Africa Green Energy Holdings Business Plan › Section 3 › Market Analysis — South African Energy Sector

3.1 Macroeconomic and Energy Context

South Africa is the largest, most-industrialised, and
most-electrified economy on the African continent, with a 2025 gross
domestic product of approximately USD 410 billion and an installed
electricity-generation capacity of approximately 65 GW. The country
accounts for roughly 40% of all electricity produced in Sub-Saharan
Africa. Despite this scale, the energy sector has been under sustained
structural stress for more than 15 years. Generation reserves have been
chronically inadequate, transmission infrastructure has lagged demand
growth, and the dominant state-owned utility, Eskom, has cycled through
multiple operational, financial, and governance crises.

The cumulative economic cost of load-shedding to the South African
economy has been estimated by the South African Reserve Bank at between
ZAR 1.2 trillion and ZAR 1.5 trillion over the period 2007 to 2024,
equivalent to approximately 8% to 10% of cumulative real GDP. The
Council for Scientific and Industrial Research has separately estimated
that load-shedding shaved 1.5 to 2.0 percentage points off real GDP
growth in 2022 and 2023 — a finding subsequently corroborated by the IMF
Article IV consultations of 2024 and 2025.

In 2024 and 2025, the trajectory began to reverse. The Eskom Debt
Relief Act 2023 transferred ZAR 254 billion of Eskom debt to the
National Treasury subject to strict operational conditions. Operation
Vulindlela, the joint Presidency-National Treasury reform unit,
accelerated the unbundling of Eskom into separate generation,
transmission, and distribution entities. The Electricity Regulation
Amendment Act 2024 — gazetted into law — laid the legal basis for a
competitive wholesale electricity market expected to be operational by
2027. By March 2026, Eskom had achieved 308 consecutive days without
load-shedding and improved its Energy Availability Factor (“EAF”) to
67%, its highest level since 2018.

3.2 The Coming Supply Cliff (2029-2030)

Despite the welcome respite of 2025-26, Eskom’s own Medium-Term
System Adequacy Outlook 2026-2030 (published October 2025) and the
Department of Electricity and Energy’s IRP 2025 (gazetted October 2025)
explicitly acknowledge a looming supply cliff. The combination of (i)
8.4 GW of scheduled coal-plant retirements between 2029 and 2030, (ii)
the simultaneous expiry of the 1.15 GW Cahora Bassa hydro import from
Mozambique, and (iii) the very slow pace of replacement-capacity
construction (notably the delayed 6 GW combined-cycle gas turbine
programme) creates a potential 9.5 GW gap in firm capacity.

In its base case, IRP 2025 projects unserved energy will rise above 4
TWh per year by 2030 if any of the gas, transmission, or renewables
programmes slip. Importantly, the IRP framework now uses a probabilistic
multi-nodal model that confirms regional shortfalls in the Eastern Cape
and Mpumalanga even when national balance is met. This regional
dimension is critical: it means that locally-sited renewable capacity
can command premium tariffs even in periods of national surplus.

Figure 3.1

3.3 Policy and Regulatory Catalysts

South Africa’s renewable energy market is now underpinned by an
exceptionally well-developed and predictable policy stack. Five
regulatory instruments establish the demand-side framework that AGEH is
positioned to serve:

3.3.1 Integrated Resource Plan 2025

The IRP 2025 (gazetted 15 October 2025) is the binding
electricity-sector plan to 2039. It targets the addition of 105 GW of
new capacity, including 34 GW of wind, 25 GW of solar PV, 8.5 GW of
battery storage, 16 GW of distributed (embedded) generation, 16 GW of
gas-fired plant, and 5.2 GW of new nuclear. The investment value is
estimated at ZAR 2.23 trillion (USD 128 billion). Critically, IRP 2025
sets near-term horizons of 11.27 GW of solar PV, 7.34 GW of wind, and 6
GW of battery storage to be procured by 2030.

3.3.2 South African Renewable Energy Masterplan (SAREM)

SAREM, gazetted in April 2025, complements IRP 2025 by setting an
annual deployment target of 3 to 5 GW of new renewables every year until
2030. SAREM also defines the localisation, manufacturing, and skills
targets that REIPPPP bidders must meet, including a minimum 40% local
content for solar PV modules, 45% for wind towers, and 35% for battery
components, increasing to 60% by 2030.

3.3.3 Just Energy Transition Investment Plan (JET-IP)

The JET-IP framework, anchored by the USD 8.5 billion International
Partners Group commitment made at COP26 and expanded thereafter,
mobilises concessional climate finance specifically for South Africa’s
coal-to-clean transition. AGEH is eligible to access JET-IP concessional
debt facilities for the battery-storage component, the just-transition
jobs programme, and the regional grid-investment programme.

3.3.4 Electricity Regulation Amendment Act 2024

Enacted in 2024, this Act fundamentally restructured the South
African electricity market by enabling competitive private generation at
any scale (the previous 100 MW cap on embedded generation was already
lifted in 2022), creating an independent national transmission company
(“NTCSA”), establishing the legal basis for the Wholesale Electricity
Market, and entrenching the right of private offtakers to wheel power
across the grid.

3.3.5 Carbon Tax Act and Climate Change Act

The Carbon Tax Act (effective from 2019 and rising to ZAR 308/tCO₂e
from 2026 in real terms) and the Climate Change Act 2024 together create
explicit financial penalties for fossil-fuel-based emissions and a
sectoral emissions budget. These instruments make renewable energy
demonstrably cheaper than alternative new-build options on a full-cost
basis.

3.4 REIPPPP Track Record

The Renewable Energy Independent Power Producer Procurement Programme
is widely regarded as the most successful renewable-energy procurement
programme in the developing world. Launched in 2011 under the auspices
of the National Treasury, it has, by the end of December 2025, awarded
more than 12.5 GW of capacity across seven bid windows, mobilised more
than ZAR 292 billion in private investment, brought 6.6 GW of capacity
into commercial operation, generated 133,764 GWh of clean electricity,
and avoided 129.2 million tonnes of CO₂-equivalent emissions.

Figure 3.2

Bid Window 7, originally launched in December 2023, has been
progressively allocated and reallocated through 2024 and 2025. As of
December 2025, BW7 has awarded 3,940 MW of solar PV across 18 projects
and 932 MW of onshore wind, with bid tariffs ranging from ZAR 0.499 to
ZAR 0.532 per kWh — among the lowest in the world. AGEH is positioned as
a credible candidate to participate in REIPPPP Bid Window 8, anticipated
for tender in 2027.

3.5 Levelised Cost of Energy — A Step-Change Below Coal

Figure 3.3

The decline in levelised cost of energy (“LCOE”) for South African
renewables has been one of the most dramatic in the world. Solar PV
tariffs cleared at ZAR 3.65/kWh in BW1 (2011), ZAR 0.62/kWh in BW4
(2015), and ZAR 0.49 to ZAR 0.51/kWh in BW7 (2025) — an 86% decline.
Onshore wind tariffs declined from ZAR 1.51/kWh in BW1 to approximately
ZAR 0.50/kWh in BW5. By contrast, the all-in LCOE of new-build coal in
South Africa is estimated at ZAR 1.05 to ZAR 1.45/kWh (excluding carbon
tax). Solar PV is now approximately one-third the cost of new-build
coal, and roughly half the cost of Eskom’s average wholesale tariff.

3.6 Eskom Tariff Trajectory

Figure 3.4

The Eskom regulated wholesale tariff has risen by more than 240% in
nominal terms between 2015 and 2026 (an average compound annual growth
rate of 11.8%), far outstripping inflation. This sustained tariff
escalation is the single most powerful force driving large industrial,
mining, retail, and data-centre customers toward private
renewable-energy procurement. Every Eskom tariff increase materially
enlarges the addressable corporate-PPA market and improves AGEH’s
projected returns under its wheeling-contract revenue line.

3.7 Corporate PPA and Wheeling Market

The corporate PPA and private wheeling market is the fastest-growing
segment of the South African electricity sector. The combination of (i)
the lifting of the embedded-generation cap in 2022, (ii) Eskom’s
publication of standardised wheeling tariffs, (iii) the
operationalisation of NERSA’s wheeling framework, and (iv) the sustained
ESG and decarbonisation commitments of South African corporates listed
on the JSE has created an explosive growth trajectory. According to
BloombergNEF, S&P Global Commodity Insights, and SAWEA, the
contracted corporate PPA market grew from approximately 50 MW in 2020 to
more than 4.2 GW by the end of 2025, and is forecast to reach 17.5 GW by
2030 — a compound annual growth rate of 33%.

Figure 3.5

3.8 PESTEL Analysis

Figure 3.6

The PESTEL framework above synthesises the principal political,
economic, social, technological, environmental, and legal forces shaping
the South African renewable-energy sector. The aggregate picture is
decisively constructive for new investment: political consensus has
crystallised behind the Just Energy Transition; economic incentives
favour renewable over fossil-fuel generation on a full-cost basis; the
social licence to operate is strong (>80% of polled South Africans
support renewable expansion); technological cost declines continue;
environmental regulation increasingly penalises emissions; and the legal
framework now offers clear, enforceable contracts.

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