South Africa as an Investment Destination amid the Energy Crisis
Main Article Content
Keywords
Load shedding, energy crisis, South Africa, Foreign Destination Investment, SEZs, Coega IDZ, SEZ Act, Development, Policy
Abstract
This paper examines the impact of load-shedding (energy crisis) and the performance of Special Economic Zones (SEZs) in South Africa, focusing on the experiences of the Coega Industrial Zone (IDZ). Despite their potential to attract Foreign Direct Investment (FDI) and foster economic growth in the country, SEZs have been plagued by unreliable electricity supply since 2008. This study analyses the consequences of load-shedding on SEZs, drawing on existing literature, Coega IDZ documents, reports, and newspaper articles from reputable sources. The findings reveal that load-shedding significantly hinders investor confidence, forcing businesses to contend with production losses, increased operational costs, and supply chain disruption. The study highlights how these challenges have resulted in a suspension of major investment projects, resulting in a loss of job creation and economic development. This research contributes to the under-researched literature on SEZs and FDI in Africa, emphasising how electricity supply, a key component of infrastructure and a critical pillar of competitiveness, can directly affect FDI and the country’s global economic standing. The study underscores the urgent need for a sustainable solution to South Africa’s energy crisis to unlock the full potential of its SEZs and foster inclusive economic growth.
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References
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Chauke, K., 2022. Special Economic Zones: Is it an Elixir for economic growth in South Africa? Technium Soc. Sci. J., 33, p. 16. https://doi.org/10.47577/tssj.v33i1.6743
Cheng, T. 2019. Special Economic Zones: A Catalyst for International Trade and Investment in Unsettling Times?. Brill, 20(1), 32-67. https://doi.org/10.1163/22119000-12340122
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Dobronogov, A., & Farole, T. 2012. An Economic Integration Zone for the East African Community: Exploiting Regional Potential and Addressing Commitment Challenges. https://doi.org/10.1596/1813-9450-5967
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Garsous, G., Kozluk, T. and Dlugosch, D., 2020. Do energy prices drive outward FDI? Evidence from a sample of listed firms. The Energy Journal, 41(3). https://doi.org/10.5547/01956574.41.3.ggar
Goldberg, A., 2015. The economic impact of load shedding: The case of South African retailers. University of Pretoria.
Graham, E.M., 2004. Do export processing zones attract FDI and its benefits? International Economics and Economic Policy, 1(1), pp. 87-103. https://doi.org/10.1007/s10368-003-0003-4
Hogg, A., 2020. SA business confidence slumps to 21-year low as loadshedding, coronavirus bite. BizNews, Inc. Available from: http://hdl.handle.net/11427/20079.
http://www.coega.co.za/DataRepository/Documents/iljJqATjUPhZFnucPTbxNcQ5K.p df [Accessed 19 March 2023].
http://www.statssa.gov.za/publications/Report-00-30-02/Report-00-30-022018.pdf [Accessed 19 March 2019].
https://www.biznews.com/briefs/2020/03/11/sa-business-confidence-slumpsloadshedding-coronavirus.
https://www.coega.co.za/DocumentList.aspx?cmd=browse&catID=3&objID= [Accessed 16 March 2023].
Inglesi-Lotz, R. and Ajmi, A.N., 2021. The impact of electricity prices and supply on attracting FDI to South Africa. Environmental Science and Pollution Research, 28(22), pp. 28444-28455. https://doi.org/10.1007/s11356-021-12777-1
Joffe, H., 2012. Challenges for South Africa’s electricity supply industry. Focus J Helens Suzman Found, 64, pp. 32-37.
Makgetla, N S. 2021. Learning from experience: Special Economic Zones in Southern Africa. https://doi.org/10.35188/unu-wider/2021/064-1
Matondolo, S.L. and Kahn, M.T., 2023. Optimum Reliability Integrated WEF
Mbambo, D.M., 2015. An examination of the quality of infrastructure provided in South Africa’s industrial development zone. University of Cape Town. Available from:
Mining Review Africa, 2008. Rio Tinto suspends work on Coega smelter project. Mining Review Africa. Available from: https://www.miningreview.com/top-stories/riotinto-suspends-work-on-coega-smelter-project/ [Accessed 23 March 2023].
Mlambo, V. H. (2023). Living in the Dark: Load Shedding and South Africa’s Quest for Inclusive Development. IAHRW International Journal of Social Sciences Review, 11(2), 153-160.
Mtimka, O., 2011. The Coega Project: creative politicking in post-apartheid South Africa (Doctoral dissertation).
Nation Address 2023 [Online]. Eastern Cape, South Africa: Coega Development
Nel, E.L. and Rogerson, C.M., 2013. Special economic zones in South Africa: Reflections from international debates. Urban Forum. Springer, pp. 205-217. Osuigwe, C.E., Gumbo, T. and Aigbavboa, C., 2022. Special Economic Zones (SEZs) Establishments: Lessons from International experiences for South Africa. https://doi.org/10.1007/s12132-012-9184-7
Phiri, M. and Manchishi, S., 2020. Special economic zones in Southern Africa: White elephants or latent drivers of growth and employment? The case of Zambia and South Africa. (9292569171). https://doi.org/10.35188/UNU-WIDER/2020/917-4
Provincial Government of South Africa, 2023. COEGA Development Corporation (CDC) [Online]. South Africa: Provincial Government of South Africa. Available from: https://provincialgovernment.co.za/units/view/200/eastern-cape/coega-developmentcorporation-cdc [Accessed 19 March 2023].
Renewable Technology into the Eskom Distribution Grid, in the Eastern Cape Operating Unit. 2023 31st Southern African Universities Power Engineering Conference (SAUPEC). IEEE, pp. 1-6. https://doi.org/10.1109/SAUPEC57889.2023.10057681
Rodríguez-Pose, A., Bartalucci, F., Frick, S.A., Santos-Paulino, A.U. and Bolwijn, R., 2022. The challenge of developing special economic zones in Africa: Evidence and lessons learnt. Regional Science Policy & Practice, 14(2), pp. 456-481. https://doi.org/10.1111/rsp3.12535
RSA, 2012. Policy on the Development of Special Economic Zones in South Africa. Cape Town, South Africa: Government Gazette.
Seidman Makgetla, N., 2021. Learning from experience: Special Economic Zones in Southern Africa. (9292670646). https://doi.org/10.35188/UNU-WIDER/2021/064-1
Shi, X. and Sun, S., 2017. Energy price, regulatory price distortion and economic growth: a case study of China. Energy Economics, 63, pp. 261-271. https://doi.org/10.1016/j.eneco.2017.02.006
Sishi, E.K., 2021. The development impact of special economic zones in South Africa: Insights from Coega, Gauteng, Saldanha Bay and Dube TradePort (Doctoral dissertation, University of Johannesburg).
Stats SA, 2019. Coega Special Economic Zone, 2018 [Online]. Pretoria, South Africa:
UNCTAD, 2019. World Investment Report: Special Economic Zones [Online]. Geneva: United Nations Conference on Trade and Development. Available from: https://unctad.org/system/files/official-document/wir2019_en.pdf [Accessed 23 March 2023].
Walsh, K., Theron, R., & Reeders, C. (2021). Estimating the economic cost of load shedding in South Africa. In Paper submission to the Biennial Conference of the Economic Society of South Africa (ESSA) (Vol. 22).
Wang, J., 2013. The economic impact of special economic zones: Evidence from Chinese municipalities. Journal of Development Economics, 101, pp. 133-147. Wentworth, L., 2014. Creating Incentives for green economic growth: green energy in South Africa. https://doi.org/10.1016/j.jdeveco.2012.10.009
Winter, D., 2011. Power outages and their impact on South Africa’s water and wastewater sectors. Pretoria: Water Research Commission.
Wolmarans, M. and Schroeder, W., 2017. Environmental Impact Report for the Coega Aquaculture Development Zone. E.E.S.S.P. Ltd., (X0118/CDC ADZ EIA/01/FEIR/01). Available from: https://sahris.sahra.org.za/sites/default/files/additionaldocs/ADZFEIR.pdf [Accessed 23 March 2023].
Zeng, D.Z., 2016. Special economic zones: Lessons from the global experience. PEDL synthesis paper series, 1(1), pp. 1-9.
Zeng, D. Z. 2022. What Determines the Heterogeneous Performance of Special Economic Zones? Evidence from Sub-Saharan Africa. Global Policy, 13(4), 495-506. https://doi.org/10.1111/1758-5899.13054
Africa, S.S., 2021. Learning from Experiences.”. VoxEU. Last.
Ateba, B. B., Prinsloo, J. J., & Gawlik, R. 2019. The significance of electricity supply sustainability to industrial growth in South Africa. Energy Reports, 5, 1324-1338. https://doi.org/10.1016/j.egyr.2019.09.041
Boateng, A., Hua, X., Nisar, S. and Wu, J., 2015. Examining the determinants of inward FDI: Evidence from Norway. Economic Modelling, 47, pp. 118-127. https://doi.org/10.1016/j.econmod.2015.02.018
CDC, 2019. Integrated Annual Report 2018/19 [Online]. Port Elizabeth, South Africa:
CDC, 2022a. Coega reaffirms position as preferred investment destination [Online]. Eastern Cape, South Africa: Ceoga Development Corporation. Available from: https://www.coega.co.za/NewsArticle.aspx?objID=105&id=16848 [Accessed 16 March 2022].
CDC, 2022b. Integrated Annual Report 2021/22. Eastern Cape, South Africa: C.D.
CDC, 2023. Coega welcomes SONA focus on energy – Commentary on State of
Chakraborty, T., Gundimeda, H. and Kathuria, V., 2017. Have the special economic zones succeeded in attracting FDI? Analysis for India. Theoretical Economics Letters, 7(3), pp. 623-642. https://doi.org/10.4236/tel.2017.73047
Chauke, K., 2022. Special Economic Zones: Is it an Elixir for economic growth in South Africa? Technium Soc. Sci. J., 33, p. 16. https://doi.org/10.47577/tssj.v33i1.6743
Cheng, T. 2019. Special Economic Zones: A Catalyst for International Trade and Investment in Unsettling Times?. Brill, 20(1), 32-67. https://doi.org/10.1163/22119000-12340122
Chettiar, M., Lakmeeharan, K. and Koch, R.G., 2009. Review of the January 2008 electricity crisis. In the Cigré 6th Southern Africa Regional Conference.
Coega Development Corporation (CDC). Available from:
Corporation. Available from:
Corporation. Available from: https://www.coega.com/NewsArticle.aspx?objID=121&id=18867 [Accessed 16 March 2023].
De Mello Jr, L.R., 1997. Foreign direct investment in developing countries and growth: Department: Statistics South Africa. Available from: https://doi.org/10.1080/00220389708422501
Dohrmann, J.A., 2008. Special Economic Zones in India–An Introduction. Asien, 106, pp. 60-80.
Dobronogov, A., & Farole, T. 2012. An Economic Integration Zone for the East African Community: Exploiting Regional Potential and Addressing Commitment Challenges. https://doi.org/10.1596/1813-9450-5967
DTI. T.D.o.T.a. Industry, 2017. Industrial Policy Action 2016/17 - 2018/19: Economic Sectors, Employment, and Infrastructure Development Clusters. Pretoria, South Africa: The Department of Trade and in (ISBN: 997-0-621-4483-4).
Dunning, J.H., 2015. The eclectic paradigm of international production: A restatement and some possible extensions. The Eclectic Paradigm: A Framework for Synthesizing and Comparing Theories of International Business from Different Disciplines or Perspectives, pp. 50-84. https://doi.org/10.1007/978-1-137-54471-1_3
Engineering News. 2008. ‘’Eskom downgrade could impact SA’s own credit rating’’ E (online edition), 27 May.
Engineering News. 2022. ‘’South Africa FDI inflows drop in second quarter, household debt rises’’ in online edition, 27 September.
Farole, T. and Akinci, G., 2011. Special economic zones: Progress, emerging challenges, and future directions. World Bank Publications.Frick, S.A. and RodríguezPose, A., 2022. Special economic zones and sourcing linkages with the local economy: Reality or pipedream? The European Journal of Development Research, pp. 1-22. https://doi.org/10.1596/978-0-8213-8763-4
Garsous, G., Kozluk, T. and Dlugosch, D., 2020. Do energy prices drive outward FDI? Evidence from a sample of listed firms. The Energy Journal, 41(3). https://doi.org/10.5547/01956574.41.3.ggar
Goldberg, A., 2015. The economic impact of load shedding: The case of South African retailers. University of Pretoria.
Graham, E.M., 2004. Do export processing zones attract FDI and its benefits? International Economics and Economic Policy, 1(1), pp. 87-103. https://doi.org/10.1007/s10368-003-0003-4
Hogg, A., 2020. SA business confidence slumps to 21-year low as loadshedding, coronavirus bite. BizNews, Inc. Available from: http://hdl.handle.net/11427/20079.
http://www.coega.co.za/DataRepository/Documents/iljJqATjUPhZFnucPTbxNcQ5K.p df [Accessed 19 March 2023].
http://www.statssa.gov.za/publications/Report-00-30-02/Report-00-30-022018.pdf [Accessed 19 March 2019].
https://www.biznews.com/briefs/2020/03/11/sa-business-confidence-slumpsloadshedding-coronavirus.
https://www.coega.co.za/DocumentList.aspx?cmd=browse&catID=3&objID= [Accessed 16 March 2023].
Inglesi-Lotz, R. and Ajmi, A.N., 2021. The impact of electricity prices and supply on attracting FDI to South Africa. Environmental Science and Pollution Research, 28(22), pp. 28444-28455. https://doi.org/10.1007/s11356-021-12777-1
Joffe, H., 2012. Challenges for South Africa’s electricity supply industry. Focus J Helens Suzman Found, 64, pp. 32-37.
Makgetla, N S. 2021. Learning from experience: Special Economic Zones in Southern Africa. https://doi.org/10.35188/unu-wider/2021/064-1
Matondolo, S.L. and Kahn, M.T., 2023. Optimum Reliability Integrated WEF
Mbambo, D.M., 2015. An examination of the quality of infrastructure provided in South Africa’s industrial development zone. University of Cape Town. Available from:
Mining Review Africa, 2008. Rio Tinto suspends work on Coega smelter project. Mining Review Africa. Available from: https://www.miningreview.com/top-stories/riotinto-suspends-work-on-coega-smelter-project/ [Accessed 23 March 2023].
Mlambo, V. H. (2023). Living in the Dark: Load Shedding and South Africa’s Quest for Inclusive Development. IAHRW International Journal of Social Sciences Review, 11(2), 153-160.
Mtimka, O., 2011. The Coega Project: creative politicking in post-apartheid South Africa (Doctoral dissertation).
Nation Address 2023 [Online]. Eastern Cape, South Africa: Coega Development
Nel, E.L. and Rogerson, C.M., 2013. Special economic zones in South Africa: Reflections from international debates. Urban Forum. Springer, pp. 205-217. Osuigwe, C.E., Gumbo, T. and Aigbavboa, C., 2022. Special Economic Zones (SEZs) Establishments: Lessons from International experiences for South Africa. https://doi.org/10.1007/s12132-012-9184-7
Phiri, M. and Manchishi, S., 2020. Special economic zones in Southern Africa: White elephants or latent drivers of growth and employment? The case of Zambia and South Africa. (9292569171). https://doi.org/10.35188/UNU-WIDER/2020/917-4
Provincial Government of South Africa, 2023. COEGA Development Corporation (CDC) [Online]. South Africa: Provincial Government of South Africa. Available from: https://provincialgovernment.co.za/units/view/200/eastern-cape/coega-developmentcorporation-cdc [Accessed 19 March 2023].
Renewable Technology into the Eskom Distribution Grid, in the Eastern Cape Operating Unit. 2023 31st Southern African Universities Power Engineering Conference (SAUPEC). IEEE, pp. 1-6. https://doi.org/10.1109/SAUPEC57889.2023.10057681
Rodríguez-Pose, A., Bartalucci, F., Frick, S.A., Santos-Paulino, A.U. and Bolwijn, R., 2022. The challenge of developing special economic zones in Africa: Evidence and lessons learnt. Regional Science Policy & Practice, 14(2), pp. 456-481. https://doi.org/10.1111/rsp3.12535
RSA, 2012. Policy on the Development of Special Economic Zones in South Africa. Cape Town, South Africa: Government Gazette.
Seidman Makgetla, N., 2021. Learning from experience: Special Economic Zones in Southern Africa. (9292670646). https://doi.org/10.35188/UNU-WIDER/2021/064-1
Shi, X. and Sun, S., 2017. Energy price, regulatory price distortion and economic growth: a case study of China. Energy Economics, 63, pp. 261-271. https://doi.org/10.1016/j.eneco.2017.02.006
Sishi, E.K., 2021. The development impact of special economic zones in South Africa: Insights from Coega, Gauteng, Saldanha Bay and Dube TradePort (Doctoral dissertation, University of Johannesburg).
Stats SA, 2019. Coega Special Economic Zone, 2018 [Online]. Pretoria, South Africa:
UNCTAD, 2019. World Investment Report: Special Economic Zones [Online]. Geneva: United Nations Conference on Trade and Development. Available from: https://unctad.org/system/files/official-document/wir2019_en.pdf [Accessed 23 March 2023].
Walsh, K., Theron, R., & Reeders, C. (2021). Estimating the economic cost of load shedding in South Africa. In Paper submission to the Biennial Conference of the Economic Society of South Africa (ESSA) (Vol. 22).
Wang, J., 2013. The economic impact of special economic zones: Evidence from Chinese municipalities. Journal of Development Economics, 101, pp. 133-147. Wentworth, L., 2014. Creating Incentives for green economic growth: green energy in South Africa. https://doi.org/10.1016/j.jdeveco.2012.10.009
Winter, D., 2011. Power outages and their impact on South Africa’s water and wastewater sectors. Pretoria: Water Research Commission.
Wolmarans, M. and Schroeder, W., 2017. Environmental Impact Report for the Coega Aquaculture Development Zone. E.E.S.S.P. Ltd., (X0118/CDC ADZ EIA/01/FEIR/01). Available from: https://sahris.sahra.org.za/sites/default/files/additionaldocs/ADZFEIR.pdf [Accessed 23 March 2023].
Zeng, D.Z., 2016. Special economic zones: Lessons from the global experience. PEDL synthesis paper series, 1(1), pp. 1-9.
Zeng, D. Z. 2022. What Determines the Heterogeneous Performance of Special Economic Zones? Evidence from Sub-Saharan Africa. Global Policy, 13(4), 495-506. https://doi.org/10.1111/1758-5899.13054
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Jan 23, 2026
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South Africa as an Investment Destination amid the Energy Crisis. (2026). Journal of BRICS Studies, 4(2), 123-134. https://doi.org/10.36615/hd54db53
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How to Cite
South Africa as an Investment Destination amid the Energy Crisis. (2026). Journal of BRICS Studies, 4(2), 123-134. https://doi.org/10.36615/hd54db53
