South Africa - Country Commercial Guide
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Government Intervention: 

Over the following ten years, South Africa’s total power capacity is expected to expand by just under 4GW according to Fitch Connect forecast. The vast majority of this capacity will come from non-hydro renewable sources, which will increase from a 9.3% share of total power generation in 2023 to 17.0% by 2032 according to the predictions. This growth will be fueled by the Renewable Independent Power Producer Programme and the lifting of the license cap, which will enable more private sector participation in the power sector. 

The production of thermal energy in South Africa is expected to decline from 200.1 TWh in 2023 to 188.0 TWh in 2032. The Just Energy Transition Partnership’s plans to decommission and repurpose outdated coal-fired power plants in an effort to lower the market’s high level of emissions and the persistent underperformance of the country’s existing thermal capacity are mostly to be the reason for this. By 2032, the government is apparently planning to shut down seven coal-fired power facilities, but until more specifics are known about when and how this will occur, there is not much that can be said about this.

Current Status: 

In South Africa, approximately 85 percent or 42,000MW, of the nation’s electricity is generated via coal-fired power stations. Despite environmental concerns, coal will continue to provide the majority of South Africa’s power for the next decade, although the share from renewables will grow rapidly. Non-hydro renewables are predicted to develop faster than the market, with 8.7GW of additional renewable energy capacity planned to be installed between 2023 and 2032. Solar energy will be the primary driver of this expansion because the government relaxed the standards for local content in solar modules in order to speed up the implementation of solar projects. The market’s major downside concern continues to be ongoing power outages (load shedding), differences over the course of policy, intra-party disputes, and political threats. 

State Owned Utility: 

Eskom, the vertically integrated, state-owned power company, generates approximately 95 percent of electricity used in South Africa, as well as a substantial share of the electricity generated on the African continent. The utility ranks in the top 20 utilities worldwide by generation capacity and is the biggest producer of power in Africa. Approximately 95% of the electricity used in South Africa and 45% of the electricity used in Africa is produced by Eskom. About 45% of all end users in South Africa receive their power straight from the firm, with the remaining 55% being resold by redistributors (including municipalities). Meeting the rising demand for power and ensuring economic growth is Eskom’s main issue. Additionally, the business trades electricity with SADC member nations and purchases electricity from them. Future participation in African markets outside of South Africa (i.e., the rest of Africa and the SADC markets linked to the South African grid) is restricted to initiatives that directly support secure supplies for South Africa. 

Government Intervention: 

The South African government in 2019 announced plans to unbundle Eskom into three separate entities responsible for generation, transmission, and distribution. This move was prompted by an urgent need to address the utility’s significant debt levels while South Africa’s National Treasury is drafting a measure to handle the USD23 billion debt load of the struggling national utility. The National Transmission Company South Africa (NTC) has been granted permission by the National Energy Regulator of South Africa (NERSA) to operate a transmission system inside the territorial limits of South Africa starting in July 2023. Eskom, a South African electrical utility firm, has welcomed the NERSA action since it represents a crucial step in the process of legally separating the transmission business.


Despite Eskom’s debt challenges, South Africa operates a highly successful, Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) for utility-scale transactions.  Over 6,000MW of generation capacity across a range of technologies, primarily in wind and solar, have been granted to bidders because of the renewables program, which is considered as a model for other African nations. The Renewable Independent Power Producer Programme (REIPPP) aims to add more megawatts to the nation’s electricity grid through private sector investment in renewable energy sources like wind, biomass, and small hydro. To address the recent loadshedding crisis, the President announced that the IPP Office will double the procurement of the normal 2,600MW of renewable power per annum in 2022 and completely scrap the licensing cap threshold which was previously set at 100MW.

South Africa Integrated Resource Plan (IRP)

Policy: The South African Government’s National Development Plan (NDP) is the blueprint for infrastructure development to 2030.  The NDP lays out a framework for future power generation in South Africa, while energy policies in South Africa are driven primarily by the Department of Mineral Resources and Energy’s (DMRE) Integrated Resource Plan (IRP). The IRP is DMRE’s estimate of electricity demand growth and what energy generation types should be procured to meet that demand, along with the generation capacity, timing, and cost.  The IRP is an electricity infrastructure development plan based on least-cost electricity supply and demand balance, considering security of supply and the environment (minimize negative emissions and water usage).

The IRP envisages a total addition to electricity capacity of 29,500 MW by 2030, led by renewables (notably 14,400 MW from wind and 6,000 MW from solar photovoltaic). 

Policy Direction: The South African Government’s National Development Plan (NDP) is the blueprint for infrastructure development to 2030.  The NDP lays out a framework for future power generation in South Africa, while energy policies in South Africa are driven primarily by the Department of Mineral Resources and Energy’s (DMRE) Integrated Resource Plan (IRP). The IRP is DMRE’s estimate of electricity demand growth and what energy generation types should be procured to meet that demand, along with the generation capacity, timing, and cost.  The IRP is an electricity infrastructure development plan based on least-cost electricity supply and demand balance, considering security of supply and the environment (minimize negative emissions and water usage).

The IRP envisages a total addition to electricity capacity of 29,500 MW by 2030, led by renewables (notably 14,400 MW from wind and 6,000 MW from solar photovoltaic).

Policy Direction: As a result, the government announced a procurement package in September 2020, which represents a major acceleration of the goals set out in South Africa’s latest Integrated Resource Plan. This was government’s way of trying to respond to the problem of persistent electricity shortages in the country by announcing a new phase of power-generation procurement totaling a projected 11,813 MW.

The bulk of the new capacity will be distributed as follows: 

  • Renewables (6,800 MW)
  • Gas (3,000 MW)
  • Coal (1,500 MW)
  • Pumped storage (513 MW)

All projects will be undertaken by independent power producers (IPPs), with output being sold to Eskom. Ambitiously, the authorities aimed for the new capacity to be in place by 2022 but there seem to have been delays on putting some of the projects into financial close. This is mostly due to some companies that won bids based on prices that changed significantly as consequence of Covid-19 which affected the supply chain on manufacturing.


Status Update: 

Coal has traditionally dominated the energy supply sector in South Africa. Presently, about 80 percent of South Africa’s primary energy needs are provided by coal.  Through 2032, South Africa is projected to continue generating the majority of its electricity from traditional thermal power sources, primarily coal-fired generation. The projections are supported by the fact that South Africa has a plentiful supply of cheap coal which assures a low-cost fuel source for electricity generation. Furthermore, South Africa’s thermal power generation will likely fall to 188.0 TWh in 2032 from an estimated 200.1 TWh in 2023 according to BMI projections. The planned phase-out of ageing units at coal-fired power plants across the nation, as well as a drop in efficiency for many power plants, are the main causes of this decline. It is anticipated that a yearly average of 99.3% of thermal output will continue to come from coal-fired electricity. The 4.8GW Medupi and 4.8GW Kusile projects, which are anticipated to eclipse any upcoming investments in gas-fired power, are to blame for coal’s continued dominance. Therefore, South Africa is less likely to be able to find the volumes of gas needed to considerably lessen its reliance on coal. With the options currently available, particularly the potential for gas imports from Mozambique, gas-fired power is not anticipated to play a larger role in South Africa’s power industry in the future, providing that enough infrastructure is created. The IRP plans to decommission just over 10,000 MW of coal-fired power plants by 2030 and replace them with a mixture of renewables and gas.  

Legal Issues: 

It was reported in May 2022 that Unit 4, which was damaged in a generator explosion, after hydrogen (used to cool the shaft) mixed with air instead of carbon dioxide during a purging process, will be brought online in August 2024. Eskom has said that it will implement fixes to design flaws as it undertakes repairs of the unit. Meanwhile, units 5 and 6 at the power station are operating at partial loads to ensure they meet emissions license requirements. Eskom will implement fixes and repairs to these units during routine maintenance shutdowns to bring them to full load. The government has also stated that the Kusile power plant is expected to be online by 2023. In December 2020, the Pretoria High Court overturned the environmental approval of the planned 1.2GW Thabametsi coal-fired power plant after successful appeals by environmental groups. This followed arguments that the power plant would have been one of the most polluting power stations in the world. At the same time, the environmental groups are also lobbying for the planned Khanyisa coal power project to also be cancelled. This poses a downside risk for future thermal power projects planned for South Africa.


South African state-owned utility, Eskom, stated in November 2020 that it was planning to reach carbon neutrality by 2050. This is planned under its Just Energy Transition program, with the aim of moving away from coal power. While this target is nearly three decades away, there’s a reasonable doubt on the prospects of success given Eskom’s continued high reliance on coal power considering that they are also still constructing the Medupi and Kusile coal power plants of over 4GW each. Eskom received a delay from the Department of Forestry, Fisheries, and the Environment (DFFE) in accordance with the Minimum Emission Standards (MES) relating to the levels of sulphur dioxide (SO2) emission at Kusile Power Station. Eskom was also given a revised Atmospheric Emission License (AEL) to Kusile Power Station to reflect this postponed decision by the Nkangala District Municipality. Eskom will be able to run the three units without using the Flue Gas Desulphurization (FGD) plant, which is outfitted with emission-abatement technology for SO2, for a period of up to 31 March 2025 while the flue gas ducts in the permanent stack are being repaired, thanks to the postponement granted on 5 June 2023 and the licenses issued on 13 June 2023. By December 2024, all duct repairs in the permanent stack will be finished. This occurs after the Unit 1 flue gas duct failed on October 22, 2022.

Renewable Energy

Government Initiative: Renewable energy is increasingly regarded as an attractive source of power in the country. To diversify its energy mix and attract more IPPs to the sector, South Africa has developed a renewable energy independent power producer program, namely the Renewable Energy Independent Power Producer Procurement Program (REIPPPP), which has proven very successful in bringing renewable energy projects to commercial operation. To date, REIPPPP has successfully procured 6.4 GW from 112 IPPs across seven bid windows. 

After numerous rounds under REIPPPP, the program has seen a significant decline in costs by approximately 55 percent for wind (ZAR 1.51 to ZAR 0.62 per kWh) and 76 percent (ZAR 3.65 to ZAR 0.62 per kWh) for solar PV, which make the technologies cost-competitive with new-build coal.  Furthermore, renewable power sources account for just under 3 percent of South Africa’s national electricity supply, from a baseline of zero in 2010.

Investment: The program has leveraged approximately $135.6 billion in investment across South Africa, and projects include wind, solar (both PV and concentrating solar power), small hydro, landfill gas, and biogas as sources of energy. Of this, 25.8 percent is from foreign financiers and investors across the globe. To date, the United States is the largest source of foreign direct investment (FDI) in the renewables space, and several U.S. companies have shown strong interest in this program and have participated in tenders issued by the South African Department of Energy.


At the request of the South African government, the World Bank Group authorized the $497 million Eskom Just Energy Transition Project (EJETP) in November 2022. In order to decommission the 56-year-old Komati coal-fired power station, repurpose the project area with renewable energy and batteries, and create jobs for workers and communities, it will support its public energy provider, Eskom. If the project is successful, it might serve as a model for a fair energy transition in South Africa and beyond. The Canadian Clean Energy and Forest Climate Facility (CCEFCF), a $47.5 million concessional loan, a $10 million grant, and a $439.5 million loan from the World Bank all contribute to the project’s funding.

Opportunities: According to research house BMI, non-hydropower renewables will be the fastest growing source of electricity generation in South Africa between 2019 and 2028. Struggling thermal capacity at Eskom and the government’s commitment to REIPPPP contracts suggest good growth opportunities. Wind power will be the primary source, accounting for 60 percent of renewables output by 2028. The large presence of the coal power sector means renewables’ contribution to total electricity output will remain below 10 percent during this time.

Gas Generation

While a large portion of the planned generation is based in the renewables space, a key issue has been the move towards natural gas as a fuel source. Currently, efforts are being made to develop west-coast offshore gas and explore shale gas reserves. The aim is to have liquefied natural gas (LNG) infrastructure in place to power combined-cycle turbines. Although the country has vast untapped shale resources, which is estimated to generate up to 130,000GWh of electricity per year according to the South Africa’s National Planning Commission, exploiting the country’s shale gas deposits will still require the development of an adequate policy and regulatory addition to the required physical infrastructure needed to transport and process any output that is eventually produced. Looking further out to 2030, a mix of shale gas and imported LNG could be a growing part of the power generation mix. Studies on shale gas potential in South Africa’s Karoo Basin also indicate that total shale potential could be up to 30 times less than originally estimated, which, though still a sizeable amount, would weaken the investment case for domestic gas extraction.  The environmental implications surrounding future extraction in the Karoo are controversial however and would likely face resistance from environmental groups. 

The South African Department of Energy is tasked with the procurement of 3,126 MW of power from gas in the period 2019–2025. This is to be baseload and mid-merit energy generation capacity needed from gas-fired power generation to contribute toward energy security. The Department’s “Gas IPP Program” has been initiated through the IPP Office. At present, the IPP Office is concentrating on the LNG-to-Power IPP Program. The demand for natural gas is expected to expand by an average of 5.2 percent per year in 2021-30, boosted by government efforts to encourage its use and reduce reliance on coal. Under the IRP, gas-fired generating capacity is projected to rise by 3,000 MW.

The switch from diesel to gas is particularly applicable to developments at the domestic Ibhubesi gas field. This field is being developed by Sunbird Energy and is set to feed a 1,350MW power plant at Ankerlig, which currently runs on diesel. Eskom released an RFP in May 2024 for the supply, delivery and off-loading of Propane Gas via road tanker to Ankerlig and Gourikwa Power Station. The propane will be supplied to the respective sites on an “as and when required” basis for a 5-year period. Optional provision of storage space for 10 000kg of Propane within the vicinity of the Power Stations.


Nuclear power accounts for just over 6 percent of South Africa’s electricity output. Eskom operates the country’s only nuclear plant, at Koeberg, near Cape Town, where two reactors completed in the 1980s have a combined generating capacity of 1,830 MW. Although the two units at Koeberg were planned for closure in 2024 (Unit 1) and 2025 (Unit 2), upgrades to the reactors have extended their lifetimes to 2045 and 2047 respectively.

The IRP launched in 2019 appeared agnostic on the need for additional nuclear-power capacity, however, in May 2020 it was announced that the procurement of 2,500 MW of new nuclear capacity was being considered. According to Minister G. Mantashe, this could take the form of small modular reactor (SMR) projects led by private companies and consortia.  In June 2020 the Department of Mineral Resources and Energy published a Request for Information (RFI) to potential investors—the first preparatory step on what is likely to be a long road to securing additional nuclear capacity under the Nuclear New Build Program (NNBP). Following this, Eskom submitted a Nuclear Installation Site License (NISL) application to NNR for the site, with public hearings on a proposed Thyspunt Nuclear Installation Site License (NISL) held in the surrounding towns of Jeffrey’s Bay and St Francis Bay in late 2021. The government reportedly aims to have the procurement process for the NNBP to be complete by 2024.

Energy Services

According to Green Cape’s Energy Services 2021 “energy services” (ES) Market Intelligence Report, the rising electricity prices, national energy insecurity, dropping technology costs, supportive energy policies, and incentives are prompting consumers to explore alternative energy options driving the growth of the Energy Services (ES) market in South Africa, and creating a thriving value chain. To address this, the government amended the electricity generation regulations, and following that the President announced in June 2021 that “the amended regulations will exempt generation projects up to 100MW in size, from the NERSA licensing requirement, whether or not they are connected to the grid. This will remove a significant obstacle from investment in embedded generation projects,”. He also pointed out that businesses that generate their own electricity will be allowed to wheel electricity to the grid, “subject to wheeling charges and connection agreements with Eskom and relevant municipalities”.      

The national embedded generation market for installations and operation and maintenance of rooftop solar PV has grown in the past 12 months. Local solar PV data suggests an installed capacity increase by as much as ~110 MW throughout South Africa (possibly as high as 250 MW). It is expected that the total annual available market could continue to grow at this rate to a saturation point of ~500 MW installed per year on an ongoing basis. This market could reach a total of 7.5 GW of installed capacity by 2035. The commercial and industrial (C&I) sector has been leading investments in this sector, with ~70 percent of new rooftop solar PV installations nationally in this sector.

The rapid uptake of solar PV over the past three years has caught national regulators by surprise and has highlighted the need for new national policies and regulations to guide and regulate the solar PV market. At a local level, there will also be a need for policy and regulation to govern the safe uptake of solar PV.  Municipalities will need the support of the national energy regulator and national and provincial government to do this. Progress has already been made at a municipal level, with 35 municipalities across South Africa having introduced rules and regulations to allow Small Scale Embedded Generation (SSEG) to connect to and feedback on the municipal electrical grid. Of these, 21 municipalities in the Western Cape are allowing SSEG, of which, 15 have National Energy Regulator of South Africa (NERSA)-approved tariffs in place.

With increasing demand in embedded generation, the South African energy storage market is expected to grow to ZAR14.5 billion by 2035, becoming a keystone of the future energy services market. This will create opportunities for investors, manufacturers, suppliers, and energy end-users in the energy storage value chain.

Energy efficiency also presents a significant opportunity to investors and businesses in all sectors. The estimated annual total available market currently stands at ZAR3 billion, reaching an estimated ZAR21 billion by 2035. 

Business Insider South Africa:

Electricity Distribution

The issue of aging network infrastructure remains a concern for the distribution network as it compounds the supply and limits South Africa’s ability to expand electricity access. The South African Department of Mineral Resources and Energy has completed a study to estimate the backlog, and work is currently under way to determine the most effective way to fund the rehabilitation of these networks and assets going forward.  Eskom estimates that it will need 8,000km of transmission infrastructure by 2030 to bring more renewable energy online. 

Bankability of Utility

Eskom has had severe cash problems, which has raised questions about its long-term financial viability. The debt owed by the business was ZAR400.0bn (USD21.8bn) as of February 2023. The company’s financial situation is especially worrying in light of the long-term prospects for South Africa’s fast growing renewables sector, which has benefited from the government’s effective auction-based regulatory structure. Developers of renewable energy, primarily foreign corporations, have signed power purchase agreements with Eskom for the electricity produced by their projects in the anticipation that Eskom will uphold these agreements as reliable and enforceable. Investors seeking stable profits are likely to steer clear of any threat to the long-term viability of these arrangements.

Public Enterprises Minister Pravin Gordhan has confirmed that Eskom’s business model is up for discussion as government seeks to reduce the fiscal risk currently posed by the utility and to reposition the state-owned enterprise (SOE) for future sustainability.

Discussions could look to enhance Eskom revenue in the short-term through both higher sales and, controversially, tariff increases.  Yet further tariff increases (which have increased by over 300 percent in the past eight years for some consumers) could spur more consumers to find ways of using less electricity, possibly even through full or partial defection from the grid.

The National Energy Regulator of South Africa (NERSA) has also warned of a “utility death spiral,” whereby price elasticity of industrial demand is emerging as a primary driver of the lack of demand. This has served to exacerbate a “vicious cycle” in which increasing electricity prices drive declining sales, thereby resulting in the utility having to recover the same cost base from a shrinking customer base.

U.S. Initiatives

Power Africa.  

Launched in 2013, Power Africa is a market-driven, U.S. Government-led public-private partnership to double access to electricity in Sub-Saharan Africa. It also serves as a one-stop shop for private sector entities seeking tools and resources to facilitate doing business in Africa’s power sector. In 2016, the Electrify Africa Act unanimously passed both houses of Congress and was signed into law, institutionalizing Power Africa and establishing two goals:  to add 20,000 MW of generation capacity and expand electricity access to 50 million people in Sub-Saharan Africa by 2020. In bringing together more than 140 of the world’s top companies, development institutions, and financial entities, Power Africa employs a transaction-centered approach to directly address key constraints to project development and investment in the power sector. These interventions aim to mitigate investment risk and accelerate financial close by facilitating project bankability, providing technical and transaction support to engaging with host-government counterparts:

Power Africa in South Africa.  

This interagency team is working to support the country’s effort to introduce large-scale renewable energy and natural gas (for power and other uses) into the economy, while assisting the government in their effort to strengthen and expand the regulatory framework.  Additionally, Power Africa provides transaction advisory support to municipalities, developers, and finance partners.

Sub-Sector Best Prospects                                                                                          

Products and services with immediate need or potential in South Africa include:

  • Renewable Energy Independent Power Producer Procurement Program (REIPPPP).
  • Energy Services
  • Energy Efficiency and Demand-Side Management (DSM) Technologies.
  • Oil/Gas, LNG Provision, Exploration Equipment, Extraction, Pipeline, and Fuel Conversion.
  • Transmission and Distribution Equipment.
  • New Plant Equipment and Related Systems.
  • Process Automation and Systems Control Equipment.
  • Off-Grid Solutions, e.g., Fuel-Cell Technology.


Department of Mineral Resources and Energy (DMRE)

Eskom Holdings Limited

Fitch Solutions


For More Information:

Contact in Johannesburg, South Africa:

Phone: +27-11- 290-3103

Fax: +27-11- 884-0253

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Power Africa

Phone: +27-12-452-2056

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