South African Fossil Fuel Subsidies Hit Record Highs as Country's Energy Crisis Deepens

April 10 2024, Cape Town—South Africa's fossil fuel subsidies tripled between 2018 and 2023, hitting ZAR 118 billion (USD 7.5 billion), up from ZAR 39 billion (USD 2.9 billion) 5 years earlier, a new report by the International Institute for Sustainable Development (IISD) reveals. 

The increase was largely driven by the global energy crisis, with consumer subsidies rising to reflect higher prices for oil, gas, and coal following Russia's invasion of Ukraine, according to the report Blackouts and Backsliding: Energy Subsidies in South Africa 2023. 

The increases came as global fossil fuel subsidies hit a record high of USD 1.5 trillion in 2022, with governments around the world scrambling to respond to the energy crisis. 

The largest share of fossil fuel subsidies in South Africa in 2023 went to oil and gas consumption, carbon tax exemptions, and the electricity sector. 

Fossil fuels provided 91% of South Africa’s total energy supply in 2021, compared to 80% globally. Coal dominates the electricity sector, accounting for 86% of all generation, while wind and solar make up just 6%. This is despite the fact that the average cost of renewable energy installation bids in South Africa has decreased by more than 77% since 2011.

But while fossil fuel subsidies have increased, the country's creaking electricity system is deteriorating rapidly, with rolling blackouts (known as load shedding) reaching record levels in 2023. The country experienced outages on 335 of 365 days of the year, taking a significant toll on the economy.

Core issues include a lack of investment in new generation and in the grid by the government and Eskom, the heavily indebted state-owned utility, the report said. 

"Soaring fossil fuel subsidies in South Africa mean the country is still locked into dependence on economically volatile fuels, with ill-targeted consumer subsidies failing to protect the poorest families," said Anna Geddes, co-author of the report and associate consultant at IISD.

She added: "Carbon tax exemptions for big emitters like Eskom, as well as current plans to expand gas-generated power, are undermining South Africa’s commitments to shift away from fossil fuels. Government support should send a clear signal to investors and the market, and therefore be consistent with climate targets and social priorities, such as ending load shedding and ensuring access to energy for all.”

South Africa committed to phasing out inefficient fossil fuel subsidies as a member of the G20 in 2009 and, more recently, as part of the COP 28 agreement, to tripling the world’s installed renewable capacity to 11,000 GW by 2030 and to transitioning “away from fossil fuels in energy systems in a just, orderly and equitable manner…to achieve net zero by 2050.”

Despite these commitments, the South African government’s latest draft Integrated Resource Plan 2023 outlines a future energy system increasingly dependent on gas, potentially at the expense of renewables.

Geddes added: “Worsening blackouts are taking a heavy social and economic toll on South Africa. Expanding subsidies for economically volatile fossil fuels will ultimately increase the risks South Africans face and fail to address long-term energy security concerns.

“In a world increasingly united in bringing an end to fossil fuel dependency, South Africa must set its sights higher or risk being left in the dark.” 

Media Contacts:

Anna Geddes, Associate Consultant: Energy—anna.geddes@iisd.net
Harry Cockburn, Communications Consultant: Energy—harry.cockburn@iisd.net