South Africa shoots itself in the foot

South Africa is experiencing a massive renewables boom in the form of solar, batteries and inverters in an effort to escape Eskom and its load shedding – but the country’s economy and unemployed aren’t benefitting from the billion-dollar industry.

Collectively, the country has imported $2.5 billion (R47 billion) worth of solar panels, lithium-ion batteries and inverters, compared to $1.7 billion (R32 billion) in the whole of 2022.

This includes importing roughly R12 billion worth of solar cells and panels alone in the first half of the year as the country faces crippling load shedding.

This exponential industry growth can potentially add desperately needed economic growth and job opportunities in South Africa, but imports are taking preference, and another economy is benefitting from our demand.

These are the concerns of Gaylor Montmasson-Clair, Senior Economist in sustainable growth at Trade and Industrial Policy Strategies (TIPS) and the facilitator of the South Africa Renewable Energy Masterplan (Sarem), who spoke to Bruce Whitfield on The Money Show.

“On the one hand, it’s great to see a new booming industry emerging, but it’s sad to see that the bulk of what we need to stave off load shedding is being imported and to the benefit of another economy,” said Montmasson-Clair.

He noted that South Africa already has the needed manufacturers that can produce solar panels, batteries and inverters, but it’s expensive – and this is even more of an issue when considering that these products are subsidised when imported from China.

Montmasson-Clair said South Africa is missing out on a massive opportunity to attract significant investment into the country.

Investments that would benefit the local economy and offer increased job opportunities are critically important in a country with an extremely high unemployment rate.

He further noted that you rarely get an opportunity to take advantage of an industry that is expanding exponentially. Still, there seems to be little incentive for companies to get involved due to the high costs and very little government help.

“We should be supporting our manufacturers to make sure that they can supply this hugely lucrative market and create more jobs,” said Montmasson-Clair.

“We currently have two manufacturers of solar panels, two main companies that produce wind towers, numerous companies that produce lithium-ion battery packs, and several companies that produce inverters. We really have some world-class productions,” he added.

According to Montmasson-Clair, the vital issue is that every single panel or product out of China is subsidised by the government, which makes it hard for South African companies to compete at price points.

However, the country’s manufacturers are not far off, and they need some form of assistance to benefit from a “once in a generation industry boom”, which the government seems to be short-sighted on.

From an economic standpoint, it doesn’t make sense to have imports skyrocketing when domestic manufacturing isn’t even operating at full capacity, he added.

However, Montmasson-Clair said that the Sarem is still out for public comment until 18 August 2023, and this masterplan aims to address the assistance needed from the government – including policies to aid local producers – and incentives to drive private participation in the industry before South Africa misses the boat regarding this opportunity to add growth to the economy.

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