Since 1 January 2026, importers bringing steel, aluminium, cement, fertiliser, electricity and hydrogen into the European Union have had to account for and pay for the carbon emitted in making them, under the Carbon Border Adjustment Mechanism (CBAM). The transitional phase from 2023 to 2025 required reporting only. The definitive phase now carries a financial cost.
For South Africa, the continent’s most exposed exporter of CBAM goods, the immediate hit is smaller than feared. The longer-term risk sits in its power grid.
Limited exposure today
Of the covered products, only iron and steel and aluminium are exported from South Africa to the EU in significant volumes, accounting for roughly 3.3% and 2.8% of South African exports to the bloc respectively. Cement and fertiliser together are less than 0.1%. Crucially, under the definitive regime, indirect emissions from electricity currently attract a financial liability only for cement and fertiliser, not for steel and aluminium.
Why the grid matters
South Africa’s electricity comes mostly from coal. For aluminium in particular, emissions from electricity can be many times larger than the direct emissions at the smelter. If the EU extends CBAM charges to indirect emissions for steel and aluminium, South African producers relying on grid power would face materially higher costs than competitors supplied by cleaner electricity. One industry estimate cited by South African trade publications suggested that at a carbon price of about €80 a tonne, the cost to aluminium exporters could approach €1,440 per tonne of product if indirect emissions were included.
Broader research by the African Climate Foundation and the London School of Economics estimated that CBAM could reduce African exports to the EU of aluminium by up to 13.9% and iron and steel by 8.2%. Analysis by researchers in Singapore ranked South Africa, Egypt and Mozambique as the African countries likely to face the biggest trade and economic impact.
What investors should watch
- Product-level emissions data. Exporters that can measure and verify embedded emissions will avoid default values that are usually punitive.
- Power procurement. Renewable power purchase agreements and wheeling arrangements can cut indirect emissions ahead of any rule change.
- Domestic carbon pricing. Carbon prices paid at home can, under CBAM rules, reduce what is owed in Europe, an argument for keeping that revenue in South Africa.
- Customer engagement. EU buyers are passing CBAM costs and data requests upstream; suppliers that respond quickly keep contracts.
The current reprieve is a window to prepare, not a reason to wait.
Sources: Daily Maverick: Eskom’s carbon intensity and South African exporters · Freight News: CBAM penalties for South African exporters · Creamer Media: Incoming CBAM could see African aluminium, iron exports fall · NTU: The impact of CBAM on Africa
