Public enterprises minister Pravin Gordhan, a close confidant of President Cyril Ramaphosa, expressed doubts that a landmark climate finance agreement with rich countries “is worth taking or not”, saying this will be clear once costs to SA are better understood.
The deal, announced in November, to help Africa’s biggest polluter manage the transition of its carbon-intensive economy was a world first and was seen as one of the most eye-catching successes of the climate change conference, COP26, held in Glasgow, Scotland. In terms of the agreement, the governments of France, Germany, the UK and the US, as well as the EU, would help SA “mobilise” $8.5bn (about R129bn) to support SA’s “just transition”.
While Ramaphosa described the agreement, which seeks to help SA end its reliance on coal while also supporting communities and workers in coal-producing areas, as a “watershed moment”, others in the government — most notably mineral resources & energy minister Gwede Mantashe — have been more sceptical.
Speaking during a planning session of the presidential climate commission, a body established by Ramaphosa, Gordhan expressed doubt that SA’s partners would stick to their word, citing recent experiences with Covid-19 and vaccine access.
“The developing world as a whole has to learn some lessons from our past 18 months of experience in access to Covid-19 vaccines. The reality is that you will get a few minor donations, but the rest of the stuff is going to cost you money, which was the case as far as [SA was] concerned,” he said.
The comments from SA may create unease with partner nations as they indicate that a widely hailed agreement that could be seen as a model for other countries is far from being a done deal.
When it was announced, much was left unsettled, with the official text saying it was subject to conditions such as “concurrence on the investment framework, and in line with budgetary procedures and consensus on the use of funds and terms on which finance may be provided”.
Daniel Mminele, a former deputy governor of the Reserve Bank and most recently CEO of Absa, also addressed the commission in his capacity as the head of a climate finance task team appointed by Ramaphosa to work on the details of the financial offer.
The funding would be made available over a period of three to five years through a range of instruments, including grants and concessional finance, to support the implementation of SA’s revised nationally determined contribution (NDC) to the reduction of greenhouse gas emissions. According to the revised NDC that was submitted in Glasgow, SA committed to reduce domestic carbon emissions to within a target range of between 350-million tonnes and 420-million tonnes of CO2-equivalent (a reduction of about 20%-33% compared with current emissions) by 2030.
A statement by the presidency said the financing was aimed at speeding up investment in renewable energy and the development of new sectors such as electric vehicles and green hydrogen, while also ensuring that Eskom, which produces more than 90% of SA’s electricity from coal, has access to finance to repurpose power stations due for decommissioning over the next 15 years.
The terms of the finance deal needed to recognise SA’s own economic priorities and development imperative, Mminele said. “We need to get a better understanding of exactly what is on offer, in what combination, at what price and on what terms.”
The outcomes of a joint negotiation process to discuss the investment plan must be aligned to SA’s fiscal stance, in terms of both affordability and sustainability, he said.
“We are in somewhat uncharted territory with this initiative, and it is vital that we implement a transaction that can serve as a benchmark for emerging markets, low-income countries and developing countries, that would be worth emulating, or at the very least form a basis for further development,” he said.
The $8.5bn represents a small fraction of the demand for financing required to support the just transition. “We need to ensure that what we eventually put on the table for cabinet to consider will at least be a catalyst for mobilising further and even more substantial funding, particularly from the domestic and international private sector.”
Gordhan said the commission had an important role to play in guarding against climate funding becoming the next big chapter in state capture.
“We have just started to recover from state capture, how do we now guard against rent-seeking to make sure [climate funding] goes to places where it will be spent properly and that it doesn’t just make a few people extremely rich,” he said.
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