The great green reset of SA’s economy demands urgent and essential action

For South Africa to launch its transition to green energy for broad-based industrialisation requires rapid actions – not words. Actions are required for credibility to be rebuilt.

By Jason F Bell and Simon Roberts 

South Africa’s economy is currently at a dramatic fork in the road. The first of two starkly different options is to put a green growth and transformation agenda at the forefront of the country’s development plans. Such a path will require significant investments to realise South Africa’s world-leading potential yields in green energy (notably wind and solar). This is in line with the finding that development finance institutions need to take on a more prominent role in climate funding to cover the gap left by the private sector.

The second path is the one we are on. 

We continue to bury our heads in the sand, and commitments at the COP27 meetings are not matched with action. Staying on this path worsens already dire climate change metrics to new record levels, ensuring our failure to achieve even the most conservative 2050 targets.

This second path includes the many voluntary commitments to net-zero targets which are not worth the paper they’ve been written on. Clear rules and incentives need to be enforced. In the absence of sufficient accountability and punishment for non-compliance, the biggest emitters gladly opt for a wait-and-see approach, along with their latest greenwashing advertisement or product line. On this path, the longer we wait, the more aggressive we will have to be with the high costs of inaction against climate change as we adjust to the accelerating changes we failed to address or prepare for.

On the flip side, there are positive tipping points where breakthroughs can set off feedback loops to drive lower costs, including in electric vehicles and green ammonia for fertiliser. South Africa is on the front line of these hard choices as it is both in a climate hotspot and has incredible renewable energy potential.

Moreover, we have major trading partners looking to ensure their industries are sufficiently protected and supported to meet their climate change mitigation targets. The European Union’s Carbon Border Adjustment Mechanism is one example where South Africa’s exports are at risk.

South Africa’s agenda and ambitions heading into the COP27 negotiations focused on ensuring a just transition. This led to the $8.5-billion Just Energy Transition Partnership between South Africa, Germany, France, the European Union, the United States of America and the United Kingdom. It was welcomed as a landmark step towards addressing many of South Africa’s infrastructural and investment challenges.

However, it is unclear if it will provide handouts we could do without to a few large fossil fuel-based companies or contribute to ensuring a climate-resilient future and justice. COP27 did not produce concrete adaptation measures.

Genuine partnerships are required to build coalitions to unlock South Africa’s green economy and direct funds for massive investments in rapid structural change. Building these coalitions must be central to South Africa’s green economic and industrial future vision. However, the economic and industrial structure that has persisted since the apartheid era makes coalition building incredibly difficult.  

Why is this so? What structural and systemic problems are behind South Africa’s slowness to act?

In essence, the just energy transition challenge relates to changes required to the minerals-energy complex (MEC) in South Africa. Much of South Africa’s industrial and, by extension, climate challenges can be traced back to decisions that built the industrial base on a set of carbon-emitting industries.

Corporations such as Eskom, Sasol and ArcelorMittal South Africa were globally low-cost producers dominating key productive sectors such as chemicals, steel, and, of course, energy.

The MEC represented an example of concerted coordination and linkage building at the heart of the apartheid economy. The concentration of economic power is linked to failure to diversify the economy and vulnerability to any moves away from coal. This includes a lack of investment in new, diversified energy sources and the necessary infrastructure, compounding the costs by the day.

The well-documented fragmentation of the state has contributed to an economy at a standstill, with rent-seeking undermining investment, diversification, employment creation, and, ultimately, the economy’s structural transformation.

The immense potential of solar and wind offers the chance for a green economy reset. However, history may repeat itself if the MEC-linked companies dominate the changes in enclaves disconnected from the wider economy.

What confidence should we place in the ability of the growing smorgasbord of strategies, roadmaps, and public and private actions to achieve the just transition goals if most of these plans are built around these companies? How can the government lead in shaping development in the green hydrogen era?

For South Africa to launch its transition to green energy for broad-based industrialisation requires rapid actions – not words. Actions are required for credibility to be rebuilt.

First and foremost, the transmission grid must be separated from generation, and investment fast-tracked in this essential infrastructure. Nobody will take South Africa seriously without investment in the grid.

Second, the government must build a determined coalition of interests with a stake in a green industrial ecosystem which links to downstream industries and communities beyond the mining and energy-intensive enclaves. 

An ecosystem is framed around a green political settlement to drive investments in the green economy, with reciprocal transparent commitments to build linkages and not to exploit market power.

Third, this green political settlement must ensure an even distribution of the benefits to rebuild social solidarity and realise our potential of a structurally transformed and reindustrialised economy driven by a collective green economic vision. 

Article courtesy Daily Maverick

Jason F Bell is a Researcher at the Centre for Competition, Regulation and Economic Development; School of Economics at the University of Johannesburg. Professor Simon Roberts is a Lead Researcher at the Centre for Competition, Regulation and Economic Development at the University of Johannesburg.

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Speculative bubbles in the price of lithium put energy transition and electric mobility at risk

Uncertainty in the price of this mineral may risk the future supply of this essential component for electric vehicles. The involvement of external agents in the market could hinder decision-making and limit investment by mining and production companies, negatively affecting the manufacture of batteries.

The instability and volatility of the price of lithium in the international market may hinder the energy transition, especially electric mobility. This uncertainty could also hamper the future supply of this essential component for the manufacture of batteries. “The prices of lithium, one of the most important minerals at present for the energy transition and the transport sector, are not very stable, and there is evidence of a significant presence of speculative bubbles,” said Jorge M. Uribe, a member of the UOC‘s Faculty of Economics and Business, leader of the Finance, Macroeconomics and Management (FM2) group and lead author of this work together with other experts from the University of Barcelona and Colombia’s Universidad del Valle.

“We tend to think that prices reflect the market’s situation and that they automatically adjust to supply and demand, but this is not always the case. In the case of lithium, the situation is very delicate, because this mineral is essential to enabling the energy transition towards more sustainable and less polluting models in the mobility and transport sector. Without lithium, there is no way for electric vehicles to thrive and replace combustion vehicles,” Uribe said.

In the last decade, lithium has become a highly prized mineral worldwide. It is currently the main component of electric vehicle batteries and is gaining importance in systems that store energy from the stationary market (i.e. buildings and residential properties). “Currently, no technology is as efficient as lithium-based technologies for the production of batteries at a reasonable cost. That’s why this mineral is more important every day, especially in the transport sector and in the transition to electric vehicles,” explained Uribe. He also added that, even in stationary power generation, renewable energies (i.e. solar and wind power) are not able to produce energy at specific times due to the climate conditions, which means that “energy storage is a global priority today and will increasingly be so”.  

Complexity of the lithium market

Unlike those of other raw materials, the lithium market is fully globalised and suffers significant price fluctuations, often without any apparent cause and for reasons unknown to the agents involved in the sector. “We have found a very synchronized presence of several bubbles simultaneously with the lithium bubbles. This is probably due to the financial influence and the presence of agents that deal not just with lithium but rather invest in several markets,” Uribe said. The volatility and uncertainty generated by these bubbles could affect the introduction of electric vehicles as well as new transport models.

The instability of lithium prices can make planning difficult because, faced with volatile prices, companies will not make important investments until they have assurance that the price and cost is real and stable, that they are responding to fundamental market rules rather than speculation, or very short-term factors. “The existence of a bubble in the lithium market delays all the implementations and progress made in the sector. For example, a company that wants to make an investment today is likely to prefer to wait two years to see how the market stabilizes and make sure that we are not in a bubble,” said Uribe. In the case of Spain, the situation may become even more complex, as energy transition and sustainable mobility plans have been designed with short or medium-term actions in mind. “Spain is more vulnerable than other nations outside Europe because its proposal for energy transition is very ambitious,” he said.  

Proposals to avoid speculation

To avoid the volatility of lithium prices and possible lithium bubbles, the authors of the study propose the adoption of measures such as stabilisation funds and the creation of capital reserves. These strategies reduce the risks for producers, regularising the market. “These funds should ideally be in portfolios such as for example, global gold-like stock markets. This guarantees a minimum price and removes the uncertainty of a sudden rise or collapse of the bubbles,” he said.

Similarly, it is also necessary to design medium- and long-term planning by governments and large companies in the sector, with the aim of providing greater security and diversifying the operational risks inherent to the lithium market. “If no measures are adopted, there is a significant risk, as prices can fall very abruptly, causing lithium shortages,” concluded Uribe.  


Uribe, Jorge M. et al. “Price Bubbles in Lithium Markets around the World”. IREA – Working Papers, 2021, IR21/10.  

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