What’s Stopping Sunny South Africa’s Solar Industry? Court Case Sheds Light on the Wider Problem

A South African solar manufacturer, ARTsolar, is taking the government and several renewable energy developers to court. The case focuses on local content rules for renewable energy projects. ARTsolar says it invested in new manufacturing capacity because it expected these rules to lead to orders for locally assembled solar panels. That did not happen.

Wikus Kruger has researched renewable energy financing and procurement in Africa for 15 years. He argues that the ARTsolar court case points to a deeper policy problem. Local manufacturing requirements were added to South Africa’s renewable energy programme without a clear industrial strategy. The government created obligations, but not the conditions needed for local production to succeed. The result has been conflict between manufacturers, developers and the state – and localisation efforts that have delivered far less than expected.

Why is ARTsolar’s court case more than just a legal battle?

The dispute highlights a common policy mistake. Government treated local content rules as if they were an industrial strategy.

Under South Africa’s renewable energy procurement programmes, projects must meet local content thresholds. This usually means spending at least 35% of total project value on locally made goods and services. The rules also allow formal exemptions when local suppliers cannot produce enough equipment, deliver fast enough, or meet technical standards. The ARTsolar dispute seems to centre on how these exemptions were granted, and whether they were justified.

But the deeper issue sits behind the legal arguments. Local content rules were introduced on their own, without a wider plan for building an industry.

Because there was no such plan, many practical questions were left unanswered. Would factories receive steady orders? Would projects become more expensive or be delayed? What would this mean for electricity prices? Once these questions were ignored, problems were inevitable. Exemptions became common, and disputes followed.

This pattern is not limited to solar. In South Africa’s wind energy sector, manufacturers also invested in local factories in response to procurement signals. While wind and solar are different industries, they faced similar risks. Several wind component manufacturers closed as a result of delayed or cancelled bidding rounds.

Seen this way, the ARTsolar case is not just about whether rules were followed. It shows what happens when procurement tools are used on their own, without a clear industrial plan to support them.

What does this say about South Africa’s renewable energy industrial strategy?

South Africa’s renewable energy policies list many goals, but few clear priorities. There is no single government body in charge of green industrial development. Different departments deal with energy, trade, skills and finance, but they often work in silos.

This matters because building manufacturing industries is difficult. Global experience shows how demanding localisation can be. China, for example, leads the world in making solar panels. Its success came from decades of careful planning across the economy.

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China did not rely on local content rules alone. The government ensured steady demand for solar power. It supported exports. It provided cheap and reliable energy for factories. It offered long-term funding that allowed firms to grow over time.

The state also protected key industries in other ways. It invested in skills and research. It used trade measures to protect local manufacturers. It coordinated closely across national and local government. It linked panel production to chemicals, machinery, logistics and export markets. This helped firms scale up quickly and stay competitive.

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The lesson for South Africa is not to copy China. It is to recognise that competing in global manufacturing markets requires coordination, scale and strong institutions. This goes far beyond adding local content rules to procurement.

Why is cost effective, reliable electricity so important for South Africa’s development?

There is strong evidence that reliable and affordable electricity underpins growth, investment and job creation. This is especially true in energy-intensive sectors.

South Africa’s development plans still rely heavily on mining, minerals processing, basic manufacturing and agro-processing. These sectors depend on stable and reasonably priced power.

When electricity becomes unreliable or expensive, firms cut back. They delay investment or shut down entirely.

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Some wealthy countries can cope with high electricity prices because they built their industrial base when energy was cheap. Today they can rely more on services and high-productivity manufacturing. South Africa is not yet in that position.

For the foreseeable future, affordable electricity remains a key condition for growth. This is why localisation efforts need to be designed carefully: raising electricity costs before the economy can absorb them risks undermining the very development they are meant to support.

What’s needed to boost localisation?

International experience shows that renewable energy manufacturing succeeds only where governments create the right conditions. Firms need predictable demand, affordable power, skilled workers and access to finance. Policy also needs to be coordinated across energy, trade and industry.

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These choices cannot be made without understanding their wider economic effects. Localisation does not only affect factories. It also affects electricity prices and investment decisions across the economy.

A recent example is the 10% import duty on solar panels introduced in 2024. Like local content rules, a tariff can be a useful industrial policy tool. But only if it is part of a broader strategy.

Introduced on its own, the tariff could not create a competitive solar manufacturing industry. What it could do was raise the cost of power.

This is another example of policy being applied in pieces. Individual tools were used without a clear plan for how they fit together or how they would affect the electricity system as a whole.

South Africa would likely see greater benefits by focusing on areas where it already has strengths. These include construction, engineering and balance-of-plant components such as cables, mounting structures, inverters and transformers.

The country is also strong in grid equipment, operations and maintenance, and project development. These activities create many jobs, build useful skills and support faster expansion of affordable power.

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Finally, industrial strategy should consider the whole electricity system. South Africa’s grid expansion through the Transmission Development Plan and Independent Transmission Projects offers opportunities to involve local firms in steel, electrical equipment, construction and maintenance. But current procurement and contracting structures often favour larger, international players. This leaves local technical firms stuck with small, secondary roles instead of giving them meaningful work and growth opportunities.

The ARTsolar dispute should not be reduced to a story of heroes and villains. It should be treated as a warning: without a coherent industrial strategy, localisation efforts will continue to disappoint.

Wikus Kruger receives funding from the GET.Transform initiative and the DANIDA Fellowship Centre.

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