Lessons from ArtSolar: Why South Africa's local content policies fail without strategic planning

The recent High Court ruling involving Durban-based solar panel assembler ArtSolar has reopened a long-running debate about local content requirements in South Africa’s electricity build programme. The question now is whether the challenges experienced under the Renewable Energy Independent Power Producer Procurement Programme and the Risk Mitigation Independent Power Producer Procurement Programme will be repeated as part of the Independent Transmission Programme.

While the ArtSolar case turns on procurement process and disclosure, it exposes a deeper and unresolved problem. Localisation policy has struggled to translate into real industrial capability and job creation, not because its intent is misguided, but because it has been structurally misaligned with industrial reality.

Local content thresholds were introduced into energy procurement before a viable domestic manufacturing base existed at scale. The failure of the DCD wind turbine tower manufacturing facility in the Coega Industrial Development Zone offers a clear illustration. Two factors proved decisive.

The first was the inability to manufacture and deliver the volumes required, largely due to the stop-start nature of procurement rounds. Periods of intense demand were followed by extended gaps with no orders, making sustained production uneconomic.

The second was policy and governance instability during the period of state capture, including the refusal by Eskom at the time to conclude power purchase agreements for approved projects, which undermined investor confidence and order certainty. South Africa entered large-scale renewable procurement without establishing a coherent policy framework to enable new manufacturing capacity or to scale existing capacity over time. Upstream capability in core components such as solar cells, glass, and balance-of-plant equipment remained limited. Manufacturing existed in isolated pockets, but the broader supplier ecosystem was thin, undercapitalised, and exposed to global cost pressures.

This mismatch was reinforced by procurement design. Renewable energy programmes prioritised speed, tariff certainty, and bankability. Project finance structures are inherently risk averse, and fully wrapped engineering, procurement, and construction contracts placed performance risk squarely on contractors and equity holders. In this context, developers naturally favoured large international suppliers with proven track records and strong balance sheets. Pricing was heavily influenced by scale, and local manufacturers either did not exist at the required volumes or could not supply consistently. Localisation objectives were therefore subordinated to delivery risk.

Firms that invested in local capacity faced sustained losses and, in several cases, closure. Predictably, this discouraged further industrial investment and reinforced reliance on imported supply chains. Capital constraints compounded the problem. Manufacturing requires long-term, patient finance. Local firms operate in an environment of high interest rates, currency volatility, logistics bottlenecks, and infrastructure risk. Global competitors benefit from scale, integrated supply chains, and state support in their home markets. Without targeted finance, industrial incentives, or credible offtake commitments linked to performance, localisation relied on aspiration rather than support.

Most critically, industrial policy and energy policy were never properly integrated. Local content was treated as a procurement condition rather than a sequenced industrial strategy. Skills development, supplier upgrading, technology transfer, and market protection were insufficiently coordinated. Industrial capability cannot be legislated into existence. It must be built deliberately and over time.

The ArtSolar case illustrates the credibility risks that follow from this misalignment. Allegations of non-compliance by project developers sit alongside counterclaims about the depth of local value created by domestic firms. Once credibility weakens across the system, localisation becomes contested rather than developmental. Policy intent remains sound, but legitimacy erodes. This matters beyond the solar sector.

Local content is central to South Africa’s broader industrial ambition, particularly in the context of the energy transition. If localisation fails to deliver real capability, it undermines public confidence, deters investment, and weakens the case for future industrial policy interventions. Localisation has not failed because it is wrong in principle. It has failed because it was asked to do industrial work without industrial foundations. Demand was created without supply readiness. Capital was assumed rather than mobilised.

The energy transition still offers an opportunity to build domestic industry. The Independent Transmission Programme represents the next test of whether lessons have been learned. Success will depend less on percentage targets than on whether policy, markets, and industrial reality are aligned.If transparency is created around component demand over the next decade, and if this is matched with appropriate finance, credible measurement, and enforceable rules, localisation could begin to shift from policy theatre to industrial development.

Thomas Garner holds a Mechanical Engineering degree from the University of Pretoria and an MBA from the University of Stellenbosch Business School. Thomas is self-employed focusing on energy, energy related critical minerals, water and communities. He is a Fellow of the South African Academy of Engineering and a Management Committee member of the South African Independent Power Producers Association.

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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