Setting the Scene�The Current Geopolitical Crises: Risks and Opportunities

Presentation by Dr Kenneth Creamer

29 July 2026

Consultation hosted by NPC, PCC and PEAC

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Overview of Presentation

• Identification of current global energy trends

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• Data insights from this year’s Statistical Review of World Energy

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• How do these trends impact on South Africa’s economic planning?

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• Which path will South Africa choose?

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Identification of current global energy trends

• The situation globally remains very fluid, and it is impossible to predict all the consequences of the various shocks and geopolitical changes underway.
• Nonetheless, some significant trends in world energy markets are clearly discernible.
• These trends pre-existed the current conflict in the Middle East, and the ongoing Russia-Ukraine conflict, but the trends have been accelerated by these conflicts.
• It would be important for South Africa to factor these trends into the country’s economic planning.

Trend 1- Disincentive for imported fossil fuels

• Shocks to oil and gas prices are creating a disincentive for the use of imported oil and gas as importing countries seek to steer their economies towards greater energy security
• The strategic vision is to use new energy technologies to make their economies less vulnerable to external limitations on their growth and development

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Trend 2 – Geopolitics are accelerating the energy transition

• The current crisis is resulting in the acceleration of the global energy transition that was already underway before the current crisis
• Investment in renewable energy – originally driven by policy and then by price advantages – is now also being driven by geopolitical and energy security considerations

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Trend 3 – Electrification is increasing

• The rate of electrification is increasing, as processes that have historically made use of fossil fuel-based energy, are turning to electricity-based solutions
• This is occurring in a wide range of applications, most visibly in mobility (with electric vehicles) and also in certain industrial processes (electric arc furnaces)

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Trend 4 – Industrial and energy policies are aligning

• Governments are more actively pursuing industrial policy interventions upstream and downstream along new energy value chains
• This is resulting in increased investment in grid infrastructure and other electricity equipment, critical minerals, battery production, and
• Is increasing the productivity of certain services through digital applications and artificial intelligence

Data insights from this year’s Statistical Review of World Energy

• Insight 1 – Oil shocks have effects on oil consumption
• Oil shocks in the 1970’s created incentives for a movement away from oil dependence. One of the responses was that investment in nuclear power accelerated in several countries.

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Insight 2 – Local sources of energy are being prioritised

• It is likely that the energy shocks of the current period will again cause fossil fuel importing countries to strengthen their strategic position through increasing investments in alternative sources and, where possible, local sources of energy.
• For example, the EU between 2022 and 2025, has reduced its imports of fossil fuels by increasing wind and solar investments.
• In Pakistan, investment in roof top solar has displaced about 20% of its fossil fuel electricity sources in the past five years.

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Insight 3 – The process is happening unevenly and is contested

• A number of economies are oil and gas exporters who are at risk if global fossil fuel demand falls. Some like Saudi Arabia are trying to diversify their energy sources and their economies.
• North America, driven particularly by the United States, was the only world region to increase the carbon intensity of total energy supply during 2025.
• China has electrified more quickly than Europe and the United States

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The process is happening unevenly and is contested

• For many African countries – with 19% of the world’s population but only 3,6% of the world’ energy supply in 2025, the challenge is not about decarbonising the energy system, but about mobilising investment to build a (decarbonised) energy and electrification infrastructure.
• For Africa, a key threat of the current conflict is that the resultant rising borrowing costs are making such investments more costly and more difficult.
• For South Africa, which is less capital constrained, a specific risk is that policy errors will be made in response to ongoing geo-political shifts and that an energy transition that is still in its early stages, will be delayed, or even derailed.

How do these trends impact on South Africa’s economic planning?

• For South Africa, these developments expose significant risks and opportunities.
• As a net importer of crude oil and refined petroleum products, the country remains highly exposed to global fuel price shocks, exchange-rate volatility and disruptions to international supply chains.
• Fuel levy reductions, in response to the early days of the current Middle East Crisis, helped to cushion the immediate impacts on households and businesses, but these measures are necessarily temporary.
• There is a need to move beyond short-term crisis management towards a long-term development strategy that strengthens economic resilience. This overall development strategy should guide specific economic policy frameworks for the electricity sector and for liquid fuels.

Electricity Policy

Electricity policy needs to remain laser-focussed on achieving a competitive path for future electricity prices.

The continuation of electricity price increases will serve to inhibit investment and economic growth and will have severe negative consequences for employment and socio-economic development.

The restructuring of Eskom and the wider electricity sector should be designed to ensure:

• security of supply, including for poor households,
• increased levels of investment in grid and generation capacity, and
• price containment through sufficient levels of price competition among generators of electricity.

Just transition policies should be implemented to offer pathways to workers and communities negatively affected by technological changes,

The Just transition must also aim to secure the wider economic benefits of growth and new employment that will be achieved through the reliable provision of competitively priced electricity.

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Liquid Fuels

Liquid fuel policy announced recently by government intends to stipulate a requirement to increase the size of strategic fuel reserve holdings by both government and the private sector.

This is against the background that since the Middle East conflict commenced, South Africa has not to date suffered material fuel shortages and has switched a large portion of the country’s fuel purchases from the Middle East region to the Atlantic basin.

The longer-term plan should be to reduce fuel imports over time and to shift over time to new energy vehicles, including in the public transport system.

A number of refineries in South Africa have closed in recent years as they have proven to be uncompetitive

Which path will South Africa choose?

• South Africa is a relatively open economy with growth cycles affected by global shocks and trends.
• But we have negative and positive agency.
• Negative: In the 1980’s (during the crisis of apartheid) and for twelve years since 2014 (the state capture years), South Africa’s growth rate has diverged below that of the world economy and emerging market growth rates.
• Positive: When governance was relatively strong in the first 12 years of democracy and global commodity prices were high South African growth even exceeded the world average from time to time.

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Which Path? Opportunities vs Risks

• If we respond to the current crisis with appropriate energy, electrification, minerals and industrial polices we will have the potential to lift South Africa’s trend growth and be less vulnerable to the ups and downs of global cycles.
• But poor policy responses to the current crisis would likely mean that South Africa continues to underperform, deepening and pro-longing the ongoing phase of negative per capita growth, with the inequality and unemployment outcomes that this entails.

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We should expect challenges along the way

• A capable and ethical state is required to lead the planning process in the national interest.
• To be effective, government planning needs to be embedded in the realities of the South African economy, but must be autonomous of vested interests.
• Currently there are signs that SA’s energy transition is stalling – there is disagreement over the details of the unbundling of Eskom, and regulations for the wholesale market and protocols to enable wheeling of electricity across the grid are facing delays.
• If this stall in the energy transition takes hold – and the state is unable to sustain reform momentum - South Africa risks remaining on a path of energy-constrained growth, particularly if electricity and other energy costs continue to rise.
• This would be a sub-optimal outcome as compared to the counterfactual where the economy moves onto an elevated growth path based on a lower cost, cleaner and relatively sovereign energy future.

Closer alignment is required between energy planning and industrial policy

• Government’s recently announced Industrial Development Strategy seeks to align policy interventions with global trends by prioritising the 3Ds of decarbonisation, digitalisation and diversification.
• This approach intends to change the structure of the South African economy in line with the logic of the world’s emerging new power systems and industrial systems.
• Forward-looking policy frameworks are required for strategic sectors such as energy-intensive industries, electric vehicles, battery manufacturing, green hydrogen, transmission equipment and fertiliser production, and the use of public investment and procurement to strengthen domestic productive capacity.
• Plans to build over 14000 km of transmission lines and the investment in electricity generation that a modernised grid would unlock, have the potential to be a game changer for South African manufacturers, steel producers, cement and construction sectors.

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Which Path for South Africa?

• South Africa’s long-term prosperity will depend on whether the country uses this moment to accelerate the structural reforms required to achieve a competitive price path for electricity, reduce dependence on imported fossil fuels, strengthen domestic industrial capabilities and build an energy system that supports inclusive growth.
• These policy choices will determine whether the country remains vulnerable to future external shocks or emerges more resilient, more competitive, and better positioned within a rapidly changing global economy.

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