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Opinion Piece: Localisation Of The Renewable Energy Industry Can Position African Manufacturers To Effectively Compete With Foreign Companies

  • EDITORIAL
  • 4 min read

By Mamiki Matlawa, Group Business Development Executive at ACTOM

Despite the urgency to transition from traditional power production to sustainable alternatives – not only as it reduces environmental impact but also fosters local economic growth – wealthier nations across the globe are leading the shift while some countries, such as South Africa, are lagging.

Of crucial importance is to adapt existing products and engineering offerings to meet the demands of the renewable energy industry, with innovations such as online condition monitoring, that can improve the efficiency and reliability of renewable energy projects, paving the way for a sustainable future.

South African companies have been involved in the green economy space since 2011 when the government introduced the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Thus, local organisations already have a wealth of experience in manufacturing the balance of plant for renewable energy products, including in the areas of engineering, procurement and construction, financing and operation, and maintenance.

South Africa has homegrown skills and resources in renewable energy, which could be harnessed and nurtured to overcome South Africa’s lag in the renewable energy space. Furthermore, these skills and resources could also be exported to the rest of the continent to work with other African countries to shape a greener and more resilient future – unlocking economic benefits for South Africa and Africa as a whole.

Comprehensive approach needed

However, to successfully develop South Africa’s domestic manufacturing capabilities and reduce the African region’s dependence on foreign suppliers, a comprehensive approach is vital with companies providing end-to-end services, including product supply, installation, and maintenance to ensure a smooth transition to sustainable energy sources.

Key to this is mechanisms such as the African Continental Free Trade Agreement (AfCFTA), which aims to achieve the free movement of physical goods throughout the African Union, as well as the liberalisation of trade through the implementation of preferential tariffs.

Recently, the five member states of the Southern African Customs Union (SACU) – South Africa, Lesotho, Botswana, Namibia and Eswatini – ratified the AfCFTA agreement. SACU has also submitted its joint offer of tariff concessions, which is currently being verified by the AfCFTA Secretariat.

The AfCFTA agreement is expected to catalyse the manufacturing industry and open trade opportunities between African manufacturers, increasing regional demand for equipment and services and driving access to new markets. Importantly, this will enable African manufacturers to develop economies of scale, which will position them to effectively compete with foreign companies in the renewables space.

South African transition

On the domestic front, a significant factor that is to some extent helping South Africa bridge the gap to wealthier nations in transitioning to sustainable energy sources is the ongoing energy crisis, as well as natural disasters like recent flooding in some provinces. These are the drivers that are pushing the country to look at sustainable energy sources and thus speeding up the transitioning process.

According to Trade and Industrial Policy Strategies Senior Economist Gaylor Montmasson-Clair, South Africa has imported R35 billion worth of solar panels since 2010. Montmasson-Clair says that R12 billion worth of solar panels have been imported by South Africans so far in 2023. This is equivalent to roughly 2 200MW of generation capacity. It is estimated that South African households and businesses have installed 4 400MW of rooftop solar PV to date, which has significantly reduced the residual load that Eskom needs to meet during the day.

The scope for African manufacturers in the green economy is vast, but the continent needs to expand the supply chain in this space by effectively harnessing initiatives such as the AfCFTA agreement to build economies of scale. It is only through the localisation of the renewable energy industry that local manufacturers can hope to compete with large-scale and well-established foreign suppliers.