SA has received its first commitment to financing its green transition with an indicative grant allocation of between $200m and $500m from the Climate Investment Funds (CIF), a global fund that supports solutions to climate change.
SA and two other countries have been invited to participate in the accelerating coal transitioning programme funded by the CIF’s Clean Technology Fund, minister of environment, forestry and fisheries Barbara Creecy said on Friday.
“Accordingly, we have been asked to develop an investment plan commensurate to an indicative allocation of between $200m and $500m from the Clean Technology Fund. This allocation includes a $1m Investment Plan Preparation Grant so we can develop the plan,” she said.
The CIF visited SA last month along with climate envoys from the US, UK, France and Germany to discuss possibilities for funding a “just transition transaction” to assist SA to move towards a lower carbon economy in line with globally agreed targets to reduce greenhouse gas emissions. The CIF also funds the development finance institutions of the four countries concerned.
“Based on previous experience of allocations from this fund, we envisage that this initial amount can leverage additional blended finance from one of the multilateral development banks with a multiplier of three or four to one,” Creecy said.
The fund has previously assisted SA with developing renewable energy.
The envoys have proposed a specific transaction to assist Eskom’s decommissioning of coal-based power and the greening of power generation. This would also involve upgrading the transmission grid to facilitate new connections of renewable energy, in the form of concessional loan finance via their national development finance institutions.
Creecy said the government was setting up a high-powered finance workstream involving the Treasury to look at the technicalities around accessing global green finance. The government will establish a just energy transition financing facility, through which money would flow.
“We see the decision by the CIF as a small, but important first step towards laying the foundation work for the broader financing programme of our Just Transition,” she said. “The focus of this investment plan will be the Eskom energy transition, including repowering and repurposing of retiring coal plants and investment in new low-carbon generation capacity.”
The CIF offer comes just over a week before the commencement of COP26 in Glasgow at which world leaders will negotiate commitments to reduced emissions as well as funding commitments from the developed world to the developing world for climate change mitigation.
SA is hoping to use the informal meetings that take place on the sidelines of COP26 to generate further interest in supporting the country’s just transition to a low carbon economy.
However, at a briefing to the Presidential Climate Commission (PCC) on Thursday by Rudi Dicks, a top official in the presidency, it emerged that SA had been disappointed with the mix of financing offered in the meeting with the envoys, particularly the relatively small amount of grant funding. Loan funding, even where concessional, poses difficulties for SA and Eskom, given their extensive debt.
Creecy stressed that a central pillar of SA’s negotiating position at COP26 would be to access the “right mix” of grant and concessional funding and private sector investment for the developing world. SA is part of the African negotiating block.
A major issue already is the failure of developed nations to come up with annual funding of $1bn for five years that it promised at earlier COP meetings. Creecy said during the PCC meeting that she understood that only 75% to 80% of the funding had been raised.
She said SA was not expecting to conclude a financing transaction for itself during COP26, but rather to use the opportunity to meet many funders in a short space of time. Aside from the approach by the envoys, SA was also looking at funding from other countries, she said.
PatonC@businesslive.co.za
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