The Department of Trade, Industry and Competition (DTIC) is proposing tariff hikes on various imported goods in the renewable energy sector, to boost local manufacturing.
Published for public comment by the International Trade Administration Commission (ITAC), the proposed measures would increase customs duties on components used in solar, wind and battery storage technologies.
In a Government Gazette, DTCI entity ITAC says the domestic demand trajectory, raw materials resource base, technological capacity and manufacturing experience places South Africa in a potentially strong position to become a key player in regional and international supply chains.
“When carefully balanced, an improved tariff structure will increase the demand for, as well as the supply-competitiveness of, locally manufactured products and components; this will further enable export market opportunities and will enhance the competitiveness of the local renewable value chain,” it notes.
Niveshen Govender, CEO of the South African Wind Energy Association (SAWEA), says while the industry body supports government’s long-term vision to deepen localisation and expand local industrialisation capabilities where possible, it believes it is essential to jointly determine the best options, while avoiding negative impacts on the industry as both global and local energy markets evolve.
“As SAWEA, we are currently engaging with our members to fully understand and unpack the implications of this proposed tariff review. In continuing our efforts to advance wind energy in South Africa, we believe it is necessary to initiate a deeper investigation into the impacts of potential tariffs on the local industry, as well as the deployment of wind energy as part of the energy security plan, and the levelised cost of energy from wind energy,” says Govender.
First steps
SAWEA says it encourages extensive consultation between government and industry, to ensure that any adverse effects are avoided, and the right mechanisms are employed to support the South African localisation agenda.
As such, Govender adds, it will be important to ascertain a baseline understanding of the local supply chain, and how SAWEA and the industry as a whole can support its continued and sustainable business operations.
“To fully support localisation at scale, it is important to first ensure consistent and continuous demand for wind energy so that local manufacturing concerns are supported and sustained in the long-term.”
While SAWEA welcomes the differentiated approach in the gazette to consider duty adjustments where local manufacturing is viable and exemptions where it is not, it cautions against the premature removal of existing import rebates or blanket local content mandates that do not reflect current realities in the wind sector.
“Instead, a flexible, incentive-driven framework, aligned with clear procurement pipelines and supported by industrial enablers, such as port reform, logistics coordination and finance risk-sharing, is key to enabling sustainable localisation,” says Govender.
Another industry body, the South African Photovoltaic Industry Association (SAPVIA) says it is engaging its members to gather input and will submit a comprehensive written response.
“Concurrently, SAPVIA has initiated direct discussions with the International Trade Administration Commission to ensure our sector’s perspectives are fully considered,” says Dr Rethabile Melamu, CEO of SAPVIA.
“Whilst we plan to submit a detailed position in our formal submission based on our members’ inputs, we wish to highlight the following key concerns at this stage,” says Melamu.
SAPVIA says the time provided for representations (four weeks) is too short to allow industry to make comprehensive submissions.
It adds that the rationale provided for the tariff review does not clearly align with existing government strategies, such as the South African Renewable Energy Masterplan, the Integrated Resource Plan, or Nationally Determined Contributions.
“In our discussions with ITAC, it has been noted that the proposed tariffs are believed to support the creation of manufacturing-related jobs. However, most employment opportunities in the solar PV sector are generated during the deployment and installation phases of projects, not necessarily in manufacturing,” says Malemu.
“For instance, a PV module assembly plant with a capacity of 500MW typically employs only 60 to 100 people, as these processes are largely automated. In contrast, the manufacturing of mounting structures can create 10 times more jobs, with hundreds in the deployment of the technology.”
According to SAPVIA, any introduction of tariffs on solar components must be guided by a comprehensive value chain analysis, including a detailed assessment of employment potential across the entire PV value chain.
It adds that the discontinuation of the solar PV module rebate would be highly detrimental to the sector.
“Our view is that the current local manufacturing capacity is less than 15% of domestic demand and likely to decrease based on project pipeline. Scaling to 50% or more will take several years and hinges on a stable electricity supply. In the light of our recent electricity challenges, investors may be cautious. In addition, the existing rebate system has already been constrained by limited administrative capacity within ITAC.
“SAPVIA remains committed to constructive engagement with government stakeholders to ensure any tariff-related decisions support both industrial development and South Africa’s renewable energy transition. We will provide a full statement and data-driven submission in the coming weeks,” says Melamu.
Share