A recent report from the Net Zero Tracker initiative has brought to light a concerning issue for South Africa—the potential loss of over 500,000 jobs as wealthy nations implement carbon border taxes in the near future.
The report, titled “Carbon Competitiveness: South Africa at the Net Zero–Trade Nexus”, delves into the implications of carbon border adjustment mechanisms (CBAMs) being developed by advanced economies. These mechanisms aim to impose the same carbon-related costs on imports as those applied domestically, with the goal of discouraging carbon-intensive production. For a country like South Africa, where coal accounts for 80% of electricity generation and the economy is highly carbon-intensive within the G20, this poses a significant threat to both exports and employment.
The report estimates that 422,000 jobs in South Africa are linked to exports destined for countries that already have CBAMs in place, such as the European Union and the United Kingdom. An additional 89,000 jobs are tied to exports heading to countries like Japan and Australia, which are considering similar policies. With 78% of South Africa’s $135 billion in exports in 2023 targeted towards markets with net-zero emissions goals, the country is highly vulnerable to global carbon regulation.
China, South Africa’s largest trading partner, imported $31.1 billion in goods and services in 2023, with over 98% of these exports coming from sectors where South Africa’s emissions per product exceeded those of China. As China prepares to implement stricter domestic carbon pricing, South African exports may face increased emissions scrutiny.
Certain industries are particularly at risk. The basic metals industry, for instance, sends over 80% of its exports to countries with net-zero commitments, with 30% bound for markets with existing or imminent CBAMs. Agriculture is also under pressure, as South African producers struggle to compete with countries boasting lower carbon footprints. The automotive industry, a significant source of employment, is highly exposed as well, with 65% of vehicle exports by value going to countries with carbon taxes in place or under consideration.
Despite the risks posed by CBAMs, the report also highlights opportunities for South Africa. The country boasts key advantages such as abundant renewable energy potential, rich reserves of critical minerals essential for the global low-carbon transition, and representation in major trade and governance bodies. As Africa’s most industrialized nation, South Africa plays a pivotal role in producing vital components for clean energy technologies.
The government has already taken steps towards decarbonization through the Climate Change Act of 2024 and the Just Transition Framework. However, the success of these initiatives hinges on support from developed countries, particularly those in the Just Energy Transition Partnership with South Africa.
In conclusion, while the rise of CBAMs presents challenges for South Africa, it also presents an opportunity for the country to leverage its resources and position itself as a key player in the global low-carbon transition. Collaboration and support from developed nations will be crucial in navigating this transition successfully.
