- Study finds 5 to 10 GWh plants commercially viable with strong regional demand outlook.
- Southern Africa battery demand forecast to reach 55 GWh by 2034 driven by BESS rollout.
- New tax incentives and SEZ benefits to boost competitiveness against East Asian imports.
A new feasibility study by Ernst & Young Advisory Services (EY Parthenon) for the Localisation Support Fund confirms that South Africa has the technical and commercial capacity to support the development of between one and three battery giga-factories focused on lithium iron phosphate cell production.
The report highlights lithium iron phosphate chemistry as a preferred solution for stationary energy storage due to its strong safety profile and cost effectiveness, making it well suited to large scale Battery Energy Storage Systems.
According to the study, a giga-factory with an annual production capacity of between 5 GWh and 10 GWh is operationally viable in the South African market. This aligns with rapidly rising regional demand, with Southern Africa expected to require up to 55 GWh of battery capacity by 2034. Growth is being driven primarily by a 30% annual expansion in Battery Energy Storage System deployments, which are increasingly critical for grid stability and renewable energy integration.
Battery Energy Storage Systems are expected to form the core demand base for locally manufactured cells. The report positions this segment as the primary anchor market, particularly as South Africa accelerates efforts to stabilise its electricity network and integrate higher shares of renewable energy.
From a cost perspective, the study finds that locally produced lithium iron phosphate cells could become competitive with imports from East Asia, provided that targeted tariff measures and industrial incentives are implemented.
South Africa’s competitive positioning is supported by several structural advantages. These include access to key battery minerals, established industrial infrastructure, and existing engineering capabilities. The report also underscores the importance of international partnerships, particularly with experienced Asian manufacturers, to address technical and skills gaps during the early stages of industry development.
Special Economic Zones are identified as central to the localisation strategy, offering both infrastructure readiness and attractive fiscal incentives. Key locations highlighted include the Tshwane Automotive Special Economic Zone, which could integrate battery production with existing automotive manufacturing, as well as the Coega Special Economic Zone in Gqeberha, known for its port access and energy logistics capabilities.
Additional hubs include the East London Special Economic Zone, which benefits from established renewable energy and automotive supply chains, and the Richards Bay Special Economic Zone, strategically positioned for both raw material imports and exports of finished energy storage systems.
To support industry growth, the South African government is rolling out a range of financial incentives. From March 2026, investors in battery and new energy vehicle production will qualify for a 150% tax deduction on capital expenditure. In addition, US$53 million equivalent has been allocated under the Industrial Development Support Programme to strengthen local battery manufacturing and assembly capacity.
Further measures under consideration include tariff protections within World Trade Organization limits to shield emerging local manufacturers from lower cost imports during scale up. Companies operating within Special Economic Zones will also benefit from a reduced corporate tax rate of 15% alongside exemptions on VAT and customs duties for production inputs.
The study also emphasises the importance of securing a stable supply of critical minerals. While South Africa has reserves of iron ore, phosphate and copper, regional integration will be essential. Partnerships with Zimbabwe and Mozambique are recommended to access lithium and graphite resources, enabling the development of a resilient and competitive battery value chain across Southern Africa.
Link to the full report HERE
Author: Bryan Groenendaal
