Major Solar Shift in South Africa: Insights from VRE Ventures

Renewable energy projects continue to drive civil construction activity in South Africa, despite a notable shift from solar to wind energy.

The FNB/BER Civil Confidence Index recently fell from an almost eight-year high of 47 in the first quarter of 2024 to 44 in the second quarter. This reading indicates that over 55% of respondents are dissatisfied with current business conditions.

This slight decline in business confidence reflects a slowdown in activity. However, the activity growth indicator remains significantly above its long-term average. According to Stats SA, the real value of construction works increased by 7.8% year-on-year in the first quarter of 2024, with potential for an even more positive reading in the second quarter.

“The survey results from the last few quarters are not as pessimistic as the Stats SA data might suggest,” said Siphamandla Mkhwanazi, Senior Economist at FNB. “This is primarily because the survey focuses on very large contractors and those in the private sector.”

Looking ahead, work is expected to increase in the coming months. The rating of the lack of new demand as a business constraint, a proxy for order books, has reached its best level since 2008. Mkhwanazi noted, “The significant improvement in order books is a very positive development, suggesting that prospects for future work are similar to those during the construction boom related to the 2010 FIFA World Cup.”

Transition from Solar to Wind

Despite a slight decrease, activity growth remains well-supported, with a noticeable improvement in the pipeline of work. Projects related to renewable energy continue to sustain civil construction activity. However, there appears to be a shift from predominantly solar projects to wind energy.

South Africa experienced a solar boom in 2023 due to increased load shedding. However, solar energy’s limitations—such as not being harnessable at night or during cloudy conditions—restrict its potential in the country’s transition away from fossil fuels. Conversely, wind energy can be harnessed any time of the day, making it a more reliable source of baseload power.

Overall, despite being above the long-term average, sentiment in the civil construction industry remains relatively low. “Given the underlying conditions, especially activity, confidence should be higher. However, uncertainty regarding the political environment and the impact of crime, corruption, and government inefficiency likely weigh on business confidence,” added Mkhwanazi.

For all your solar needs, whether it’s solar inverters, lithium batteries, solar panels, generators, solar accessories, BESS solutions, or UPS solutions, VRE Ventures is here to help. Contact us today to learn more about how we can support your renewable energy projects and contribute to a sustainable future.

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