How China’s solar crisis could ignite African manufacturing

From the newsletter

For years, African countries have benefited from China’s solar panel overproduction, which drove prices down as manufacturers battled for global market share. But that era may be coming to an end. China’s government is now ordering solar giants to reduce output, after some of the industry’s biggest players reported billions of dollars in losses.

• For Africa, the timing could not be better. With several solar manufacturing plants under development, China’s policy shift may provide the spark needed to jumpstart a sector that is already gaining momentum.

• Solar demand in Africa has quadrupled in the past five years, with imports from China set to hit record highs this year. For local manufacturers, this surge in demand could be key to achieving scale and building a competitive industry.

More details

• The Asian giant controls about 80% of the global solar market and dominates the supply chain for several critical materials. And has pumped in heavy subsidies into the sector to strengthen its companies’ global competitiveness. But the very policies that fueled its rise are now coming back to haunt it. Six of its largest solar cell and panel manufacturers saw their combined losses double in the first half of the year to $2.8 billion, with all but one reporting deeper losses.

• China now wants to reverse what it calls overcapacity and cut-throat pricing that has left the sector drowning in losses. Last year, its factories produced 588 gigawatts (GW) of solar cells, far outstripping domestic demand of 277 GW and overseas demand of 174 GW. This oversupply persisted even as global demand kept growing. For example, African countries imported 12.7 GW of panels last year, 3.4 GW more than in 2023.

• The country’s decision to rein in overproduction could mark a turning point for an industry that has reshaped global energy markets. African countries in particular have benefited from cheap Chinese solar modules, which enabled the rapid growth of solar home systems, mini-grids, and increasingly, commercial and industrial (C&I) solar projects. These affordable panels have been critical in lowering barriers for businesses, developers, and households alike.

• Take Sierra Leone, for example, over the past 12 months, it imported solar panels equivalent to 61% of the country’s total electricity generation. South Africa imported a record 4.1 GW in 2023 and 3.6 GW in 2024, easing pressure on its congested grid. In Algeria, imports in the first seven months of this year were three times higher than in all of 2024. 

• But this heavy reliance on imported solar has left little room for local manufacturing to grow. Domestic firms have found it nearly impossible to compete with Chinese giants selling panels at below production cost. However, with the new shift away from mass production and low-margin products, Chinese companies may leave space for other players to enter the market. African countries, many of which sit on vast reserves of copper, cobalt, and lithium, have the raw materials to build their own solar supply chains. 

• Some progress is already visible. Since the start of the year, solar cell and panel production facilities with a combined capacity of more than 15 GW have been announced, most of them in Egypt. Morocco has doubled its panel production to 1 GW annually. South Africa hosts several assembly plants, while Nigeria is setting up multiple factories with the aim of eventually banning imports altogether.

Our take

• China’s retreat offers Africa an opening, but limited skills and technology mean partnerships with Chinese firms may be necessary. Strong government subsidies will also be needed to make local manufacturing competitive.

• The AfCFTA can provide the scale required for factories to survive, grow, and justify investment in advanced production lines. Without regional integration, most markets remain too small to sustain large plants.

• For developers and households, panel prices may stop falling—and even rise. This could slow installations unless financing models adapt, forcing investors and PAYGo firms to rethink their strategies.