SA could be a central player in the global energy transition if it overcomes power and logistics hurdles – study

16 Nov 2023

South Africa plays a pivotal role in paving the way and developing the blueprint for developing countries’ just energy transition, a new study has found. However, challenges such as load shedding and rail and port services are holding the country back.

South Africa is home to some of the most critical minerals needed to ensure a just energy transition, a study titled Growth Through Inclusion in South Africa has found.

“South Africa is, by a substantial margin, the world’s largest producer of platinum and platinum-group metals (PGMs). These are essential to produce and use hydrogen because they are essential for the membranes that go into electrolysers and fuel cells,” the study, lead-authored by development economist Ricardo Hausmann from Harvard’s GrowthLab, found.

“South Africa is also a major producer of chromium. This mineral is used as a catalyst in these membranes, goes into lithium-ion batteries, in high-performance solar panels, and in making stainless steel alloys used in solar, hydro, and geothermal plants,” the report said.

Critical minerals such as chromium – of which South Africa is a major producer – are expected to grow in demand by 75 times to 91 kilotonnes by 2040, under a sustainable development scenario, the International Energy Agency has found.

Although South Africa is a major producer of the critical minerals needed to achieve a just energy transition away from fossil fuel dependence, the country still has some hurdles to overcome before maximising its potential.

The country’s energy shortfall has resulted in rolling blackouts and hampered its people and economy, and this challenge has also affected the mining sector where the critical minerals are harvested. Examples of this can be seen in platinum production declining to record lows owing to load shedding, the study found.

The study also found that additional challenges around rail and port infrastructure and services, policy uncertainty and licensing and regulatory setbacks have also posed numerous challenges to the industry.

“Since the electricity crisis started to intensify in recent years, exports of platinum have decreased significantly. Even before load shedding started in 2007, regulations prevented the country from expanding its market share during the commodity super-cycle (commodity prices falling below or above average prices) that started in 2004. If the country is to maximise the benefits of the coming global boom in mineral demand, it will need to address these issues,” the report said.

For South Africa to capitalise on these resources, the country would need to address its electricity, rail, policy and port challenges, the report said. This is particularly key to unlocking the country’s mineral manufacturing sector, which is dominated by China, a nation that Western countries are looking to decrease their dependence on.

“Currently, geopolitical forces are creating opportunities for countries like South Africa in mineral processing. Excessive dependence on China is seen as a strategic risk both in the US and Europe, who want to diversify their suppliers to ‘de-risk rather than decouple’ from China, as Janet Yellen, the US Treasury Secretary, has argued. South Africa could exploit this moment of opportunity to attract investment in mineral processing…” researchers said in the report.

The report also listed further opportunities for South Africa to improve its green supply chains, such as the development of clean technologies, innovation in flow batteries for grid-scale storage, developing the green hydrogen economy, fuel cell manufacturing and green industrial parks, among others.

Read more in Daily Maverick: New Harvard report dissects how state failure, spatial exclusion are curbing SA’s growth

The report concluded: “These noteworthy green growth opportunities show that the South African economy could have a promising future, but the nature of these opportunities also highlights the ongoing damage from collapsing state capacity.

“South Africa’s growth potential moving forward comes from the supply side of green growth — that is, capitalising on its potential to help the world decarbonise through producing many goods, services, and knowledge that global decarbonisation will require.” DM

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