After many months of negotiations, the details about the investment plan for $8.5bn in climate finance pledged to SA by the governments of rich nations at COP26 in Glasgow, Scotland, in 2021, are now eagerly anticipated following the cabinet’s endorsement of the plan earlier this week.
At a media briefing on Thursday after a cabinet meeting, minister in the presidency Mondli Gungubele said the Just Energy Transition Partnership Investment Plan (JETP-IP) was accepted by the cabinet. He would not expand on details of the plan saying that a briefing would be held soon to elaborate on the “funding challenges in taking forward that plan”.
Nick O'Donohoe, the CEO of the UK’s development finance institution, British International Investment (BII), was in SA this week to, among others, further talks on the JETP. He told Business Day that discussions were continuing about exactly how finance would work, and there were also challenges around the implementation of the plan.
He would not provide details on what the UK’s contribution would entail, saying there were still some questions “around the timing and what counts and doesn’t count”.
O’Donohoe did say, however, that while much of the financing would be “sovereign” in nature, development finance institutions would also play a role.
The UK is the co-ordinator for the partner countries, and it is also co-ordinating the involvement of development finance institutions in the partnership agreement.
“Overall, the SA government is doing a good job of orchestrating [the JETP and the investment plan], especially given the very tight time frame within which the plan has to be put together,” he said.
The investment plan was developed by the Presidential Climate Finance Task Team, which is being led by former Absa CEO Daniel Mminele, and will set out how the $8.5bn — to be mobilised by the governments of the UK, US, France, Germany and the EU — will be spent to support SA’s transition to a low-carbon economy. The plan is also expected to provide more insight into the type of funding the partner countries will provide.
O’Donohoe said the BII “will be making a contribution” as part of the UK’s role in the JETP.
After having significantly scaled its investments into clean energy infrastructure, the BII’s investment portfolio in SA increased from $142m in 2021 to $520m in 2022.
Recent investments include BII’s partnership alongside Standard Bank and H1 Holdings in three projects under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP). The projects, to be developed near Kenhardt in the Northern Cape, will be SA’s first baseload renewable energy project, powered entirely by renewable sources. BII also invested in H1 Holding, a black-owned and managed renewables investment and development company.
O’Donohoe said it was “amazing” how much focus the JETP was getting internationally given its potential to serve as a “role model” for how rich nations can support and finance climate adaptation and mitigation in developing economies. This was illustrated, said O’Donohoe, by the amount of attention the partnership received during the annual meetings of the International Monetary Fund and the World Bank Group in Washington earlier in October.
“The whole world is waiting for this,” he said.
When the partnership was first 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”.
Some in government have expressed their reservations about the partnership — mineral resources and energy minister Gwede Mantashe has said that the partner countries should not use the JETP to dictate how SA’s energy transition will play out, and public enterprises minister Pravin Gordhan warned against committing SA to costly debt obligations.
Statements made by representatives from some of the partner countries suggest that the funding package will entail little in the way of grant funding and that it will rather consist of concessional finance and investment in private sector initiatives.
The investment plan (JETP-IP) is expected to be formally endorsed by all the partners at the COP27 climate negotiations in Egypt in November.
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