The World Economic Forum (WEF) has highlighted South Africa as one of the countries making the strongest progress in energy transition alongside other African countries and other emerging economies.
In a report released this week, the country ranked 84th out of 120 countries on the WEF’s list of 120 nations that have made some advancements in energy transition. This comes as South Africa develops a dynamic electricity market that will see the state-run Eskom compete with independent power producers for residential and business customers.
In the report, titled “Fostering Effective Energy Transition Insight” (ETI), the WEF praised South Africa, Ethiopia, Tanzania, Zimbabwe, and Lebanon as among the top five countries that achieved the highest levels of relative progress in their respective energy transitions.
“While these countries have shown significant strides, there is still considerable room for improvement. Nevertheless, the success stories of these countries, which are in the lower quartile of the ETI ranking, provide valuable and specific lessons, especially for those nations that have, so far, experienced an unbalanced energy transition.”
In the face of load-shedding — which has worsened progressively over the past four years, with the exception of 2024 — households and businesses have increasingly been turning to solutions including rooftop solar to secure a reliable supply of power.
The progress of Sub-Saharan African countries was noteworthy as 83% of the countries on the index moved backward in at least one of the three energy system performance dimensions indicators; namely energy security, energy equity and energy sustainability.
The report said markets, including South Africa and Zimbabwe, saw a rise in renewable energy generation, with Zimbabwe growing its capacity primarily through hydropower and South Africa doing the same through an increase in rooftop solar for households. But it said there was still room for improvement.
“Despite strides made in improving energy and carbon intensity, South Africa’s energy sector still has significant room for further enhancement. On the other hand, several countries have experienced a reversal in energy transition momentum over the past three years, notably, the UK, Italy, Turkey, Angola, and Kuwait.”
The report said the index’s regional breakdown of energy transition momentum reveals a wide divergence in performance, with Sub-Saharan Africa showing the strongest improvement, while the Commonwealth of Independent States experienced the most significant decline.
“Over the past decade, the Middle East, North Africa, and Pakistan region has seen 7% growth in ETI scores, which have stagnated in the last three years. The region’s heavy reliance on oil revenues poses challenges for a sustainable energy transition.
“While transition readiness has improved by 22% over the decade, the region has seen the most significant decline in finance and investments in the past three years.”
The report said the rising global focus on emissions reduction is driving the market for green bonds, while energy efficiency reduces energy demand in various markets.
The large-scale renewable energy and energy storage market remains a promising avenue for sustainable growth and energy security
— Ulrich Terblanche, GreenCape senior analyst
“In Sub-Saharan Africa, the African Energy Guarantee Facility offers insurance against political risks for green energy projects aligned with EU guidelines. Similarly, in Nigeria, InfraCredit’s guarantees have facilitated access to local currency debt finance from the domestic bond market for energy infrastructure projects valued at $300m.”
European countries still lead the overall index, with Sweden on top, Denmark, Finland, Switzerland and France at the very top. Brazil and China have also made notable progress. The gap in performance between advanced and developing economies continues to narrow, the report said.
Roberto Bocca, head of the WEF’s Centre for Energy and Materials, said clean energy infrastructure investments have increased to reach $1.8-trillion in 2023, though almost 90% of the growth since 2021 has been in advanced economies and China.
“Digital innovations, including generative artificial intelligence, present significant opportunities for energy companies, enabling them to generate over $500bn in savings annually. This can enhance equity and security by enabling additional capital investment or reducing energy supply costs.”
He said, however, that as these technologies advance, the electricity needed for their computational demands will increase and must be managed carefully through the adoption of more efficient AI models and clean energy sources.
Accenture Strategy Group CEO Muqsit Ashraf said the speed of the global energy transition was now more important than ever and that policymakers and businesses needed to balance the three energy system priorities of equity, security, and sustainability.
“It is clear that there is no single universal answer for all countries. The Fostering Effective Energy Transition report, now in its 14th edition, benchmarks energy system performance and readiness for the transition through the ETI and provides insights across nations.”
He said while investments in developing nations remain insufficient, and challenges persist within and across countries, especially in energy affordability and access, equity-focused policies and decisions were gaining prominence.
In GreenCape’s 2024 Renewable Energy Market Intelligence Report, GreenCape senior analyst Ulrich Terblanche said by navigating the opportunities, drivers and barriers, investors are expected to unlock significant investment opportunities in South Africa’s green market.
“The large-scale renewable energy and energy storage market remains a promising avenue for sustainable growth and energy security. This growth will likely be driven by investment in the private procurement market.”
However, he said South Africa’s deteriorating global ranking among sovereign credit ratings agencies in recent years has added risk to investments in the country and increased the cost of doing business.
“South Africa’s creditworthiness has deteriorated over the past five years, resulting in a downgrade from investment grade to speculative grade by all three major credit ratings agencies. This downgrade has raised the country’s borrowing costs, making it more expensive to fund major infrastructure projects like grid expansion.”
Terblanche said South Africa's addition to the Financial Action Task Force greylist compounded the investment risks, but there were opportunities for local manufacturing of renewable energy components for public and private offtake agreements in a growing renewable energy market.
“Local content requirements aim to grow the South African manufacturing sector. These requirements vary for large-scale renewable energy projects, depending on the offtaker’s obligations to local content requirements through mechanisms such as Preferential Procurement Regulations, the Municipal Finance Management Act, and the Mining Charter,” he said.
Adam Matthew, chief responsible investment officer for the Church of England Pensions Board, told Business Times in February that South Africa remained a hugely important economy that the board considers a leader for its energy transition and mining sector reforms.
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