Mervyn Naidoo, Group CEO of ACTOM, highlights that South Africa’s energy transition, as well as similar efforts by other countries around the world, is accelerating the demand for power transformers, as nations upgrade and expand their power grids to meet rising energy needs.
At the same this worldwide shift towards renewable energy exposes a critical infrastructure gap – in the severe shortage of transformers. As countries push to expand generation capacity and decarbonise their grids, the demand for transformers, essential for transmission and distribution, has surged beyond current global supply capabilities.
Unlike legacy power plants reliant on fossil fuels, power plants using renewable sources such as solar and wind are often geographically dispersed, located far from existing grid infrastructure. This has created an urgent need for new transmission lines and substations, driving up demand for transformers at a pace manufacturers are struggling to meet.
Factory slowdowns, supply chain bottlenecks and procurement delays during the recent Covid-19 pandemic have left manufacturers with limited capacity to ramp up production. The result is a global constraint that continues to ripple across infrastructure planning and execution.
Delaying grid upgrades
The current shortage of transformers is delaying grid upgrades, stalling renewable energy project rollouts and deterring investment in new generation capacity. Without the ability to connect new plants to national grids, the achievement of energy security and decarbonisation goals is at risk.
However, the global shortage of transformers is also a consequence of systemic uncertainty in infrastructure demand and fragmented procurement practices. Although energy transition goals and transmission development plans signal the long-term need, the absence of firm, bankable orders has stifled investment in manufacturing capacity.
Procurement cycles in South Africa and other markets have often been ad hoc and reactive, leading to uncertainty in multi-year demand. This lack of visibility hinders manufacturers, particularly in transformer production, where high overheads require consistent throughput. Without sustained loading, factories struggle with under-recoveries, idle resources and financial strain.
Yet, Naidoo points out that the global transformer shortage presents a strategic opening for South African manufacturers. As international markets face long lead times – up to four years in Europe – and constrained supply, South Africa can position itself as a reliable alternative, especially if local firms can commit to competitive delivery windows of 12 to 18 months. Additionally, government could introduce aggressive export incentive programmes, similar to those implemented by many foreign countries. These initiatives could help mitigate the impact of US tariffs, positioning South Africa as an attractive and competitive source for transformers in the wider global market.
Re-entering global supply chains
The country has a chance to re-enter global supply chains with agility. South Africa's industrial base and engineering expertise position it well, but unlocking this opportunity also needs coordinated action, such as policy support for bankable capacity expansion, procurement reform for demand visibility, and targeted skills development to meet global standards.
Strategic procurement is crucial to reducing transformer lead times and enhancing grid reliability. By transitioning from reactive to proactive planning, manufacturers can stock critical components in advance, shortening production timelines and enabling quicker delivery. This approach turns procurement into a strategic enabler rather than just a cost centre.
Growing locally
At home, localisation enhances these benefits by enabling quicker repairs for transformers and components. With local manufacturing, repair turnaround times are reduced, avoiding lengthy overseas shipping times and costs. Shipping a failed large transformer to an international factory of origin and returning it to South Africa can cost as much as R40 million per transformer. Localisation enables reduced downtime and ensures continuity of supply.
Beyond logistics and cost, local manufacturing allows for better monitoring and support by domestic technical teams, improving product reliability and availability. This creates a more responsive energy infrastructure. In contrast, imported products often lack local servicing support, leading to delays and increased risks for operators.
Protectionism around the world
The global economic landscape is shifting, with nations increasingly prioritising domestic economic participation. This rise in protectionism signals a clear message that countries are recalibrating to secure their own industrial futures. South Africa must respond with equal strategic intent.
With rising tariffs threatening our export competitiveness, particularly in sectors like transformer manufacturing, we face the risk of job losses and economic contraction. The solution lies in leveraging these shifts to build a resilient, self-sustaining industrial base.
We need to embrace the ‘SA Inc’ mindset and, more broadly, an ‘Africa Inc’ vision. By investing in local supply chains, maximising domestic procurement and building regional manufacturing ecosystems, we can unlock economic growth, create jobs and reduce dependency on volatile global markets.
For more information visit: www.actom.co.za
