DINGA SIKWEBU AND WOODRAJH AROUN | Protecting SA’s nascent renewable industry

The curtain has fallen for comments on possible tariff and custom duty increases on a list of imported renewable energy products. At the end of last month the International Trade Administration Commission (Itac) issued a call for submissions on six preliminary determinations aimed at protecting South Africa’s renewable energy technology industries from foreign competition and a flood of imports. The determinations are part of a review of tariffs applicable to renewable energy industries that Itac launched last year. After weighing public comments due before Friday, April 24, Itac will come up with final determinations, which the commission will recommend to the trade, industry and competition minister.

If supported and they come through as policy, the preliminary determinations will not be government and trade authorities’ first intervention to protect renewable energy industries and build South Africa’s capability to manufacture components for the sector. Over the past 15 years government introduced various measures to ensure the country has a burgeoning renewable energy technology manufacturing sector. As recently as June last year government, business and labour signed the South African Renewable Masterplan, a social compact to leverage investments for renewable energy production chains. However, an important question lingers: will intervention be done correctly this time round?

Like South Africa intends to do, many governments around the globe are adopting measures whose aim is to shield local industries that manufacture renewable energy technologies from global competition. The stimulus to these protectionist measures is the growth in trade of solar and wind goods. Clearly, concerns about global warming and global agreements to mitigate climate change propel the rapid uptake in clean energy technologies. According to a UN Conference on Trade & Development global trade report published at the end last year, between 2013 and 2022 “trade in solar-energy goods rose 56% and wind-related goods 39%, far ahead of the 23% growth in overall industrial goods”.

Since 2011, and similar to other countries, South Africa has been experiencing a rapid growth in renewable energy. The country presently has a combined capacity of 6.2GW generated in solar and wind farms. These utility-scale plants were built as part of the Renewable Energy Independent Power Producers Programme (REIPPPP) launched 15 years ago. Parallel to this build-programme, load-shedding and rising electricity prices triggered the private installation of a further 6GW of rooftop small-scale embedded generation systems across the country.

Although the stated objectives of these programmes include building a strong base to manufacture components used in solar and wind installations, the results have been dismal. What the failure means is that South Africa imports most renewable energy technologies. “Past localisation efforts failed due to irregular demand and policy uncertainty”, says South African Photovoltaic Industry Association CEO Rethabile Melamu.

Despite the failure to build manufacturing capacity for components, further enormous growth in renewable energy generation in the country is expected, with new wind and solar plants installing larger and higher-capacity technologies. According to the Integrated Resource plan, South Africa’s long-term electricity capacity plan, the country intends to build 105GW of new generation capacity by 2039, with significant amounts of this new capacity coming from renewable energy sources. In the next five years the plan foresees the addition 11.27GW of solar photovoltaic and 7.34GW of wind energy.

According to Minerals Council of South Africa’s Christian Teffo, the country is experiencing a “private energy generation boom”. Speaking at a webinar at the beginning of the year, Teffo referred to energy projects worth R306bn of capital investment registered with the National Energy Regulator of South Africa.

Without referring to these developments as a boom, two reports echo the sentiment of expected growth in renewable energy. First, a recent National Treasury report on Operation Vulindlela referred to an Eskom dashboard that identified 204 projects with a capacity of more than 23.9GW that are in the pipeline and have reserved or allocated grid capacity. Second, GreenCape’s 2025 Market Intelligence Report on large-scale renewable energy estimated an incorporation of 32GW into the South African energy system by 2030. The estimate includes REIPPPP preferred bidders announced in 2024 and large renewable projects in development for private off-takers.

In the context of this prognosis, it is therefore important to take Itac’s determinations seriously. Importing components for solar and wind farms will be a missed opportunity to re-industrialise and create jobs. “Labour’s concerns are that some solar companies invested in manufacturing, but others are then importing”, says Cosatu’s parliamentary officer, Tony Ehrenreich.

The first determination by the country’s trade administration is to increase existing applied import tariffs on components for solar, wind and battery energy storage industries to bound rates permissible under World Trade Organisation (WTO) rules. The second determination is to increase the general rate of custom duty on fully-assembled lithium-ion batteries to the WTO-bound rate of 15%, calculated according to the value of the battery.

Third, Itac has come up with possible phased discontinuation of a temporary rebate introduced two years ago that allows importation of photovoltaic (PV) cells, modules and panels duty-free. The fourth preliminary determination is about designation for local procurement and local content requirements of solar panels, fasteners, towers, trackers that rotate panels and inverters that convert direct current from solar panels to alternating current for power grids and households.

Arguing that domestic manufacturing capacity exists, Itac’s notice raises a fifth proposal for consideration. The commission proposes for comment the removal of some solar components from the South African Revenue Services’ (Sars) staged consignment policy. Sars policy permits importers to clear multiple consignments as a single shipment, thus allowing them to a pay a single tariff. Lastly, Itac raises for deliberation the establishment of a committee made of renewable energy roleplayers to advise the commission on trade-related measures.

There is no doubt that the Itac’s intentions are noble. In a context of de-industrialisation and high levels of unemployment, particularly among young people and women, it is crucial to build labour-absorbing sectors in South Africa. But good intentions are not enough. Thoughtout, well co-ordinated and multi-pronged policies are required. Capacity to implement and monitor interventions are crucial. Industrial policies, which are beyond the brief of a trade administration commission, need to complement trade-related measures aimed at supporting sectors, as Itac’s preliminary determinations intend to do.

Increases in tariffs outside of broader industrial strategy can be blunt instruments. As Melamu indicates in support of Sapvia’s call for a phased and pragmatic approach to tariff reform, “Increasing duties before local industry is capable of supplying price-competitive and bankable alternatives risks undermining project delivery and investor confidence”.

South Africa also needs to learn from its recent interventions in the sector. Although the then department of minerals and energy acknowledged in 1998 that “South Africa has neglected the development and implementation of renewable energy applications”, it took government 13 years to implement a renewable energy programme in the form of REIPPPP. To reap benefits from an expanding renewable energy sector policymakers need to move with speed.

In addition to speed, building a new sector requires consistency of implementation. Although the REIPPPP gained traction from component manufacturers who began to build establishments and factories locally, the stop-and-start nature of the programme led the failure to localise production and dominance of multinational corporations as suppliers. Eskom’s refusal to sign power purchase agreements with winning bidders in the middle of implementation created a hiatus that was detrimental to manufacturers. Manufacturers need throughput and ongoing production. Only consistent implementation and a fat order book can sustain manufacturers.

Third, there is the question of co-ordination and enabling institutions. What institutions can ensure coherence? It is good that Itac is proposing a committee to advise the commission on trade-related measures. But as argued above, building a sustainable renewable energy technology industry needs interventions beyond trade measures. With its aim to foster local demand, drive industrial development through localisation, develop emerging suppliers and build local capabilities, the renewable energy masterplan should be seen as an overarching framework for Itac’s proposals on tariffs. Greater commitment to implement the plan’s four pillars in needed.

“The work on [the renewables masterplan] was an excellent activity to bring government, business, labour and community together; to agree on what targets could be”, says GreenCape’s executive director and masterplan project steering committee member Mike Mulcahy.

The fourth requirement for success of Itac’s plans is regulatory certainty. A major industry association is worried about delays in policy implementation and uncertainty around designation and localisation. The association argues that delays pose real risks and undermine momentum towards local production. If one looks at the legislative terrain, one would appreciate why these concerns are not alarmist. Although signed into law in July 2024, the Public Procurement Act is not yet in force. This is the legislation that gives the trade, industry and competition minister power to stipulate minimum thresholds for local production and content in designated sectors. Clouds are also gathering, indicating that similar to low-intensity lawfare around previous preferential procurement regulations, the new legislation will be a target of legal potshots.

Finally, whatever route South Africa embarks on, the country cannot ignore ongoing geopolitical tensions and the fact that renewable energy technology is a global value chain. Local players have to find niches within the chain where we can extract value and excel. Unless we do this we stand to repeat mistakes of previous interventions.