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Renewable Energy Transition in South Africa: Implications for the Food and Beverage Industry

By Xolile White, Technical Director, Nestlé East & Southern Africa Region

Renewable Energy Transition in South Africa Implications for the Food and Beverage Industry
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South Africa has set a target to generate 18 GW of renewable energy by 2030 according to the Integrated Resource Plan (IRP) released by the South African government in 2019, which outlines the country's energy mix and goals for the next decade.

The IRP states that the country aims to add 18,000 MW of renewable energy capacity to the grid by 2030, comprising 14,400 MW of wind power, 6,000 MW of solar photovoltaic (PV) power, and 513 MW of concentrated solar power (CSP), aiming to reduce dependence on fossil fuels and contribute to global efforts to combat climate change. The food and beverage industry is a significant sector in South Africa, heavily reliant on energy for refrigeration and processing, and therefore, the transition to renewable energy has both challenges and opportunities for this industry. The Renewable Energy in South Africa: Boosting Economic Growth and Enhancing Energy Security report by the World Bank Group highlights the potential economic benefits of renewable energy, including job creation and increased energy security. However, the progress has been slow, and policy certainty and regulatory reform are needed to unlock its full potential.

As such, the transition to renewable energy has important implications for this industry, both in terms of the challenges it poses and the opportunities it presents.

One of the most significant challenges facing the food and beverage industry in the context of the renewable energy transition is the potential for higher energy costs. According to a report from PwC, "South Africa has some of the highest electricity prices in the world." This is due in part to the country's reliance on coal for energy production, which is both expensive and environmentally damaging. Switching to renewable energy sources could help to reduce the cost of electricity and make it more accessible to businesses and households, thus driving economic growth.

While renewable energy sources are becoming increasingly cost-competitive, they still require significant upfront investment, which may be difficult for some businesses to bear. Additionally, the intermittency of renewable energy sources can pose challenges for businesses that require consistent and reliable energy supply, particularly those that operate on a 24/7 basis.

Despite these challenges, there are also significant opportunities for businesses in the food and beverage industry to benefit from the transition to renewable energy. Renewable energy sources such as wind and solar are becoming increasingly cost-competitive with fossil fuels, and businesses that invest in these sources of energy can potentially save money on their energy bills over time. In addition, renewable energy sources can provide businesses with greater energy independence and resilience, reducing their vulnerability to energy price shocks and supply disruptions.

Another important opportunity presented by the renewable energy transition is the potential to enhance a business's environmental credentials. Consumers are increasingly concerned about the environmental impact of the products they consume, and businesses that can demonstrate a commitment to sustainability are likely to be viewed more favourably. By investing in renewable energy, businesses in the food and beverage industry can demonstrate their commitment to reducing their carbon footprint and contributing to a more sustainable future.

There are also broader implications for the food and beverage industry in South Africa. As the country moves away from fossil fuels and towards renewable energy, there is likely to be a shift in the competitive landscape, with businesses that can adapt to the new energy paradigm potentially gaining a competitive advantage. This may lead to the emergence of new business models and partnerships, as well as opportunities for collaboration between businesses and the government in the development of renewable energy infrastructure.

One of the key issues facing South Africa's energy transition is the slow pace of regulatory reform. According to a report from Deloitte, "South Africa's current regulatory environment is one of the biggest barriers to the adoption of renewable energy." The report notes that there is a lack of policy certainty, which makes it difficult for investors to commit to renewable energy projects. This lack of investment is hindering economic growth, as renewable energy has the potential to create new jobs and drive investment in the country.

Energy experts also argue that South Africa's slow progress in transitioning to renewable energy is hindering the country's efforts to tackle climate change. Also noting that in late 2022, Eskom boilers experienced power generation issues from chemical pre-conditions that lead to heightened rates of corrosion and frequent failures.

There are already examples of businesses in the food and beverage industry in South Africa that are taking advantage of the opportunities presented by the renewable energy transition. For example, the Woolworths Group, a major retailer in South Africa, has invested in solar energy to power its stores and distribution centers. Similarly, South African Breweries has committed to sourcing 100% of its electricity from renewable energy sources by 2025. These businesses are demonstrating that it is possible to embrace renewable energy and benefit from the opportunities it presents, even in an industry that is heavily reliant on energy.

In conclusion, the transition to renewable energy in South Africa has important implications for businesses in the food and beverage industry. While there are certainly challenges associated with this transition, there are also significant opportunities for businesses that are willing to invest in renewable energy sources. By doing so, businesses can potentially save money, enhance their environmental credentials, and gain a competitive advantage in a changing energy landscape.

Contact:
Nestlé East and Southern African Region (ESAR)
Mota Mota
Head: External Communications
Tel: +27 72 206 9015
Email: [email protected]   

About Nestlé
Nestlé is the world’s largest food and beverage company. It is present in 187 countries around the world, and its 291,000 employees are committed to Nestlé’s purpose of unlocking the power of food to enhance quality for everyone, today and for generations to come. Nestlé offers a wide portfolio of products and services for people and their pets throughout their lives. Its more than 2,000 brands range from global icons like Nescafé or Nespresso to local favourites like Ricoffy. Company performance is driven by its Nutrition, Health, and Wellness strategy. Nestlé is based in the Swiss town of Vevey where it was founded more than 150 years ago.