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Net-Zero South Africa—It All Hinges on Renewables

A Just Transition to a competitive, net-zero South Africa hinges on the nation’s ability to unlock its world-class renewable-energy resources at scale and at an unprecedented pace.

The Climate Pathways and Just Transition study (conducted by the National Business Initiative, Business Unity South Africa, and BCG) assesses what it would take to achieve a net-zero South Africa by 2050 and to ensure a just transition, which aims to move South Africa to a net-zero economy that is socially resilient and inclusive. The study is to date one of the most robust, transparent, and inclusive examinations of climate change in South Africa.

It finds that responding to climate change in South Africa is fundamentally about economic competitiveness and lifting people out of poverty, inequality, and unemployment, while contributing to the global goal of reducing carbon emissions.

By developing an energy system anchored in renewables, South Africa can solve its current energy crisis and improve the affordability, availability, and reliability of its power supply—all while enabling new green industries to help create a globally competitive economy that is resilient to trade risk arising from the transition to net zero.

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Press Release

1. South Africa Cannot Afford to Sit Idle—the Cost of Inaction Is Massive

  • A net-zero South Africa is one of the most challenging decarbonization undertakings globally, given South Africa’s heavy reliance on coal; its triple challenge of inequality, poverty, and unemployment; and its weak economy.
  • The economic and social cost of inaction is massive. Approximately 50% of South Africa’s export value, more than 1,000,000 direct jobs, and some 15% of GDP will be at risk if carbon emissions in South Africa are not reduced.
  • The physical risk of climate change in South Africa is significant and threatens South Africa’s people and economy.

2. Renewable Energy Is the Key to a Competitive Net-Zero Economy in South Africa

  • By deploying renewables at scale, South Africa can solve its current energy crisis and restore its economy’s competitiveness. The deployment will allow the diversification of the economy and can capture new green industries such as green H2, synthetic fuels, and green steel.
  • Renewable energy is the key lever for responding to climate change in South Africa. It enables a nearly 60% reduction of carbon emissions in the country.

3. Most of the Technology Required to Decarbonize Is Available, but an Unprecedented Infrastructure Rollout Is Needed

  • Renewables, among the key solutions to climate change in South Africa, are already commercially viable. However, decarbonizing South Africa’s power system will require an unprecedented renewable-energy rollout. By 2050, at least 190GW of renewables must be installed. This means that 6GW to 7GW of renewable energy needs to be deployed every year from now until 2050. This could nearly double if the green H2 opportunity is captured. To put this in context, South Africa’s current installed renewables capacity of approximately 5GW took more than ten years to install.
  • A net-zero South Africa will have renewable power as the primary energy carrier; fossil fuels will be phased out. Gas will be used in limited volumes and for a short period in the transition (to enable a larger and faster scale-up of renewables and the competitive decarbonization of other sectors) and will be phased out as soon as cost parity with green alternatives is reached.

4. Expanding and Modernizing South Africa’s Power Grid Is Critical to Enabling the Energy Transition

  • The power grid needs to be expanded and strengthened to accommodate large-scale renewable-energy capacity from across the country and to deal with a growing, ever-more-electrified economy. Currently, only about 30GW of renewables could be added to the grid. This is well short of the 190GW needed for the power system by 2050.
  • The grid needs to be modernized through digitization to better match the supply of and demand for renewable power. If these grid upgrades are not completed, renewables cannot be rolled out at the required pace, putting the goal of a net-zero South Africa by 2050 at risk.

5. The Main Challenge Will Be Financing; Around ZAR 310 Billion of Investments Are Needed by 2030 in Renewables Alone

  • More than ZAR 6 trillion in investments is needed to reach a net-zero South Africa by 2050. Of this, the power sector requires nearly half of the required investments (about ZAR 3 trillion).
  • Approximately ZAR 1 trillion is required by 2030, of which ZAR 310 billion is required for investments in renewable energy alone. Overall, about 60% of the investments needed by 2030 are sufficiently bankable and mature enough to be funded mainly from private-sector sources.
  • International development finance will be critical to fund “nonbankable” investments (such as social costs and reskilling costs) and to cover the “economic gap” in new green industries to attract further private-sector investment (for example, to subsidize green H2 costs and stimulate supply-side investments).

6. Renewables Anchor Economic Diversification and Job Creation, but More Is Needed to Ensure a Just Transition

  • Unlocking South Africa’s renewable-energy sources—in combination with access to key mining commodities, expertise in important industries such as synthetic fuel production, existing trade relationships, relevant infrastructure (such as rail and ports), and a young, growing population—will position the nation well to win in new green markets and to drive further job creation.
  • A renewable power system can result in net-positive job creation of 2.4 million cumulative job years by 2050 if elements of the renewable-energy value chain are localized.
  • Reducing inequality, strengthening social cohesion, eradicating poverty, ensuring participation in a new economy for all, and managing socioeconomic risks will require more than just job creation. South Africa will need significant global support, including preferential green funding, trade support, aid in building capacity and developing skills, and sharing of technology.

Urgent Call to Action

Make the ramp-up of renewables a national priority

A net-zero South Africa, with a diversified and competitive economy, hinges on access to affordable, reliable, clean energy. Without fast and large-scale deployment of renewables, all other activities needed to achieve net zero and capture new green economic opportunities—such as green H2—will not be achievable.

Coordinate a national green industry incubator and an economic diversification approach

New economic opportunities must be pursued with an unprecedented focus, leveraging South Africa’s competitive advantages: the availability of high-quality renewables, access to key commodities, existing knowledge and skills, existing trade partnerships, and a young and growing population.

NBI and BCG for Climate Resilience in South Africa

An equitable transition to net zero must address South Africa’s poverty, inequality, and unemployment. Combining BCG’s analytical expertise with NBI’s local relationships has moved stakeholders beyond ideological discussion to a common understanding and collaborative solutions.

Net-Zero South Africa—It All Hinges on Renewables