This chapter examines the enabling environment for micro, small and medium‑sized enterprises in renewable energy in South Africa, focusing on the regulatory and policy framework, recent institutional reforms aimed at more inclusive support and dedicated mechanisms for start‑ups and innovation. It then analyses supply‑side dynamics in the country’s financial market for small‑scale businesses in renewable energy and other environmental sectors. Finally, it presents two case studies in rooftop solar photovoltaic and agrivoltaics to illustrate practical approaches to strengthening the enabling environment. These examples highlight the importance of integrated approaches across renewable value chains, combining demand‑side support with supply‑side measures including access to finance, technical assistance and market development.
Overcoming Financial and Capacity Barriers to Empower Small‑Scale Enterprises in South Africa
Abstract
Micro, small and medium‑sized enterprises (MSMEs) play an important role in South Africa’s economy and are widely regarded as a key source of economic dynamism, innovation and livelihoods. Within the context of South Africa’s JETP and energy transition, small-scale businesses have the potential to support local economic diversification, foster innovation along emerging renewable energy and other green value chains and contribute to employment opportunities, particularly when supported by well‑designed policy, financial and capacity‑building measures. However, their contribution to job creation is neither automatic nor uniform and depends heavily on the broader enabling environment in which they operate. Environmental-friendly entrepreneurship remains a nascent concept, particularly in coal‑dependent regions such as Mpumalanga.
South Africa’s MSME landscape is vast and highly heterogeneous, with more than two‑thirds of enterprises operating in the informal economy. Moreover, migrants account for a significant share of MSMEs in South Africa, with approximately one in four small business owners being foreign nationals (FinMark Trust, 2024[1]). Provincial MSME ecosystems vary widely, with the Western Cape benefiting from a relatively mature and interconnected green enterprise support environment – particularly in and around Cape Town – while Mpumalanga has far fewer formally registered MSMEs and more limited business support infrastructure (Annex B). These regional disparities intersect with longstanding structural barriers that continue to constrain participation by women‑ and black‑owned businesses, as well as enterprises operating in townships and rural areas.
At the same time, many challenges are shared across regions and sectors. MSMEs commonly face regulatory complexity, limited access to finance, high upfront costs, skills and capacity constraints, as well as difficulties navigating support programmes. Addressing these barriers is essential if small businesses are to contribute meaningfully to South Africa’s Just Energy Transition in a way that supports inclusive and sustainable economic outcomes. This chapter therefore focuses on the enabling environment shaping the participation of small-scale enterprises in the energy transition.
At national level, the institutional environment for green small‑scale enterprises has gradually improved. Despite ongoing pressures, several positive trends point to incremental improvements in the broader entrepreneurial ecosystem, including increasing digitisation, a growing share of black‑owned formal small businesses and expanded support for township and rural MSMEs. However, both formal and informal businesses continue to face significant barriers.
2.2.1. Horizontal co-ordination
Several national departments and bodies have mandates that contribute to enabling environmental-friendly entrepreneurship in South Africa, including the Department of Small Business Development (DSBD), the Department of Forestry, Fisheries and the Environment (DFFE), the Presidential Climate Commission (PCC), the Department of Trade, Industry and Competition (DTIC), the Technical Innovation Agency (TIA) and public development finance institutions (Annex C).
Despite the breadth of institutional involvement, horizontal co‑ordination across these actors remains weak. Mandates, programmes and funding instruments are often developed and implemented in silos, limiting synergies and reducing their collective impact on entrepreneurs. There is scope to strengthen inter‑institutional co‑ordination, align incentives and better integrate existing initiatives. This would allow providing more coherent and accessible support across the policy, finance and innovation ecosystem.
2.2.2. Vertical co-ordination
Vertical co‑ordination across levels of government is equally challenging. Project engagement has highlighted strong interest from national, provincial and local actors, alongside a voiced need to improve policy dialogue and information‑sharing across spheres of government. Stakeholders frequently point to overlapping mandates and institutional uncertainty over roles and responsibilities.
As reflected in the stakeholder perspectives discussed in Annex D, strengthening vertical co‑ordination will require clearer articulation of roles and responsibilities, more structured and regular platforms for exchange, stronger incentives for local stakeholders to engage in national‑level dialogues and closer co‑ordination across sectoral national departments to mainstream green objectives within public MSME support measures. A greater emphasis on collaboration around shared transition priorities will be critical.
2.2.3. Regulatory and market constraints affecting small-scale enterprises in renewable energy and other green sectors
In the renewable energy sector, permitting processes remain lengthy and vary significantly by location, creating delays for project developers and slowing the pace of renewable energy deployment. Compliance constitutes a major hurdle for small enterprises, while high administrative burdens and perceptions of corruption undermine trust and increase the cost of doing business. In this context, stakeholder consultations suggested broad support for applying risk‑based and proportionate regulatory requirements for low‑risk MSME activities as a means to reduce unnecessary compliance burdens, lower entry barriers and accelerate small‑scale participation in renewable energy markets.
High levels of market concentration further stifle competition, limiting entry into key sectors for smaller firms and contributing to slow job creation (OECD, 2025[2]). Procurement rules and risk‑management frameworks continue to favour larger firms. Corporate procurement similarly shapes market opportunities but is typically designed around compliance and risk considerations that disadvantage smaller suppliers. Access to markets and the ability to articulate competitive value propositions remain persistent challenges. Business incubators participating in the OECD survey flagged market access support as one of the most pressing gaps in the MSME ecosystem (Annex D), pointing in particular to limited opportunities for linkages with buyers, weak integration into procurement pipelines and insufficient support to help enterprises translate innovative ideas into commercially viable offerings.
Addressing these constraints will require more coherent and predictable regulatory frameworks, streamlined permitting processes, better‑aligned public and corporate procurement rules and targeted system‑level incentives to actively create and sustain markets for green goods and services, particularly for small businesses and first‑time entrants.
The OECD survey confirmed that around half of the responding municipalities actively use green public procurement to stimulate demand for sustainable products and services provided by SMMEs. However, nearly one third of respondents also acknowledged that there is significant room for improvement in terms of implementation (Annex D).
2.2.4. Recent institutional reforms in support of small-scale enterprise development
A recent reform consolidated South Africa’s small‑business support institutions by merging the Cooperative Banks Development Agency (CBDA), the Small Enterprise Development Agency (SEDA), and the Small Enterprise Finance Agency (SEFA) into a single entity – the Small Enterprise Development Finance Agency (SEDFA) – thereby creating a unified, single‑entry system for MSME support (Government of South Africa, 2024[3]). The intention is to streamline access to financial and non‑financial assistance for MSMEs as well as offer smaller businesses better protection from unfair commercial practices. This institutional consolidation is a welcome move, particularly in light of early evidence of improved reach and delivery capacity.
SEDFA became operational in October 2024 and has already reported substantial operational outputs, including providing non‑financial support to over 70 000 enterprises and delivering financial assistance totalling ZAR 3.3 billion (~USD 202 million) to more than 165 000 entities for the 2024-25 financial year (Parliamentary Monitoring Group, 2025[4]).6F1 This translates to fewer than 1% out of an estimated 2.7 million MSMEs in South Africa receiving public support.
As discussed subsequently in Annex D, stakeholder consultations suggest several outstanding operational bottlenecks. In particular, the continued reliance on manual, paperwork‑heavy application processes poses persistent barriers for many MSMEs. MSMEs continue to report long processing times and limited visibility over application status, indicating that administrative processes remain at an early stage of modernisation. These challenges underline the need to simplify and digitalise permitting and approval processes for small‑scale renewable energy and circular economy activities, including Small‑Scale Embedded Generation (SSEG), in order to reduce compliance costs and accelerate MSME participation.
2.2.5. Towards more inclusive support
There are signs of gradual progress towards more inclusive MSME support. The National Integrated Small Enterprise Development (NISED) Masterplan sets out integrated measures, including formalisation initiatives, revised credit guarantees, township and rural programmes and a digital one‑stop support platform (DSBD, 2022[5]). The MSMEs and Co‑operatives Funding Policy, approved in 2024, provides a holistic national framework to strengthen access to development finance for MSMEs and co‑operatives (DSBD, 2025[6]). It addresses financing gaps faced by early‑stage, informal, township‑ and rural‑based enterprises, including high collateral requirements, limited credit information and lender risk aversion. It supports blended and subsidised financing approaches, expanded use of credit guarantees and stronger use of intermediary and microfinance channels to improve last‑mile delivery. In addition, the policy prioritises targeted support for youth‑, women‑ and disability‑owned enterprises, supports transition to formality and broadens access to finance (Box 2.1). A key emphasis is placed on strengthening financial literacy, business capability and alignment with enterprise development services (DSBD, 2025[6]). All these proposals move in the right direction, but their impact will ultimately depend on effective implementation, adequate resourcing and strong co‑ordination.
Women play a central role in South Africa’s enterprise landscape, yet remain under‑represented among formal, growth‑oriented businesses. While women own or operate an estimated 43-46% of micro, small and medium‑sized enterprises (MSMEs), largely in informal and microenterprises, they lead less than 20% of formal MSMEs. Women‑owned firms are also more concentrated in low‑margin sectors and tend to be smaller, less capital‑intensive and younger than male‑owned firms.
Access to finance remains a major barrier. Women‑owned enterprises typically face higher collateral requirements, lower loan approval rates and more limited access to long‑term finance, reflecting lower asset ownership, shorter credit histories and lower levels of formalisation. Women‑led firms are also significantly under‑represented in private equity and venture capital portfolios, and many rely on informal or high‑cost finance, constraining their ability to invest, scale and formalise.
South Africa has introduced targeted funding instruments for other priority groups, notably youth and persons with disabilities, through DSBD programmes such as Amavulandlela and the Youth Challenge Fund. However, there has been no comparable, dedicated approach to addressing gender‑specific financing constraints. The proposed Women’s Enterprise Fund, now included in the MSME funding policy framework, marks an important step towards closing this gap.
Moreover, a growing number of commercial banks in South Africa offer dedicated programmes for women entrepreneurs, including Absa’s She Thrives Women in Business, Standard Bank’s Basali Development Programme and First National Bank’s gender‑focused SME lending facilities supported by a USD 100 million African Development Bank credit line. However, these initiatives remain uneven in scale and accessibility, are largely concentrated among larger banks and reach only a limited share of women‑owned MSMEs, underscoring the need for more systematic and co-ordinated policy support to achieve broader impact.
The G20 Action Plan on Accelerating Progress on the SDGs of 2023 provides relevant guidance, highlighting regulatory reforms to enhance financial inclusion, improved transparency through gender‑disaggregated financial data, the scaling of digital and alternative finance and the use of public‑private investment vehicles to de‑risk finance for women‑owned MSMEs.
Possible policy directions for South Africa as per the G20 Action Plan include:
Establish a dedicated Women’s Enterprise Fund offering concessional finance, guarantees and tailored business support.
Introduce gender‑responsive lending targets for public and development finance institutions, with clear monitoring and disclosure.
Mandate the collection and publication of gender‑disaggregated data across the financial system to inform supervision and policy design.
Offer tax breaks to firms and investors who meet minimum thresholds for investment in women‑led enterprises or achieve certified gender equity targets.
Develop comprehensive financial literacy and digital training programmes targeting women at all levels and integrate these into formal and adult education systems.
2.2.6. Addressing informality
Informality is a structural feature of South Africa’s enterprise landscape that government has sought to address for several decades. There is growing recognition that not all informal firms will transition to full formality and that public support is also needed for enterprises operating in the informal economy. Within this context, DSBD is expected to play a key co‑ordinating role with regards to the following policy interventions (DSBD, 2025[6]):
Improve access to finance for informal businesses through collaboration with National Treasury and the Financial Intelligence Centre to develop enabling guidelines that recognise informal MSMEs as economic actors within the financial system, without imposing the burden of full formalisation. This implies a tiered approach to the recognition of MSMEs.
Strengthen the voluntary identification of informal MSMEs by working with the Companies and Intellectual Property Commission (CIPC) and other authorities to establish a simple yet verifiable identification system. While such identification could serve as a prerequisite for accessing government support, it is explicitly not intended to trigger tax obligations through the South African Revenue Service, thereby improving access while increasing the efficiency of public assistance.
Include MSMEs operated by identifiable migrants, provided that business owners can be legally identified.7F2
Incorporate identifiable informal MSMEs into alternative credit‑assessment systems, notably through the use of digital payment data, to improve access to finance.
Expanding access to alternative financial services through fintech solutions, mobile banking, credit scoring based on digital payment histories and tailored microfinance offerings presents promising avenues for improving access to finance for informal enterprises (OECD, 2025[8]) (Chapter 4).
Broader strategies to address informality, employed by other emerging economies, such as Peru and Mexico, include regulatory reforms to reduce the cost of business formalisation, such as lowering administrative barriers, streamlining licensing and registration procedures and simplifying tax compliance, alongside labour market reforms aimed at reducing non‑wage labour costs and strengthening enforcement (OECD, 2025[8]). For example, Peru has gradually simplified business registration and licensing processes, expanded digital public services and introduced simplified tax regimes for MSMEs, notably the Régimen MYPE Tributario, which reduces compliance costs for firms transitioning into the formal tax.
In parallel, South Africa is actively rolling out a Digital Transformation of Government Roadmap, which prioritises digital identity, online registration, digital payments and integrated platforms for accessing public services. These efforts need to be pursued and have been positively acknowledged by international partners such as the IMF, although their effectiveness will ultimately depend on consistent implementation, institutional capacity and effective co‑ordination across government (IMF, 2026[9]).
2.2.7. Building innovation hubs and start-up support for renewable energy
A strong pipeline of green tech start-ups is essential for accelerating the energy transition in South Africa, yet early-stage innovators often struggle to access the finance needed to build and test their solutions. Policies supporting green-tech start-ups help founders move from promising ideas to real-world demonstration projects that can prove viability, attract private investment and create local jobs.
Within the African context, this early support is even more critical because commercial lenders are rarely willing to take risks on untested technologies and small firms face higher costs and weaker innovation ecosystems. Funding green start-ups can unlock locally designed solutions for renewable energy, energy efficiency and circular economy challenges, while enabling communities to see and trust new technologies through practical demonstrations. Strengthening this early-stage support would help African innovators play a stronger role in shaping energy solutions that work in their own contexts.
While domestic R&D resources available for advancing renewable energy technologies are limited, South African researchers, innovators and MSMEs can be eligible beneficiaries under foreign research and development programmes such as Horizon Europe, the EU’s EUR 95.5 billion research and innovation framework. In addition, dedicated EU‑Africa work streams, including the Africa Initiative IV, allocate substantial resources, about EUR 605.5 million – to joint research on green transitions, innovation systems and public‑health priorities. By tapping into these global R&D ecosystems, South Africa can accelerate renewable energy innovation despite domestic funding constraints, strengthen local capabilities and integrate its innovation actors into cutting‑edge international consortia.
In the publish sphere, South Africa’s Technology Innovation Agency (TIA), an entity of the Department of Science, Technology and Innovation (DSTI), supports technological innovation (TIA, 2025[10]). The Agency funds innovators across the value chain to advance ideas towards commercialisation, including through targeted programmes such as the Grassroots Innovation Programme, which supports community‑based innovators with prototype development and early business support.
TIA broadened its national innovation infrastructure by supporting the establishment of 31 Innovation Centres, including its network of Living Labs and the Centres of Innovation Excellence (CIEs).8F3 Support to small-scale enterprises is one of TIA’s core output areas. On average, the Agency supports around 3 000 MSMEs per year, reaching about 13 850 MSMEs between 2020 and 2025, although this remains slightly below its five‑year target of 15 750 MSMEs (TIA, 2025[10]).
While this scale of support is significant, it also highlights the need for stronger institutional capacity and greater resources to reach a far larger share of South Africa’s small‑scale businesses, particularly those driving green innovation and local development. The focus on green innovation could be strengthened, and sustainability and JETP priorities more systematically integrated across all programme offerings.
At provincial level, the Western Cape, with support from the DTIC, has supported the development of the Atlantis Special Economic Zone (ASEZ), a greentech hub designed to strengthen ecosystem infrastructure and help green manufacturing firms grow (Box 2.2). Atlantis demonstrates the benefits of industrial clustering, including shared skills development, supply chain linkages and opportunities for local enterprise participation, advantages that are particularly important for marginalised communities outside Cape Town.
ASEZ is jointly supported by the City of Cape Town, the Western Cape Provincial Government and the National Department of Trade, Industry and Competition, with additional collaboration from agencies such as WESGRO and InvestSA. As public investment and incentives are gradually phased out, the ASEZ will serve as a test case for whether a greentech‑oriented hub can remain financially sustainable while continuing to deliver inclusive development outcomes over time. It also provides practical lessons for other provinces on how a clustered greentech model can be governed and anchored in local inclusion.
A clustered approach to advancing green manufacturing
The Western Cape hosts the Atlantis Special Economic Zone for Green Technologies (ASEZ), the first greentech‑focused special economic zone (SEZ) in Africa and an emerging centre for green manufacturing. Located about 40 kilometres north of central Cape Town in a historically marginalised community with an estimated unemployment rate of 33%, ASEZ was launched in 2018. Since then, it has attracted over ZAR 3 billion (~USD 262 million) in investment and created more than 800 jobs, supporting a growing cluster of firms.
To guide investor attraction, ASEZ prioritises five green technology areas: renewable energy generation, energy storage, electric mobility, recycling and waste, and sustainable agriculture. It is also positioning itself to support renewable energy component manufacturing relevant to emerging green hydrogen value chains. Infrastructure development is organised thematically across zone 1 (renewable energy), zone 2 (agriculture) and zone 3 (manufacturing), alongside the Green Manufacturing Hub and the Eco‑Green Link. Attracting the right type of greentech firms takes time, and with only two lease agreements materialising from a pipeline of 35 prospective investors, ASEZ illustrates the lengthy timelines typically associated with securing large industrial investments.
ASEZ also incorporates skills development, enterprise support and social inclusion. It helps small firms meet supplier‑readiness requirements through training and mentoring and explores innovative financing mechanisms for micro enterprises. Social inclusion is advanced through the Community Stakeholder Network, which provides structured engagement with residents. In 2026, ASEZ will launch an eight‑month incubation programme for two cohorts of twelve entrepreneurs and a twelve‑month accelerator for a cohort of ten, combining training with real‑world placements in industrial environments.
Source: (Atlantis SEZ, 2026[11]), presentation and field mission conducted by the OECD Secretariat.
Green innovation challenges
Green innovation challenges play an important role in promoting exposure, peer learning and visibility for entrepreneurs and innovators. They offer a platform for emerging enterprises to test ideas, refine business models, engage with mentors and connect with potential investors or partners. South Africa hosts several well‑established competitions that showcase early‑stage green ventures (Table 2.1). These events help build a more vibrant innovation ecosystem by identifying promising solutions, strengthening entrepreneurial capabilities and creating entry points for youth and women‑led enterprises. It is important to localise some of these pitching challenges as demonstrated by the Mpumalanga Green Cluster Agency (MGCA), to enable meaningful participation from community members who may otherwise struggle to compete, given the uneven playing field across provinces. Participation in pitching challenges is increasingly popular. The OECD survey of MSMEs in Mpumalanga and the Western Cape found that more than two‑thirds of respondents had already participated in a pitching challenge, and the large majority considered it a useful experience (Annex D).
Examples of green innovation challenges
Source: Compiled by the OECD Secretariat.
Understanding supply‑side dynamics in South Africa’s financial market is critical to identifying the constraints and opportunities shaping access to finance for green small‑scale businesses. While demand‑side barriers such as informality, limited collateral and low financial literacy remain important, the key challenge is not necessarily a shortage of available capital, but a limited pipeline of investment‑ready green enterprises and projects. Financial institutions often report available liquidity for sustainable investment yet face difficulties in identifying bankable opportunities that meet technical, financial and risk criteria.
This reflects a broader structural issue. Compared with many African peers, South Africa’s central challenge lies in the “missing middle” between MSMEs and the financial system, as discussed in Chapter 4. A range of actors, including commercial banks, development finance institutions, the South African Reserve Bank, non‑bank financial institutions and fintech firms, shape the availability and allocation of capital. Financing remains uneven and risk‑averse, particularly for MSMEs active in renewable energy. Strengthening project preparation, technical capacity and investment readiness therefore represents one of the most effective pathways to unlock existing finance and scale MSME participation in the energy transition.
2.3.1. The role of key financial market institutions
Financial market institutions play a central role in shaping access to finance for MSMEs and in directing capital towards the energy transition. These institutions include commercial banks, development banks, central banks and a range of non-banking financial institutions such as insurance companies and pension funds, which remain significant institutional investors. Development finance institutions in particular play a catalytic role by de-risking investments, crowding in private capital and supporting early stage and higher risk projects. Together, these actors influence not only the availability of financing, but also its allocation, accessibility and alignment with green investment objectives.
Commercial banks
Stakeholder consultations revealed that South Africa’s major commercial banks remain reluctant to invest in green small‑scale businesses. These enterprises often lack established credit histories, robust accounting systems and conventionally accepted collateral. Combined with high perceived failure rates, these characteristics make large, traditional banks particularly risk‑averse and reinforce a long‑standing pattern of under‑lending. As a result, even commercially viable green small businesses struggle to access bank finance, despite their potential to drive innovation and local economic growth. This challenge is compounded by the continued reliance on traditional risk assessment methodologies, which are poorly suited to smaller‑scale, decentralised green projects (Chapter 4).
Many MSME support activities are currently financed through corporate social investment (CSI) funding rather than commercial finance. CSI funding is typically deployed to achieve social or developmental objectives rather than strictly financial returns, meaning that losses are more acceptable and often anticipated as part of impact‑driven activity. This capital is therefore treated as concessional, with losses more easily absorbed, making it easier for institutions to engage in this space without fully integrating MSME finance into their core commercial strategies.
Among South Africa’s major banks, Nedbank stands out for positioning green growth as a core element of its institutional identity and strategy, and pioneering sustainable finance instruments; for example by introducing green bonds, sustainability‑linked loans and impact investment products. It was the first South African bank to publish carbon reduction targets for its lending portfolio. By December 2024, Nedbank had committed approximately ZAR 183 billion (~USD 11.2 billion), equivalent to 19% of its total loan book, to sustainable development finance.
Other initiatives include the Standard Bank’s Sustainability Academy, launched in 2025, as a digital learning platform for businesses across Africa. It offers short courses on sustainability and ESG, renewable energy, resilient agriculture and water management. The academy aims to build practical capacity among clients and non‑clients and has set a target of training over 100 000 learners across 14 African countries. The platform prioritises a mobile first design to ensure easy access anywhere, courses are free of charge and certificates are provided upon completion (Standard Bank, 2026[12]).
Absa supports green suppliers and installers through its Supplier Value Chain Development initiative. This includes funding support for SAPVIA PV Green Card accreditation for SME solar installers (Chapter 3), with a specific focus on supporting emerging and township-based businesses to participate in the renewable energy value chain (ABSA, 2023[13]). Most commercial banks have developed specific financial products to support household solar adoption (Section 2.4).
Beyond individual initiatives, commercial banks would need to articulate clear and coherent green growth strategies. While all major banks publish sustainability reports, there remains room for improvement in how MSME development is consistently and explicitly reflected in these disclosures.
Development finance institutions
Development finance institutions (DFIs) play a catalytic role in expanding MSME finance in South Africa by providing concessional capital, risk‑sharing mechanisms and guarantee facilities that enable commercial banks to lend to MSMEs that might otherwise be excluded by traditional credit criteria. For example, First National Bank (FNB) leverages DFI‑supported funding, which allows the bank to extend lower‑cost finance and reach underserved segments such as women‑owned enterprises and sustainability‑linked projects (My PressPortal, 2025[14]). Another key instrument is the Small Loan Guarantee Programme of the International Finance Corporation (IFC), launched in 2025. IFC covers 50% of credit losses on qualifying MSME loans, thereby expanding FNB’s risk capacity and enabling more flexible lending. Similarly, the Dutch development bank FMO supports MSME financing through its NASIRA risk‑sharing facility, providing FNB with an additional ZAR 847 million (~USD 52 million) to increase lending to small businesses facing collateral and credit‑history barriers. These DFI partnerships strengthen the financial system’s ability to channel affordable capital to MSMEs, enhance banks’ appetite for higher‑risk borrowers and promote inclusive economic growth. From a banking sector perspective, more could still be done to de‑risk MSME lending, despite the important role played by DFIs.
Across development finance and corporate transactions in Africa, equity is becoming increasingly difficult to mobilise, even though many DFIs formally have mandates that allow them to take higher risk. This challenge was consistently highlighted during OECD virtual consultations with DFIs, investors and market participants. In practice, risk capital is not materialising: equity investment in corporate and project‑based deals is drying up, official development assistance (ODA) volumes are shrinking, and DFIs are defaulting to debt instruments with predictable repayment profiles, despite managing capital that is explicitly intended to absorb risk.
South Africa reflects this broader trend. While the Industrial Development Corporation continues to play a central role in development finance, its portfolio has increasingly prioritised larger and more bankable industrial and infrastructure projects, with comparatively less emphasis on high-risk MSME financing. Development institutions themselves acknowledge that the country’s venture capital and MSME equity ecosystem is undercapitalised and unable to meet demand, and South Africa’s share of continental equity funding has been shrinking relative to Nigeria, Kenya and Egypt, especially for early‑stage investments (World Bank Group, 2024[15]).
Guarantees, while theoretically powerful, remain underdeployed and rarely used at scale to crowd in equity or reassure private investors, pointing to a deeper mismatch in how risk is understood and operationalised. Existing impact‑oriented and blended‑finance funds could be influenced to support emerging areas such as agrivoltaics, but this requires time, early engagement, and direct dialogue with decision‑makers, as well as a shift away from top‑down financial engineering towards more bottom‑up approaches that better reflect on‑the‑ground realities and bridge the persistent gap between commercial and development finance.
The South African Reserve Bank
Although most central banks’ mandates are limited to price stability, as well as financial stability, several central banks in emerging markets have broader mandates related to sustainable economic growth, thus playing an important role in shaping the financial environment for the energy transition. Through monetary policy and prudential regulation, they influence overall credit conditions and shape how commercial and development banks allocate capital, including to MSMEs, and approach lending to renewable energy and other green investments. By setting interest rates to manage inflation and adjusting supervisory frameworks, central banks can create a more favourable environment for borrowing and investment, thereby indirectly supporting the financing of small-scale enterprises.
The primary mandate of the South African Reserve Bank (SARB) is to protect the value of the currency in the interest of balanced and sustainable economic growth (SARB, 2026[16]). It plays this role primarily through its monetary policy and its Prudential Authority. On the monetary side, the SARB shapes borrowing conditions across the economy, with direct implications for MSME access to finance. On the supervisory side, strengthened risk-assessment requirements influence how banks assess and price risk, including for smaller and potentially higher-risk green enterprises, although these measures are not targeted at MSMEs.
The SARB’s mandate focuses on maintaining financial stability and avoiding market distortions, yet does not extend to directly financing green investments. This reflects the importance of preserving monetary policy credibility while supporting well-functioning financial markets (Tshazibana, 2025[17]). Within this framework, its role in supporting MSMEs remains primarily indirect, through stable macroeconomic conditions and a sound banking system.
Complementary reforms, including the modernisation of the national payment system and the expansion of low-cost fast-payment solutions, also support financial inclusion. These measures can reduce transaction costs, expand access to financial services and improve cash-flow management for MSMEs, thereby enabling greater participation in the energy transition.
Non-banking financial institutions
Non‑banking financial institutions (NBFIs) play an increasingly important role in promoting financial inclusion, supporting economic growth and contributing to sustainable development. Unlike traditional banks, NBFIs encompass a broad range of actors, including insurers, pension funds, microfinance institutions, asset managers and various types of investment funds. They offer complementary, non‑traditional financing channels such as microfinance loans, impact‑investment funds and pension‑fund capital. These instruments are particularly relevant for MSMEs that struggle to meet the collateral and credit assessment requirements of banks. In many emerging economies, microfinance institutions have been instrumental in extending credit to low‑income households and micro‑entrepreneurs in underserved areas through flexible lending models that enable access to short‑term finance. However, such lending typically comes at a higher cost, reflecting elevated operating expenses, smaller loan sizes and higher perceived risks, which can limit affordability and access for some enterprises (Chapter 5).
DSBD analysis indicates that microfinance currently plays a relatively limited role in supporting MSMEs in South Africa, pointing to the need for further analysis and, potentially, targeted policy interventions to address these challenges in a sustainable manner (DSBD, 2025[6]). Experience from other emerging economies may provide useful insights. For example, in India, microfinance institutions have supported grassroots entrepreneurship and enhanced household welfare through group‑lending mechanisms that widen access to finance and foster economic empowerment (Sharma et al., 2020). Pakistan’s experience further shows how NBFIs underpin financial inclusion and economic resilience by providing liquidity to small and medium enterprises (Khowaja et al., 2020).
Fintech innovation and insurance markets
Across Africa, telecom and e‑payment providers have emerged as dominant fintech9F4 actors by first expanding digital payment infrastructure for unbanked populations and later introducing lending products for consumers and small businesses, often in partnership with commercial banks. South Africa fits into this continental trend but stands out as one of the most advanced and diversified fintech markets, accounting for a large share of Africa’s fintech revenue and driven by strong growth in digital payments, lendtech and insurtech. Since 2020, fintech revenues have tripled reaching ZAR 77.7 billion (~USD 4.8 billion) in 2023. (Birguid, 2025[18]). About 15% of South Africa’s population remains unbanked, sustaining demand for mobile money, microloans and microinsurance (World Bank Group, 2024[15]). Fintech firms play a bridging role by leveraging digital payment data, alternative credit assessment tools and embedded finance.
Unlocking the potential of small-scale enterprises in renewable energy requires an integrated approach across the value chain. Policy interventions and financial instruments are often designed in isolation, focusing on either regulation or finance, which leads to fragmented support and persistent bottlenecks that limit investment and growth. An integrated value chain approach helps identify critical gaps, such as in project preparation, standards, market access or risk allocation, and enables co‑ordinated responses that align regulatory frameworks with financial incentives. This section illustrates this approach through examples from different renewable energy subsectors.
2.4.1. Improving the enabling environment for rooftop solar photovoltaic expansion
South Africa remains the African continent’s dominant rooftop solar market (AFSIA, 2026[19]), with growth driven by load reduction,10F5 the rapid expansion of commercial and industrial rooftop systems, strong private sector investment and fast adoption of behind‑the‑meter solar by affluent households and firms.
However, uptake is marked by sharp geographic disparities. Gauteng, the Western Cape and KwaZulu‑Natal have seen a surge in installations in response to load-shedding, while Mpumalanga has experienced slower growth due to socio‑economic constraints and continued reliance on coal‑based livelihoods. Despite this, Mpumalanga has significant untapped potential for rooftop solar expansion, supported by falling solar‑component prices and the unbundling of Eskom, which are enabling households, businesses and municipalities to adopt decentralised energy systems more easily.
Estimated installed capacity of registered Small‑Scale Embedded Generation per province, 2023
Note: MW: megawatt
Source: (SALGA, 2023[20]).
Value chain bottlenecks
Skills, supply capacity and service provision
On the supply side, rooftop solar expansion in Mpumalanga is constrained by limited local capacity for installation and maintenance. Expanding training provision and strengthening the local ecosystem of technicians, installers and small firms is essential to ensure quality delivery and support market growth.
Regulatory processes and municipal capacity
Municipal readiness represents a key bottleneck. Capacities to evaluate applications and issue permits for embedded rooftop solar systems and enable wheeling remain uneven across provinces. Many municipalities lack the technical, administrative and financial resources required to process applications efficiently, ensure compliance with grid‑integration standards and implement SSEG frameworks. These constraints are compounded by legacy dependence on coal‑based revenue and weaker institutional systems.
In 2023, only six out of 14 local municipalities in Mpumalanga had formal SSEG procedures in place, and just half of these had NERSA‑approved SSEG tariffs (MGCA, 2022[21]). The OECD survey conducted in early 2026 confirmed that municipalities in the Gert Sibande and Nkangala districts still do not have SSEG processes in place.
By contrast, municipalities in the Western Cape have made significant progress: all 24 local municipalities allow SSEG, 19 permit feed‑in, and five have enabled electricity wheeling11F6 (GreenCape, 2026[22]). The provincial government has further supported this through an electricity‑wheeling toolkit providing guidance to municipalities (Western Cape Government, 2025[23]). A revenue impact study shows surplus-neutral tariffs can work for municipalities (Western Cape Government, 2025[23]).
Demand, affordability and public support
On the demand side, rooftop solar uptake in Mpumalanga remains constrained by affordability and limited public support. At the national level, incentives remain modest. In the 2023‑24 National Budget, a temporary one‑year tax rebate allowed households to claim 25% of the cost of new photovoltaic panels, up to ZAR 15 000 (~USD 890),12F7 to encourage investment during a period of intensified load-shedding. While this measure provided short‑term support, it was not sustained.
Across Africa, public support for residential rooftop solar remains limited, often due to fiscal constraints. Where measures exist, they tend to rely on fiscal incentives such as tax exemptions or concessional finance or are supported by international finance (Table 2.1). In South Africa, the most substantive ongoing support comes from a small number of municipalities offering feed‑in tariffs that compensate households for exporting surplus electricity. However, these mechanisms primarily benefit higher‑income households that can afford upfront installation costs and meet compliance requirements.
International experience suggests that well‑designed demand‑side incentives can play a critical role in stimulating uptake. For example, Kenya has introduced national net‑metering regulations allowing customers to export surplus electricity and receive billing credits, thereby creating predictable returns and lowering payback periods (The Republic of Kenya, 2024[24]). In OECD countries, some schemes also incorporate social targeting, with higher support provided to lower‑income households, although these approaches require stronger administrative capacity.
In South Africa, the current system remains more decentralised and compliance‑focused, with all grid‑connected embedded generation systems required to register regardless of export status. Simplifying procedures and introducing more targeted and inclusive incentives could help unlock faster uptake, particularly in lower‑income segments and lagging regions such as Mpumalanga.
Source: Information compiled by the OECD Secretariat.
Role of finance and market development
The private sector plays a central role through a growing range of green loans and financing products offered by commercial banks (Table 2.3). These credit instruments help households and small businesses spread installation costs and reduce liquidity constraints. They also offer a comprehensive service package to connect potential customers with qualified, certified installers and Solar Score tools to help residential house owners calculate their solar potential.
However, access remains uneven and largely limited to households with stable incomes and good credit records. Lower‑income households, which face the most severe energy insecurity, remain largely excluded from both public and private support mechanisms for residential rooftop solar. A “just energy transition” as defined by South Africa will require more inclusive approaches, including targeted subsidies or concessional finance for low‑income households, simplified administrative processes and community‑based models that reduce costs through economies of scale (Chapter 5). Public investment in social housing solar programmes, as well as partnerships with municipalities to blend grants and low‑interest loans, could further expand access.
Scaling the value chain
Strengthening rooftop solar deployment in Mpumalanga requires co‑ordinated action across the value chain, including provisions for end-of-life management (Box 2.3). On the supply side, expanding training and supporting local service providers would strengthen delivery capacity. At the regulatory level, improving municipal readiness and harmonising SSEG processes would reduce delays and uncertainty. On the demand side, targeted incentives and innovative financing models would improve affordability and broaden access.
The recycling of solar panels offers opportunities to advance circular economy value chains in South Africa, given the deployment of photovoltaic systems and the expected increase in end‑of‑life panels, with annual waste volumes expected to reach tens of thousands of tonnes by 2030. Solar PV modules contain recoverable materials such as glass, aluminium, copper and small quantities of high‑value metals, which could support secondary material markets. However, recycling remains technically complex and often not yet economically viable at scale, due to the difficulty of separating tightly bonded materials, limited specialised infrastructure and weak demand for recovered materials.
In this context, DC Solar Reclaim, one of the finalists of the GreenCape Pitching Challenge 2025, aims to establish South Africa’s first dedicated solar PV component disposal and recycling service at end‑of‑life. The initiative responds to a need to manage hazardous PV waste safely, while supporting compliance with Extended Producer Responsibility (EPR) and circular economy objectives. The proposed model includes the development of a certified tracking system for recycled panels, aimed at improving transparency and traceability across the value chain and building trust among clients..
The project faces several challenges. Access to finance remains a key constraint, particularly given the uncertain revenue streams associated with early‑stage recycling operations. Market adoption risks are also significant, as demand for recycling services remains limited. To mitigate these risks, the company is targeting independent power producers and engineering, procurement and construction firms with environmental, social and governance commitments, and is pursuing an early‑mover strategy aligned with EPR developments, including engagement with national authorities and industry associations. Beyond financial viability, the initiative is expected to generate environmental and social benefits, including reduced landfill waste, improved recovery of valuable materials and job creation for low‑ and semi‑skilled workers.
Source: DC Solar Reclaim.
Public procurement can also play a catalytic role by creating a predictable pipeline of projects. For example, Eskom’s Solar Schools Programme aims to install rooftop solar systems at 22 064 public schools by 2030, with initial implementation already underway (Eskom, 2026[30]). Such programmes can aggregate demand, lower investment risk and support the development of local skills and enterprises.
Under certain conditions, solar PV could also be made mandatory on new commercial, industrial or large parking‑roof structures, as already implemented in France or Germany (Climate Action Network Europe, 2024[31]). Given South Africa’s high solar potential and strong private‑sector uptake driven by load‑shedding, such a requirement could provide a predictable pathway to scale distributed generation while reducing pressure on the national grid.
2.4.2. Harnessing the potential of agrivoltaics
Agrivoltaics refers to the simultaneous use of the same land for agricultural production and solar energy generation.138 It involves installing elevated or strategically spaced PV panels that allow crops to grow or livestock to graze beneath them. The approach aims to maximise land productivity by producing food and renewable energy on the same site, while improving resilience through shading, reduced heat stress and better soil‑moisture retention. Across Africa, agrivoltaics has so far been implemented mainly through small‑scale pilot and demonstration projects. Deployment remains however limited and largely pre‑commercial, with no large‑scale roll‑out to date in Africa (Africa Climate Action Partnership, 2024[32]).
Agrivoltaics can also stimulate green enterprise development in areas such as fencing, mounting structures, irrigation services, seedling production and PV maintenance, opening entry points for youth and women into new markets (MGCA, 2024[33]). While these opportunities will not compensate for job losses across the coal value chain (Chapter 3), they can nevertheless contribute to economic diversification, broaden local livelihood opportunities and support the emergence of new green enterprises.
With strong solar potential and extensive agricultural land, South Africa is well positioned to scale such dual‑use solar systems. According to a recent GIS analysis, livestock grazing areas (~31 million hectares), maize and grain lands (~6 million hectares) and fruit‑producing regions (~260 000 hectares) are the most suitable zones for agrivoltaics in South Africa (Alan C. Brent, 2024[34]). Priority opportunities lie in grazing and maize regions across the Northern Cape, Free State and North West, particularly where dryland farming dominates, while water‑stressed orchard and vineyard areas in the Western Cape could benefit most from the improved water retention associated with agrivoltaic systems. Early applications in the province’s wine‑producing regions demonstrate the feasibility of integrating renewable energy deployment with high‑value agricultural production. For example, Simonsig Wine Estate in Stellenbosch hosts a 113 kWp solar PV system developed under a leasing model with SOLA (SOLA, 2026[35]). Also in Stellenbosch, GHJ Engineering Group installed the first commercial agrivoltaics greenhouse (Box 2.4).
GHJ Engineering Group, a South Africa‑based agrivoltaic engineering firm, provides a concrete example of an early‑stage commercial agrivoltaic project. GHJ operates a 73.2 kWp agrivoltaic greenhouse in Stellenbosch, under a hybrid on–off‑grid configuration. The installation is fully operational and monitored. Electricity bills show a 72% reduction in electricity costs, from approximately ZAR 28 500 (~USD 1 750) in February 2024 to nearly ZAR 8 000 (~USD 490) in February 2025.
The project is designed to maximise land‑use efficiency, increase agricultural productivity, generate clean, renewable energy and create sustainable local economic opportunities. It is commercially operational and first of its kind in South Africa, but agrivoltaics has not yet progressed beyond first deployment to wider rollout. GHJ is developing standardised agrivoltaic greenhouse configurations to prepare for replication, with access to finance now the main constraint to scaling.
To move beyond proof of concept, GHJ is seeking blended and de‑risking finance to support next‑phase rollout and commercialisation, with the objective of developing a pipeline of 15 or more agrivoltaic greenhouses. GHJ operates as a women‑led engineering firm, with a focus on inclusive participation by women and youth across the agrivoltaics value chain.
GHJ’s bottom‑up, farmer‑centred model could be particularly relevant for regions such as Mpumalanga, where the transition away from coal underscores the need for integrated solutions that support livelihoods, energy access and economic diversification.
Source: (GHJ, 2026[36])
Mpumalanga’s planned decommissioning of several coal-fired power plants presents an opportunity to reimagine land use in ways that strengthen local economies while supporting energy and food security. Well-designed agrivoltaic systems can generate clean electricity, create new income streams for farmers, stimulate small enterprise development and improve resilience. Within Eskom’s programme aimed at repurposing decommissioned coal-fired power station sites for new economic activities and renewable energy projects, the public electricity utility has signalled interest in complementary land‑use models, including agriculture and SMME‑linked activities on rehabilitated land, to help ensure that repurposed sites generate long‑term local benefits and support a more inclusive approach for workers and surrounding municipalities. With support from The Netherlands, Eskom launched in early 2026, the Grootvlei Climate Smart Horticulture Centre (Box 2.5).
The Grootvlei Climate Smart Horticulture Centre provides an example of how coal-based infrastructure can be repurposed to support new economic activities. The planning process began in 2022 and culminated in the Centre’s launch in January 2026 as a joint initiative between Eskom and the Netherlands Embassy under Eskom’s Just Energy Transition (JET) Programme. Located within the Grootvlei power station precinct, which remains fully owned by Eskom, the Centre has been established as a small-scale demonstration and training facility.
The initiative brings together a large consortium of partners. Its purpose is to demonstrate how horticulture can operate alongside renewable energy solutions to support food production, skills development and enterprise growth in a region facing water scarcity and economic restructuring.
Early training activities are underway. Eight community members from the Dipaleseng municipality are currently being trained as greenhouse facilitators. In 2026, a further 75 agripreneurs will begin the Agripreneur Development Programme, with each expected to employ local community members.
In its pilot phase the Centre occupies half a hectare. Over the next five years the ambition is to develop the site into a fully functional 20-hectare training and demonstration hub embedded in Mpumalanga’s economy, offering continuous training for farmers, technicians and young entrepreneurs while showcasing commercially viable production systems.
A central measure of long‑term success will be the Centre’s ability to catalyse private investment by demonstrating a viable model that attracts businesses in production, processing and related services. If effectively governed and integrated into wider value chains, the Centre could evolve into a multi‑stakeholder agrihub linking agriculture, energy, logistics and enterprise development, illustrating how repurposed coal infrastructure can anchor new green industries in Mpumalanga.
Source: (Daily Start, 2026[37]) and local consultations conducted by the OECD Secretariat in Mpumalanga.
Value chain bottlenecks
Awareness, technical capacity and pipeline development
Agrivoltaics remains at an early stage of development in South Africa, with limited awareness among farmers, co-operatives and municipalities. Large‑scale demonstration sites remain limited. While pilot projects demonstrate feasibility, there is currently no pipeline of standardised, investment‑ready projects that could enable scaling. Strengthening technical capacity, expanding demonstration initiatives and developing replicable project models will therefore be critical to move beyond isolated pilots. Institutional fragmentation between energy, agriculture and land‑use authorities further complicates project development.
Several mining companies are piloting agricultural diversification projects, often in isolation, resulting in duplicated efforts and limited understanding of full commercial viability. Greater collaboration would help align efforts, reduce repetition and accelerate learning across initiatives, particularly in communities most affected by the transition. There is also a strong need to establish training hubs to support reskilling and upskilling across municipalities, with Mpumalanga’s TVET colleges already exploring new curricula to capture these emerging skills (Chapter 3). Building consortia that bring together government, the private sector and academic institutions would further clarify roles in project implementation (MGCA, 2024[33]).
Regulatory frameworks, institutional co‑ordination and land use
The main constraints to agrivoltaics in South Africa are institutional and regulatory rather than technological. At present, there is no clear definition or dedicated regulatory framework, with projects generally assessed as conventional solar installations. Municipal planning systems similarly lack guidance for dual-use land applications. This lack of recognition extends to financing: funders continue to evaluate agrivoltaics as standalone solar projects, treating the agricultural value, including yield enhancement, crop protection and resilience, as incidental rather than as a distinct second revenue stream.
Moreover, South Africa’s higher embedded-generation licensing‑exemption threshold has strengthened the case for commercial-scale solar, benefiting agrivoltaic projects. However, the exemption is defined solely by generation capacity and does not recognise or incentivise co-located agricultural output.
Scaling agrivoltaics requires political recognition as a legitimate form of dual land use. International experience shows that agrivoltaics has scaled where governments have explicitly embedded it within energy, agricultural and land‑use policy frameworks. For example, France legally defines agrivoltaics as solar installations that must contribute to maintaining or improving agricultural production, while Germany treats agriculture as the primary land use and sets minimum thresholds for crop yield and land use. As in many African countries, South Africa lacks such a framework, which confines agrivoltaics to pilot projects rather than enabling bankable, scalable investments.
In Mpumalanga, land availability is also constrained by mining rights, which often remain under the control of mining companies even where operations are declining. In addition, limited access to land‑use, spatial and licensing information delays project preparation, as much of the relevant data is held by the Department of Mineral and Petroleum Resources. Developers frequently face difficulties obtaining clarity on overlapping rights, which slows early‑stage feasibility assessments. Consortia bringing together mining companies, MSMEs, community actors and project developers could help de‑risk initiatives, improve information flows, unlock access to land and support long‑term project viability.
Additional challenges stem from contaminated land linked to historical mining. While offering potential for repurposing, unclear rehabilitation responsibilities and regulatory requirements can delay projects due to costly site assessments and remediation. Greater clarity on land‑use rights, improved access to environmental data and clearer guidance on managing contaminated land, including from the Mpumalanga Department of Agriculture, Rural Development, Land and Environmental Affairs (DARDLEA), would help streamline project development and reduce early‑stage risks.
Investment conditions and market demand
Financial barriers reflect a combination of perceived risk, limited bankability and weak market positioning. Agrivoltaics sits at the intersection of agriculture and energy, with no clear ownership within existing financing frameworks. As a result, investors face uncertainty regarding business models, expected returns and risk allocation. At the same time, market demand for agrivoltaics remains limited, as many farmers and landowners are unfamiliar with the technology, uncertain about its economic benefits, and reluctant to adopt new production models that may affect yields or farming practices. Access to finance remains particularly challenging for smallholders, who often lack collateral and are reluctant to take on additional debt (Chapter 4).
Role of finance and market development
Agrivoltaics is still perceived as novel by many financiers, particularly in emerging markets, and this uncertainty disproportionately affects smallholders and emerging farmers, who already face difficulties accessing credit. A key challenge is therefore not the availability of capital, but how agrivoltaic projects are structured, assessed and positioned within existing financial frameworks. A pedagogical effort is therefore needed on both sides: to reduce perceived risks for commercial banks and investors, while also supporting farmers in better understanding the economic opportunities offered by agrivoltaics. Ultimately, agrivoltaics will scale only if farmers, investors and local communities all benefit, aligning economic viability with agricultural resilience and social acceptance.
Experience from other sectors has shown that a pipeline of projects is essential to move from individual transactions to portfolio approaches that investors can assess and price. Without sufficient scale and replicability, even well‑designed financial instruments struggle to mobilise capital. In this context, dedicated project preparation support is critical to develop bankable projects, standardise designs and documentation, and reduce early‑stage risks, thereby enabling aggregation into investable portfolios.
None of the interviewed commercial banks reported active engagement in agrivoltaics, suggesting limited familiarity with the technology. There are also opportunities to improve positioning within existing capital markets. For example, sustainability‑linked or thematic bonds could include explicit key performance indicators (KPIs), such as a requirement that a defined share of agricultural allocations.
At the same time, experience shows that scaling cannot rely on top‑down financial engineering alone. Centrally designed financing structures that are weakly connected to farmer realities, land‑use practices and local incentives often fail to generate viable projects at scale. Bottom‑up approaches, anchored in farmer demand, trusted intermediaries and locally appropriate business models, are essential to ensure uptake, performance and durability. Financial innovation is most effective when it responds to demonstrated needs and aggregation emerging from the ground. Public and concessional finance can play a critical, catalytic role in de‑risking early deployment and crowding in private capital, but long‑term scalability will depend on replicable and bankable models, supported by clear policy signals, investable pipelines and credible institutional frameworks.
Recent international developments point to opportunities for scale‑up. In 2024, G7 Development Ministers explicitly endorsed agrivoltaics and highlighted G7‑Africa partnerships as a means to improve land‑use efficiency and support agricultural and energy outcomes. Building on this momentum, the African Agrivoltaics Platform was launched in April 2026, with the aim of establishing a EUR 50 million blended‑finance facility to support project development across the continent (C4SA, 2026[38]). Engaging with such initiatives could support South Africa in developing a clearer policy and regulatory framework and moving from pilot phase to scale.
Recent policy developments and institutional reforms signal growing recognition of the role of MSMEs in South Africa’s “Just Energy Transition”. However, further effort is required to ensure that support mechanisms effectively reach informal firms and enterprises operating in underserved communities, particularly in townships and rural areas, as well as youth‑ and women‑owned businesses. Innovation support programmes and green enterprise hubs need to be further expanded and more deliberately targeted at provincial level to respond to local transition dynamics.
On the supply side, the analysis highlights persistent financing gaps despite South Africa’s sophisticated financial market and the absence of capital shortage. MSMEs continue to receive only a small share of overall lending, reflecting risk perceptions and structural barriers. Commercial banks have introduced a number of targeted initiatives, most notably in the rooftop solar photovoltaic sector, yet engagement with other green sectors remains limited. High perceived risk, small ticket sizes and inflexible risk assessment frameworks continue to constrain lending to early‑stage and innovative MSMEs. Development finance institutions can play an important catalytic role in addressing these gaps.
The practical examples presented in this chapter underscore the importance of integrated approaches across green value chains, combining demand‑side support with supply‑side finance, technical assistance and market development. These findings point to the need for more coherent, inclusive and ecosystem‑level approaches to MSME development in South Africa.
Improving the enabling environment for small-scale enterprises in renewable energy and other green sectors
At national level
Mainstream green targets in all public MSME support measures; improve co-ordination between sectoral departments at national level through formal and informal co-ordination mechanisms.
Provide economic incentives that encourage formalisation; foster entrepreneurship in renewable energy and related sectors; ease licensing requirements; simplify regulatory constraints and facilitate start-ups’ access to professional services.
Strategically leverage green public procurement to stimulate green industries and support structural reforms; increase transparency in procurement processes to improve market access for small enterprises.
Develop a national agrivoltaics strategy and regulatory framework, including targeted incentives, streamlined access to environmental data and land-use data, clear procedures for land-use rights and permitting, and dedicated training programmes through TVET colleges.
At provincial and local levels
Create a provincial inter‑departmental co-ordination forum to ensure alignment between energy, economic development, environment and municipal support functions.
Establish a multi‑year agreement for the Mpumalanga Green Cluster Agency (MGCA) with results‑based contracts to enable long‑term planning and effective implementation.
Develop green innovation hubs in Mpumalanga using a cluster‑based approach, bringing together training institutions, industry partners, municipalities and support organisations. Hubs could provide digitalised co‑working spaces, prototyping facilities and access to mentorship.
Develop a co-ordinated province-specific capacity‑building programme for municipalities, with a focus on strengthening technical skills for the green transition and systematically disseminating good practices.
Improve municipal readiness to develop Small-Scale Embedded Generation (SSEG) and harmonise, simplify and digitalise SSEG processes; set maximum processing times.
Strengthen monitoring, evaluation and learning systems at provincial and local levels so that good practices can be replicated, institutional knowledge is retained and results can be demonstrated to funders and communities.
Strengthen access to finance for small-scale enterprises
At national level
Pursue ongoing efforts to integrate informal MSMEs into the formal financial system by supporting transitional pathways that combine gradual formalisation, alternative data for credit assessment and risk‑sharing instruments.
Encourage commercial banks to develop green growth strategies, including for MSMEs, to expand engagement beyond rooftop solar, by building internal expertise in other green sectors and refining risk assessment approaches.
Incentivise development finance institutions to make stronger use of guarantees and risk‑sharing instruments, while freeing up more equity and first‑loss capital to support early‑stage green enterprises and crowd in private finance.
Leverage the JET PMU platform as a co-ordination mechanism to promote wider use of concessional loans, linking them explicitly to priority green sectors and structured graduation pathways towards commercial finance.
At provincial and local level
Work with entrepreneurs and communities to stimulate demand‑side uptake, by raising awareness of renewable energy opportunities and strengthening financial education, supporting a shift towards more market‑oriented entrepreneurship that is not solely dependent on grant funding.
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← 1. In comparison, SEDA reported the following outcomes for 2023-24: 30 084 SMMEs and co-operatives were reached through entrepreneurship awareness sessions, and 23 549 township and rural businesses received support.
← 2. Migrants account for a significant share of MSMEs in South Africa, with around one in four small business owners being foreign nationals (FinMark Trust, 2024[1]).
← 3. To date, the Agency has invested R 44 million (~USD 2.6 million) in establishing 31 Innovation Centres, comprising 13 Living Labs and 18 Centres of Innovation Excellence, distributed across several provinces.
← 4. Financial technology or Fintech refers to financial innovation driven by digital technologies, or more broadly, technology-enabled innovation in financial services.
← 5. Load-shedding has been reduced nationally, but several areas continue to face frequent load reduction, a distribution‑level intervention applied in neighbourhoods with overloaded infrastructure or high losses, resulting in electricity availability of only around five hours per day.
← 6. Wheeling refers to the delivery of electricity across transmission or distribution networks owned by a third party, enabling independent power producers to sell directly to end‑users while paying use‑of‑system charges for access to the grid.
← 7. This incentive applied only to panels and did not cover inverters, batteries or installation costs. It expired at the end of February 2024, with no renewal announced.
← 8. Originally developed in Germany in the early 1980s, agrivoltaics was later taken up at scale by Japan, which became the first country to formally regulate and deploy agrivoltaic systems, starting in the early 2000s.