South Africa’s rapidly expanding market for energy storage systems is laying the groundwork for local production of lithium iron phosphate battery cells, according to a feasibility study released by the Localisation Support Fund on Wednesday.
The fund is a government-backed initiative to promote local manufacturing and industrial development.
The study, conducted by EY, an independent adviser to the fund, finds that establishing a 5-10 gigawatt-hour (GWh) manufacturing facility in South Africa is technically feasible and commercially viable.
With supportive import tariffs within World Trade Organisation (WTO) limits, locally manufactured lithium cells could compete on price with imported equivalents, including those from East Asian producers. The study says the government can legally protect local battery manufacturing by raising import tariffs up to the WTO ceiling, striking a balance between competitiveness and trade compliance.
According to the fund, Southern Africa will require 55GWh of battery capacity by 2034, growing at about 30% annually, driven largely by grid stabilisation and renewable energy integration. South Africa’s most recent Integrated Resource Plan (IRP 2025) aims for more than 105GW of new generation capacity by 2030, with battery energy storage systems identified as a key enabler.
Huge local demand
The study found that domestic demand alone could support two to three large-scale lithium-battery manufacturers by 2034. Interviews that the authors conducted across utility, industrial, and critical infrastructure sectors highlighted that local supply is highly valued for operational independence.
While the immediate market is focused on stationary battery energy storage systems, the study identifies battery electric vehicles (EVs), especially commercial buses and trucks, as a second wave of demand once local manufacturing reaches scale. Stationary battery energy storage systems refers to a fixed-location technology designed to capture electrical energy and store it for later use.
The study finds South Africa’s cost structure and competitive advantages position it favourably against international manufacturing hubs, thanks to its relatively low labour, energy and water costs, along with incentives available in special economic zones (SEZs).
With its abundant iron ore, phosphate, and copper resources, South Africa is well placed to produce lithium battery cells locally, potentially at costs well below imported alternatives, it adds.
Atlantis or Coega
The feasibility study identifies the Atlantis SEZ in the Western Cape and the Coega IDZ in the Eastern Cape as the most suitable locations for a gigafactory, due to port access, renewable energy supplies, industrial infrastructure and existing anchor customers.
The report also stresses the importance of international technical partnerships to accelerate technology transfer, adopt proven manufacturing processes and reduce the commercial risk for new market entrants.
“South Africa does not need to be a passive consumer of the global energy transition,” said fund CEO Irshaad Kathrada. “The market is here. The demand signal is clear and growing. What is needed now is co-ordinated commitment from the government, industry and capital to translate that opportunity into production capacity.”
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