern African region is projected to require 55 GWh of battery capacity by 2034 – a compound growth rate of roughly 30% a year – fuelled primarily by the accelerating deployment of BESS infrastructure for grid stabilisation and renewable-energy integration.

South Africa's 2025 Integrated Resource Plan (IRP 2025) targets over 105 GW of new generation capacity by 2030, with BESS positioned as a key enabler of that programme.

The analysis finds that domestic demand alone could support two to three local manufacturers operating at scale by 2034.

The BESS segment, which encompasses utility-scale storage, commercial and industrial behind-the-meter applications, and critical infrastructure, is identified as the highest-demand market, with a strong customer preference for local supply where cost and quality are competitive under certain assumptions.

Interviews with offtakers across these segments showed that local sourcing is actively valued for supply chain resilience, operational independence and reduced exposure to global logistics disruptions.

The project directly supports South Africa’s broader energy and industrial policy framework, including the South African Renewable Energy Masterplan, which targets 70% component localisation in the renewable energy supply chain by 2030.

While the immediate market opportunity is concentrated in stationary storage, the study also points to the longer-term potential of battery electric vehicles (BEVs) as a second demand wave. Government has signalled its support for this transition, retaining a 150% tax deduction for EV production investment within its broader industrial strategy.

The passenger EV segment is not yet a primary demand driver for locally manufactured cells, as cost competitiveness and scale remain prerequisites. However, the study notes that a domestic gigafactory, once established, would be well positioned to serve this market as it matures.

Commercial vehicles, including electric buses and trucks, are identified as an earlier-stage opportunity given their preference for LFP chemistry and the value placed on local technical support.

A cost benchmarking exercise conducted against nine comparator countries underpins the study’s competitiveness assessment.

Using a unit labour cost methodology, which measures wages relative to productivity output rather than in absolute terms, South Africa compares favourably with major manufacturing economies including Germany and Brazil.

While some lower-cost Asian jurisdictions retain a wage advantage, the analysis perceives this to reflect labour market informality and weak wage enforcement rather than genuine productivity superiority.

The study finds that South Africa’s competitive position on energy costs, water costs, and the incentive architecture available through special economic zones (SEZs), when assessed under various policy and tariff scenarios within WTO bound rates, is sufficient to close the cost gap with East Asian cell producers and deliver price-competitive product to regional customers.

Local refining and beneficiation of LFP precursor materials, leveraging South Africa’s mineral endowment, could further reduce landed costs to an estimated $68/kWh to $72/kWh by 2030, potentially up to 40% below global import prices, the study avers.

South Africa’s mineral endowment provides what the study describes as a structurally distinctive foundation for LFP cell manufacturing.

The country holds considerable domestic reserves of iron-ore, phosphate, and copper, which are core inputs in LFP cell chemistry, alongside broader strategic mineral wealth that positions it as an ideal partner in global battery supply chain strategies.

The study identifies local refining and beneficiation as a medium-term opportunity to extend the value chain upstream, reducing input costs and import dependency simultaneously.

The analysis acknowledges that upstream gaps in mineral processing and cell component manufacturing remain, and that strengthening local and regional supply partnerships will be necessary to build long-term supply chain resilience.

Regional trade frameworks like the African Continental Free Trade Area and logistics corridors such as the Lobito Corridor are identified as enabling mechanisms for aggregating demand and reducing logistics costs across the continent.

SEZS

The feasibility study assessed five SEZ locations against a weighted criteria framework covering infrastructure readiness, proximity to ports, incentive depth, available space, grid reliability, water security and access to talent.

The Atlantis SEZ in the Western Cape emerged as the top-ranked location, scoring highest on proximity to South Africa’s densest cluster of battery pack assemblers and integrators which provide an immediate anchor customer base for locally manufactured cells. Atlantis also offers unique access to renewable-energy projects in the Western Cape, enabling a green-powered manufacturing operation from the outset.

The Coega Industrial Development Zone, in the Eastern Cape, is identified as the second preferred location, distinguished by direct access to the deep-water Ngqura port and its established record in attracting large-scale industrial investment in the automotive and metals sectors.

Both SEZs are indicated to offer competitive SEZ-level tax incentives, streamlined permitting and the infrastructure depth required for gigafactory-scale operations.

The establishment of a domestic gigafactory could considerably benefit employment and skills development.

The study modelled a workforce of over 560 direct employees at the 5 GWh scale, concentrated in equipment operation, maintenance, quality assurance and engineering roles.

The project could contribute materially to the government’s target of creating 25 000 new jobs in the green economy by 2030, with additional multiplier effects across the upstream mineral processing and downstream systems integration value chain, it predicts.

The study also highlights the critical importance of skills development infrastructure, recommending early engagement with the Manufacturing, Engineering and Related Services Sector Education and Training Authority and the Chemical Industries Education and Training Authority, alongside partnerships with South African universities and the Council for Scientific and Industrial Research, to develop the specialist electrochemistry and advanced manufacturing capability the sector requires.

The study identifies partnerships with established international cell manufacturers as a critical enabler of successful market entry.

“South Africa does not need to be a passive consumer of the global energy transition. This feasibility study makes a compelling case that we have the minerals, the location, the industrial base and the policy framework to be a manufacturer and exporter of the technologies that will power that transition.

“The market is here. The demand signal is clear and growing. What is needed now is coordinated commitment from government, industry, and capital to translate that opportunity into production capacity. The LSF looks forward to working with all stakeholders to take this forward,” says LSF CEO Irshaad Kathrada.