Strong interest has been expressed by other countries and philanthropists wishing to contribute to the financing of SA’s just-energy transition to a low-carbon economy, head of the Presidential Climate Finance Task Team Daniel Mminele said on Thursday.
This would be in addition to the $8.5bn already committed by a partnership of the UK, US, EU, France and Germany.
Bloomberg has previously reported that the UK was considering a $1bn guarantee as part of the $8.5bn package. It quoted a report from the Blended Finance Taskforce and the Centre for Sustainability Transitions at Stellenbosch University that estimated the country will need $250bn over the next three decades.
“These discussions are likely to culminate in an expansion of the partnership going forward,” Mminele said, adding that SA would definitely leverage these additional resources, which could go beyond the partnership.
Mminele said he could not indicate at this stage the amounts on offer by the other potential financiers for the project.
The $8.5bn package was designed to be catalytic and help crowd in the much greater sum of investments required by SA for its just transition.
Significant progress made
Mminele, together with the climate envoys of the countries that form the Just Energy Transition Partnership (JETP), addressed a media briefing on SA’s just energy transition to a low-carbon economy after an engagement on the progress made so far in the task team’s development of the guiding principles and investment plan for the $8.5bn.
Mminele said significant progress had been made in developing the detailed investment plan for the use of funds in the areas of electricity, transport, green hydrogen and the just transition. The building blocks of the first draft of the investment plan, the financing package and the principles underlying it were discussed with the envoys. SA has stressed that the funding must be sufficiently concessional so as not to place too great a burden on the fiscus.
He reiterated that the investment plan, which will identify the projects and activities required to achieve a just transition, would be ready by October and consultations will be held on it with key stakeholders in both the private and public sector in the coming months. He dismissed suggestions that SA was dragging its feet in developing its investment plan, saying the initiative was very complex. The offer of the $8.5bn was made at COP26 in November last year.
Huge investment is required in modern power-generation facilities and the transmission network will need modernisation.
— John Murton, UK climate envoy
SA, which depends on coal for more than 80% of its power generation, is the world’s 12th-biggest producer of the climate-warming gases.
Work on the just-transition framework, which sets out the guiding principles and guidelines for a just transition, has been finalised and this will soon be presented to cabinet, Mminele said.
He stressed that the more than three weeks of load-shedding that SA had suffered recently highlighted the fact that in addition to the threat of climate change, SA faced the immediate need to strengthen its energy security and address the shortfall in electricity supply. The JETP would help in addressing both of these challenges.
The $8.5bn, which will be financed by a mix of guarantees, concessional loans, grants and other financial instruments during the first phase of three to five years, will be used to strengthen transmission infrastructure, and enable more renewable projects to connect to the grid and the rollout of additional generation capacity. Mminele said the investment in these projects was also necessary for SA to achieve the targets it had committed to in its nationally determined contribution to the global reduction in greenhouse-gas emissions and “were critical to catalyse investments in renewable energy in a much larger scale”.
Ample, reliable power
UK climate envoy and chair of the international group John Murton said the JETP had been conceived to provide ample and reliable power to drive the economy and to help SA deliver on its ambitious emission-reduction goals. Much of SA’s energy infrastructure is old, he said, and as the old fleet neared the end of its economic life, it is becoming less reliable and needs to be replaced. Load-shedding is holding back economic growth, which renewables could help address.
“Huge investment is required in modern power-generation facilities and the transmission network will need modernisation,” Murton said, adding that the JETP would contribute to this investment
Murton said the $8.5bn was designed to be catalytic and help crowd in the much greater sum of investments required. The funds that the UK would mobilise through its contribution of a guarantee to the JETP would not be used for investment in fossil fuels, he stressed. The UK does not have a development bank, so its contribution would be in the form of a guarantee.
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