What the budget and US climate policy shift mean for SA’s energy sector – The Mail & Guardian

Reliable power is essential for economic growth in key sectors such as manufacturing, where growth is vital for absorbing labour and addressing high unemployment levels. (Gianluigi Guercia/AFP/Getty Images)

The national budget presented earlier this month highlighted progress and earmarked changes for the evolving energy landscape.

In 2024, South Africa had 300 days without load-shedding. But the fragility of the energy system and shifting global climate priorities stresses the balancing act required to sustain energy security. 

The proposed allocations and outcomes outlined in the budget highlight measures aimed at transforming the nation’s energy landscape. 

Over the Medium-Term Expenditure Framework period, the treasury announced it will allocate R219.2  billion toward energy infrastructure investments to expand capacity and enhance stability in the energy sector. 

Along with the roll-out of the Electricity Regulation Amendment Act (2024) on 1 January 2025, this will see the introduction of a competitive wholesale energy market to diversify energy supply, enhance efficiency and encourage private sector participation. The initiative is intended to attract investment into renewable energy sources and promote competition to improve energy security. 

The government has also announced that the initial planned R70  billion Eskom debt takeover would be replaced with two separate instalments of R40  billion in 2025-26 and R10  billion in 2028-29, resulting in an estimated saving of R20  billion. This decision is largely attributed to the utility’s recent improved performance and financial standing.

This shift encouragingly suggests a policy commitment to phasing out recurring bailout cycles of underperforming state-owned entities and moving toward fiscal prudence and prioritisation of economic stability. 

These efforts toward economic stability could also be strengthened by prosecuting those implicated in the Zondo commission’s state capture report, thereby enhancing Eskom’s credibility, improving South Africa’s chance of removal from the Financial Action Task Force grey list and boosting its investment climate, signalling a broader commitment to economic reform.

For several consecutive years, load-shedding, as a result of Eskom’s underperforming power stations, has been a significant barrier to economic development and has impeded economic growth. Without power, economies simply cannot grow. More pointedly, reliable power is essential for economic growth in key sectors such as manufacturing, where growth is vital for absorbing labour and addressing high unemployment levels. 

In 2024, the country experienced some reprieve as the state-owned power utility stabilised its operations and available capacity gradually improved. This has partly been the result of an increase in renewable generation capacity and slight decrease in coal generation that has since temporarily stabilised the country’s volatile energy landscape. But concerns still persist because supply constraints remain, with aged stations such as Medupi and Kusile unlikely to achieve full operational capacity because of structural flaws.

In 2024, renewable energy rose to close to 13% of total electricity generation. Alongside this, coal production dipped to about 81%, marking a shift in the energy landscape. But system volatility remains and sporadic episodes of load-shedding continue to disrupt daily economic life. 

Although the recent 10-month, load-shedding free period indicates marginal progress, its recurrence underscores the broader problems faced in achieving energy security as the country shifts to more reliable and sustainable energy sources. 

Another issue is to expedite the reconfiguration of the national transmission grid to accommodate more renewable energy, and complementary wind and solar need to enter the grid to reduce the volatility typically associated with renewables. 

Overall, the 2025 budgets’ proposed measures regarding support for continued renewable energy production present a mixed bag of opportunities and problems. The government’s commitments to the Renewable Energy Independent Procurement Producer Programme are expected to reach R277.9  billion by the end of this month as part of investments into renewable energy, and efforts to reduce barriers to investment. 

But this also comes as temporary renewable energy incentives for businesses fell away on 28  February 2025 and are unlikely to be extended, raising concerns about sustained investment enthusiasm. 

Additionally, while the 2024 SA Renewable Energy Grid survey identified some 133GW of potential wind, solar and battery capacity, grid availability and structural limitations impede progress toward using this potential capacity. This 133GW is nearly three times more than the country’s current installed capacity. 

In short, while the 2025 budget highlights progress and political will, there is a long way to go before renewables achieve their potential.

Also briefly mentioned were concerns about rising geopolitical tensions and economic uncertainty tied to South Africa’s international climate agreements. In particular, the US’ withdrawal from the Just Energy Transition Partnership (JETP) with the UK, France, Germany and the EU forged at the COP26 Climate Summit in 2021 is concerning. 

Coinciding with its departure from the Paris Agreement under its new administration policy shift away from climate-related commitments, the US’s withdrawal has resulted in a loss of more than $1  billion pledged funding for the Just Energy Transition, primarily affecting potential private sector investment. This has reduced international pledges to about $12.8  billion of the roughly $82  billion (or R1.5  trillion) required to actualise its climate commitments and meet its nationally determined contributions.

Despite this withdrawal in funding, expert consensus suggests SA’s decarbonisation agenda remains intact and achievable. With the remaining JETP countries such as the EU increasing pledges with a €4.7  billion Global Gateway Investment Package aimed at supporting clean energy projects, this seems plausible. 

But US’s withdrawal does expose vulnerabilities in SA’s international financing agreements. The unpredictability of global climate finance and commitments in the current geopolitical moment underscores the need for resilient, self-sustaining approaches to its energy transition. 

South Africa needs to strengthen its domestic policy framework to ensure alignment across government and private sector initiatives aimed at a sustainable energy transition. 

Furthermore, promoting funding initiatives, encouraging public-private sector collaboration and fostering partnerships to secure a robust and resilient financing policy can support the just energy transition.

Notable improvements in energy supply stability and continued investment in diversifying its energy mix indicate improvement. But the ongoing fragility of the energy systems, poor system capacity and infrastructure, and shifting geopolitical priorities create an unpredictable pathway to achieving sustainable energy. 

Ultimately, progress will depend on strategic decisions that prioritise economic sustainability by balancing the country’s immediate energy needs with its long-term sustainability goals.

Mischka Moosa is a data journalist at Good Governance Africa.