Severe weather conditions, worsened by climate change, are already putting additional strain on SA’s public finances. This underscores the urgency for the country to swiftly develop and enforce financial and policy measures to address these shocks, said President Cyril Ramaphosa on Monday.
He was addressing a National Treasury symposium on climate resilience in Pretoria which aims to identify strategies that will improve government co-ordination on climate change.
Ramaphosa said climate change was already having a “direct and material impact on activity across the economy”, with extreme weather events like floods and droughts causing disruptions that raise business costs, weaken competitiveness and hinder employment opportunities.
The effects of climate change heightened the severity of the 2022 floods in KwaZulu-Natal. The total cost of infrastructure and business losses from these floods reached almost R36bn.
Ramaphosa pointed out that extreme weather events resulted in infrastructure damage, which in turn strained public finances and required the shifting of funds from other critical services. “To manage the higher expenditure and lower revenues, government may then need to increase borrowing, leading to higher debt levels and interest payments. This limits government’s ability to invest in other critical areas,” he said.
There were “substantial gaps between available disaster funds and the cost of disaster response”.
“Even as we have taken proactive measures like setting up a climate change response fund, we need to think seriously about the urgent financial and policy measures needed to address these shocks and how to strengthen the National Treasury’s disaster financing response.”
Francois Engelbrecht, professor of climatology at the Global Change Institute at Wits, speaking at the same symposium, said that Southern Africa was “warming dramatically” and the region was likely to become generally drier. “We can expect more frequent, long-lasting droughts occurring, with heatwaves of unprecedented intensity,” he said.
However, over eastern Southern Africa, including parts of KwaZulu-Natal, the number of extreme rainfall events was projected to increase.
Some of the biggest climate change risks SA faced in the near term, and for which the government should have planned responses, included a Gauteng day zero, which could occur during prolonged droughts, as well as intense multiyear droughts that could collapse the country’s cattle and grain industries.
Key to SA’s climate change response was the implementation of a just energy transition, which would see the country move towards becoming a low-carbon economy, said Ramaphosa.
Through the Just Energy Transition Investment Plan (JET-IP), for which the country needs to mobilise about R1.5-trillion in financing, SA hopes to create new economic opportunities in industries such as renewable energy and electric vehicle manufacturing to replace jobs that would be lost in the coal industry, for example, and to create additional jobs and opportunities that will start to address widespread unemployment.
Ramaphosa said the carbon tax was a vital component of SA’s mitigation strategy to lower greenhouse gas emissions. “By internalising the cost of carbon emissions, the carbon tax incentivises companies to reduce their carbon footprint and invest in cleaner technologies. The carbon tax also generates revenue for climate initiatives. These funds can be reinvested in renewable energy projects, energy efficiency programmes and social support mechanisms.”
A Treasury official warned, however, that the carbon tax would never be a “cash cow” for the funding of climate action.
Edgar Sishi, head of the budget office in the Treasury, said the tax was intended to act as an incentive for companies to implement their own initiatives towards carbon neutrality.
He said the government raised less than R2bn from carbon taxes in the previous financial year. While the carbon tax rate was expected to increase from R190 per tonne of carbon dioxide equivalent emissions in 2024 to R462 in 2030, the income the government would receive from the tax was unlikely to increase to such an extent that it would become a major source of potential funding for climate action.
The presidential climate commission, in its first report on the status of climate action in SA released in June, said there was still a clear discrepancy between the country’s climate change policies and tangible outcomes achieved. It said that there was a mismatch between commitments and action, which was driven partly by contradictory public policies and positions.
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