The OECD/UNDP report Investing in Climate for Growth and Development: The Case for Enhanced NDCs shows that ambitious climate action can be compatible with economic growth and can deliver benefits for resilience to fossil fuel price shocks, employment and poverty reduction, provided investment supports the widespread deployment of low-carbon energy technologies (OECD/UNDP, 2025[1]). While the report presents evidence at the global level, policymakers in many African economies continue to consider how ambitious mitigation can be reconciled with development priorities, energy access and fiscal constraints. Across the continent, policymakers balance rising adaptation needs, energy access gaps, growing debt burdens, competing public spending needs and high borrowing costs (IEA, 2022[2]; Naidoo and Gulati, 2023[3]; Denje et al., 2025[4]).
South Africa faces several challenges, including providing reliable and affordable energy for all, high unemployment, a sluggish economy, a large informal economy, financially distressed state-owned enterprises and an energy system in which approximately 80% of electricity is generated from coal (CSIR Energy Centre, 2022[5]; OECD, 2025[6]). South Africa is also highly exposed to physical climate risks; warming is at about 1.5 times the global average rate (Republic of South Africa, 2024[7]; World Bank Group, 2022[8]) and water scarcity is increasing with major impacts on economic development. The country faces estimated investment needs of approximately ZAR 3.7 trillion for mitigation and adaptation over 2026 to 2035 (Government of South Africa, 2025[9]).
Yet, the country has taken significant steps to strengthen its climate policy framework. It submitted its second Nationally Determined Contribution (NDC2) in 2025, setting an economy-wide emissions target of 320 to 380 Mt CO₂-eq by 2035 (Government of South Africa, 2025[9]). In 2021, it pioneered the first Just Energy Transition Partnership (JETP) with international partners, to mobilise USD 12.9 billion in international pledges (Republic of South Africa, 2023[10]; Republic of South Africa, 2023[11]; de Aragão Fernandes et al., 2023[12]). In 2024, the country adopted the Climate Change Act, a major piece of legislation that establishes a national GHG emissions trajectory, sectoral emissions targets, carbon budgets, mandatory reporting for large emitters and enforcement penalties. South Africa also created the Presidential Climate Commission (PCC) as an independent statutory advisory body bringing together government, labour, civil society, traditional leaders and business, providing multi-stakeholder oversight of the just energy transition (Republic of South Africa, 2024[13]).
This policy paper aims to translate the global findings of the OECD/UNDP report into country-specific insights for South Africa, examining how South Africa can align its growth, energy security and employment goals with the delivery of NDC2 by:
Assessing the macroeconomic effects of enhanced policy action in South Africa using the ENV-Linkages computable general equilibrium model and the NiGEM macroeconometric model to compare a Current Policies scenario with an Enhanced Policies scenario aligned with South Africa's net zero commitment (Section 2).
Identifying the institutional, policy and financing conditions relevant for effective NDC2 delivery, drawing on literature and stakeholder consultations to examine implementation challenges, reform sequencing and political-economy constraints and to identify practical opportunities to strengthen investment conditions and implementation (Section 3).