How can South Africa’s energy transition be optimally designed to promote inclusive growth, industrial development and employment creation?
This question, which is crucial to economic policy, is one of many addressed in a forthcoming book, A Just Transition to a Low Carbon Future in South Africa (in which I have a chapter). The book, set to be published on 24 February by the Mapungubwe Institute for Strategic Reflection, focuses on potential low-carbon futures. Contributing authors argue that there are both threats and opportunities as South Africa embarks on its energy transition.
Appropriate government policy, supported by a forward-looking social compact by labour, business, communities and the government, has the potential to manage the threats the energy transition poses — and also to maximise the opportunities.
Where is economic growth going to come from? The answer must surely lie, at least in part, with the new investments, new industries and new products and services that will come into being as a result of to the country’s transition to low-carbon energy
The outcome of South Africa’s energy transition depends crucially on the institutions and policies that guide the introduction of the new technologies. Legal frameworks, public policies and the practices of trade unions and companies will all determine the direction and pace of the transition.
If resources are mobilised to reskill workers; if utilities are able to repurpose ageing plants and provide new employment opportunities, then the risks to incumbent workers and affected communities will be ameliorated. If policy frameworks operate efficiently to ensure that new companies are able to gain licences to begin deploying the new technologies and speedily commence operations, then the net effect may be increased employment levels and rising real wages. If such contingencies do not occur, then there is a real risk that losers will outnumber winners and that the net effect of the technology shift will be negative.
In the context of a well-managed energy transition, with adequate planning for affected workers and communities, trade unions will find it easier to be forward-looking. Their demands can be focused on the need for adequate new job opportunities and for training relevant to new technologies.
If, on the other hand, trade unions and government policy are backward-looking and seek to protect the status quo, this will slow the rate of diffusion of new technologies. It will also slow the rate at which South Africa will be able to put in place a new economic growth model.
Coal-producing Mpumalanga does not have to brace itself for ghost-towns and for an inevitable decline. A recently published study by the Cobenefits project, titled From Coal to Renewables in Mpumalanga, estimates that the province can create up to 79 000 clean energy jobs by 2030. It can achieve this only if it is forward-looking and unlocks investment in the energy transition.
Load-shedding is directly costing the economy billions of rands a year. The indirect cost is so huge that it is difficult to comprehend: it manifests in the form of investments not being made and jobs not being created.
Years of rising electricity costs mean that it is imperative that new sources of low-cost electricity are now prioritised, as well as those that are the fastest to deploy. Expanded investment in solar and wind energy is thus South Africa’s most effective pathway to international competitiveness.
The programme to restore electricity security in South Africa has the potential to stimulate large-scale investment in the country’s electricity generation, transmission and distribution infrastructure. Such investment will need to be maintained and expanded for many years to come.
It will also be important to take advantage of all potential backward, forward and lateral connections entailed in an investment programme. The developmental objective of the energy transition should be to stimulate economic growth and employment creation through the restoration of reliable and widespread access to competitively priced, low-carbon electricity.
Upstream opportunities will include the need for investment in the manufacture of solar components; wind towers and turbines; flexible gas plants; transmission infrastructure; large-scale battery installations and other products. Supportive and well-designed industrial policy will help to maximise localisation, employment, and race and gender transformation objectives. Careful sequencing and realistic programme design are very important so as not to undermine this vision.
Unfortunately, a number of local wind-tower manufacturing plants and solar-manufacturing facilities have been shut down in South Africa in recent years because of delays and stops and starts in procurement. To succeed in maximising industrial policy and employment benefits, there needs to be certainty and credibility in the management of the country’s energy transition.
Interestingly, the energy transition also presents growth opportunities for the mining sector. The energy transition is projected to be metals-intensive and the global growth in solar power will increase the demand for certain metals. An important initiative for South Africa would be to promote mining exploration in South Africa, and Africa more widely, to increase market share in the provision of these critical minerals.
Once South Africa has invested in a significant renewable-energy base, downstream opportunities will include a wide range of new activities, such as those linked to electric vehicles, green hydrogen and green jet fuel. Abundant access to low-carbon electricity is key to South Africa’s future industrial and trade success, particularly because some of our exports may be at risk as major trading partners begin to consider the implementation of environmentally oriented trade instruments, such as carbon border adjustments.
A draft green paper on electric-vehicle production has been developed by the South African government. It is based on the insight that it is important that South Africa does not simply become a market for electric vehicles produced elsewhere in the world, which would relegate the country’s car-making to internal combustion engines. It is also regarded as vital that South Africa maintains local industry’s capacity to export to key markets, such as the EU and the UK, both of which have set new targets and deadlines to reduce the number of fossil-fuel-reliant vehicles on their roads.
Currently, there is too much misinformation and noise threatening to derail South Africa’s energy transition. This is an issue on which the country urgently needs to come together — with many voices articulating a single message: that a just energy transition is the most important plan for restoring economic growth and boosting employment.