South Africa’s R47 billion missed opportunity

South Africa imported $2.5 billion (R47 billion) worth of solar panels, batteries, and inverters in the first six months of 2023, indicating a decreasing reliance on Eskom for energy generation and a missed opportunity for local industrialisation. 

The import of solar panels hit a new record in the second quarter of 2023, with R8.4 billion worth of panels being imported, over double the amount imported in the year’s first quarter. 

The value of imports in the first half of 2023 is more than the entire value imported in 2022, which was R5.6 billion. 

R12 billion worth of solar panels have been imported by South Africans so far in 2023. 

Trade and Industrial Policy Strategies senior economist Gaylor Montmasson-Clair said this is due to sustained demand from South Africa’s private sector.

Based on the assumption that solar panels cost $0.2 to $0.3 per watt, Montmasson-Clair estimated that the R12 billion of imported solar panels is equivalent to roughly 2,200 MW of generation capacity.

Following the same assumption, the country added 1,100 MW to 1,700 MW in 2022. 

Sustained demand is vital for building a local industry based on solar energy generation. 

South Africa has two solar panel manufacturers, ART Solar and SeraphimSolar. The latter is a Chinese company with a local factory.

The country has also demonstrated sustained demand for lithium-ion batteries, with R20.6 billion ($1.1 billion) of batteries imported in the first half of 2023. 

This is already more than the R13.1 billion ($0.7 billion) imported in 2022. 

Unlike the manufacturing of solar panels, South Africa has a significant number of lithium-ion battery manufacturers, said Montmasson-Clair. 

However, they tend to import battery cells from China and process them into battery packs rather than manufacturing them themselves. 

South Africa has imported a combined R47 billion worth of solar panels, batteries, and inverters so far in 2023.

A lack of local manufacturing of components used in renewable energy generation, such as solar panels, batteries, and inverters, is a missed opportunity to kickstart South Africa’s industrial base and reindustrialise, said Montmasson-Clair. 

Montmasson-Clair’s comments echo Stanlib chief economist Kevin Lings, who told Biznews that the renewable energy transition is a chance to ignite economic growth in South Africa. 

“I do not think it is just a ‘fad’ that will peter out in a few months. There is long-term growth potential in this industry,” Lings said. 

To capitalise on this, the country must ensure that more materials and equipment are manufactured in South Africa and not imported. 

This can reindustrialise the economy and potentially turn renewables into an export market for the country. 

Currently, only two solar panel manufacturers in South Africa cannot keep up with the demand from private companies looking for backup power solutions. 

This can become one of South Africa’s success stories, said Lings.

Montmasson-Clair said exports of lithium-ion batteries from South Africa remain marginal, with the country exporting R489 million ($26 million) of batteries to other African countries. 

There is latent demand on the continent for lithium batteries, and South African manufacturers are well-positioned to supply Africa with batteries. However, this opportunity is not being leveraged as yet.