Renewables
South Africa weighs industrial strategy in the energy transition
As COP31 gets underway in Turkey, analysts emphasize that South Africa's climate strategy must extend beyond power generation to protect industrial competitiveness and jobs.
Key points
- Climate finance in South Africa heavily favors the energy sector, raising concerns over industrial funding.
- Export industries face pressures from international carbon border mechanisms and vehicle-emissions rules.
- Experts outline four pathways for leveraging the low-carbon transition for sustainable industrialisation.
As delegates gather in Antalya, Turkey, for the COP31 climate summit, discussions are increasingly focused on implementation rather than initial commitments. For South Africa, the core challenge lies in ensuring that decarbonisation efforts actively build domestic industries, bolster competitiveness, and generate employment.
Recent data indicates that approximately 74.1 percent of tracked climate finance in the country flows into the local energy sector. While cleaner electricity generation remains vital, analysts argue that capital must also reach productive economic transformation. Without a broader industrial focus, nations risk decarbonising their power systems while remaining dependent on imported green technology and raw material exports.
What happened
The economic imperative for an industrial transition is stark. South Africa recorded a GDP growth rate of just 1.1 percent in 2025, alongside a contracting manufacturing sector and an official unemployment rate of 33.6 percent, affecting roughly 8.5 million people. Hard-to-abate sectors, chemicals, and automotive manufacturing accounted for about 34.1 percent of merchandise exports in 2025, leaving the economy heavily exposed to shifting international regulations.
Chief among these external pressures is the European Union's Carbon Border Adjustment Mechanism, which entered its definitive phase on 1 January 2026. Furthermore, the automotive sector faces significant adjustments as key markets in the European Union and the United Kingdom tighten vehicle emissions requirements. These two regions accounted for 62.8 percent of South Africa's total automotive export value in 2025.
To navigate these pressures, researchers have proposed four strategic pathways: economic diversification and jobs-rich industrialisation, low-carbon transitions for green growth, the strengthening of regional value chains, and enhanced climate and economic resilience across infrastructure and agriculture.
Why it matters
For energy investors, policymakers, and regulators across the African continent, South Africa's industrial test highlights the complex interplay between climate ambition and economic survival. According to World Bank figures, South Africa achieved a 90.2 percent electricity access rate in 2024, yet its historical reliance on carbon-intensive industries demands a carefully calibrated transition strategy.
Financing models must evolve beyond simply funding clean power assets. Development finance institutions and private investors are urged to deploy patient capital and risk-sharing instruments that foster local manufacturing, supply chain development, and critical mineral processing. Aligning climate finance with industrial capabilities ensures that the transition creates lasting economic value rather than shifting production dependencies abroad.
Original reporting
This article draws on the following reports. Read them in full on the publishers’ sites.
Context from CEII
Renewables are the fastest-growing part of the world’s energy system. The COP28 goal is to triple capacity by 2030, and solar mini-grids are the fastest route to power for millions of people without electricity.
6.4% of electricity in South Africa was renewable in 2021Countries in this story
Written by the CEII Desk, the Centre’s automated newsroom, from the reporting credited above and CEII’s own data. Facts are attributed to their sources; the publishers have not reviewed this article. Spotted an error? Tell our editors.
