By Maria Nkhonjera – Research Lead supporting the African Climate Foundation’s (ACF) Energy Access and Transitions Programme

As fossil fuel industries and infrastructure reach the end of their historical cycle, renewable energy should become a pivot for South Africa’s industrial development.  At present, roughly 85 per cent of electricity is generated by coal-fired power plants. What is clear is that there is serious strain on South Africa’s energy security and the ongoing electrification crisis reinforces the need for a low carbon pathway that delivers jobs, economic growth, and social benefits. While the  government’s Renewable Energy Independent Power Producer Programme (REIPPPP) and other policies have catalysed a shift in the energy market, the transition to renewable energy is not happening at the speed and with the urgency required.

Unlocking the country’s untapped renewable energy potential reveals the often-intense debates that characterise a larger, more fundamental aspect of South Africa’s entrenched industrial structure. Over the broad span of history, the economy has been structurally dependent on coal based, energy-intensive industrial processes ― reflecting the deep and complex social, political and economic context within which the energy transition is unfolding.

South Africa, underpinned by uneven and exclusionary growth, has largely failed to deliver meaningful structural change, certainly by comparison to countries such as Malaysia and Brazil. The post-apartheid state has set the country on a path of ‘premature deindustrialisation.’

Navigating the complex politics of South Africa’s energy transition requires a proactive and coordinated approach that locates the renewable energy transition within a broad-based industrialisation agenda.

A ‘green’ industrial development agenda

Three key elements should be considered to reposition South Africa’s renewable energy manufacturing.

Firstly,  the creation of new industrial value chains. The increasing evidence of dramatic declines in the cost of renewable energy sources will be a catalyst for supporting South African industries, expanding productive capacity and increasing competitiveness. Industrial growth strategies must be aligned with the energy transition. This would require green initiatives to be integrated into strategic value chains which  have the potential to expand manufacturing capacity, reduce the country’s dependence on fossil fuels and create decent ‘green jobs’. These value chains would include those for materials and components used to manufacture and assemble renewable energy technologies, such as solar photovoltaics (PV), wind turbines, and battery storage systems.

Secondly, the African Continental Free Trade Area (AfCFTA) provides the scope to promote green industries, manufacturing growth and renewable energy infrastructure. Regional energy integration is particularly attractive for South Africa, which has relatively more advanced industrial and technological capabilities, when compared to other countries on the continent. The opening-up of markets and regional economies of scale create opportunities to promote renewable energy production and foster a pro-export environment. These will enable South Africa to trade in clean energy products. Undoubtedly, this requires political leadership and commitment to the AfCFTA. The benefits will depend on creating necessary and sufficient conditions for enabling infrastructure and appropriate policies that support regional energy cooperation through, for example, the integration of grid infrastructure. This would create shared value within the broader framework of Africa’s industrialisation aspirations.

Thirdly, industrial policies should reflect the transformative dynamics of a new energy sector. A coherent industrial strategy will encompass a suite of policy instruments that speak to productive capabilities, finance, technology and trade. Emphasis on employment is essential. Inclusion and targeting of socially and economically disadvantaged groups are necessary for South Africa’s energy transition. Industrial policy will need to focus heavily on producing productive and decent jobs. While South Africa has managed to build productive, export-oriented industries that are globally competitive, these have been concentrated amongst a small number of national champions. This makes the hard and soft conditionalities of job creation critical, together with new priorities such as shifting from fossil fuel use or developing green technologies for various sectors. More attention will also need to be given to greening existing value chain activities.

The South African Renewable Energy Masterplan (SAREM), which is well underway, gives new impetus to a medium and long-term industrial strategy and action plan. It recognises the renewable energy industry as central for rebuilding the economy and supporting  growth through sector-wide linkages. With local content requirements, which support local supplier industries, the masterplan could position South Africa as a globally competitive producer of the inputs required in renewable energy plants.

Opportunity amidst disruption

The question now is not whether renewable energy should displace fossil fuels, but how it can support a new economic system that is structurally different from South Africa’s carbon-intensive and coal-driven industrial economy. In practice, this won’t be easy. There is a delicate balancing required between advancing a low carbon transition and socioeconomic transformation, as argued in Mapungubwe Institute for Strategic Reflection’s forthcoming book, A Just Transition to a Low Carbon Future in South Africa. And the new regional governance framework under the AfCFTA is gaining traction within this changing context.

But uncertainty and opportunity go together.

South Africa is well positioned to leverage its existing socio-economic structures, historic industries and strong technological capabilities to harness green industrial development opportunities. The country’s success in doing so will depend on how well it articulates the link between renewable energy policies and industrial development plans at a national, sub regional and continental level.