Climate advisers appointed by President Cyril Ramaphosa have published a set of recommendations aimed at better co-ordinating the raising of finance and flow of funds towards SA’s just transition efforts.
One of the key recommendations, setting up a new funding platform, would help address “urgent gaps” in matching available funding to appropriate projects.
The Presidential Climate Commission’s (PCC) Recommendations on a Just Transition Financing Mechanism (JTFM), which was launched this week during a National Treasury climate change symposium in Pretoria, wants to see this funding platform provide better project preparation support as a solution to the current, limited project pipeline.
To support the country’s global climate commitments and climate change mitigation efforts SA has committed to a just transition that will include moving the energy sector from a coal-power-dominated system to a less carbon-intensive, renewables-led energy mix.
Under the Just Energy Transition Partnership (JETP) several rich countries such as the US, Germany, France and the UK, have already committed more than $11.6bn towards these efforts, but a huge funding gap remains given that an estimated R1.5-trillion is needed to implement SA’s Just Energy Transition Investment Plan (JET-IP).
“The JTFM will raise and channel funds towards the just transition, provide support to enable bottom-up responses to the just transition and facilitate the development and successful implementation of just transition projects,” the PCC said.
The PCC proposed that the JTFM be, initially, based within the existing JET-IP Project Management Unit in the presidency working with development finance institutions such as the Development Bank of Southern Africa.
Bigger pipeline
Apart from work that was needed to raise more funds, the JTFM would have to perform “critical matchmaking and project preparation service” to help increase the pipeline of investment-ready projects.
“Even where funds have been mobilised (as under the JETP, however insufficient they may be in relation to current challenges), funders struggle to mobilise financing for appropriate projects whereas project developers struggle to identify appropriate funding opportunities for innovative projects. This conundrum requires effective matchmaking and project development capacities,” the PCC said.
This was underscored by the fact that SA has so far used only roughly a quarter of the $8.5bn that was originally pledged (in the form of concessional loans, grants and loan guarantees) under the JETP at COP 26 in Glasgow in 2021.
At a media briefing held during the symposium on Monday, Treasury deputy director-general Mmakgoshi Lekhethe said about $2.4bn has been raised from the pledges during the 2022/23 financial year and they anticipated another $2.4bn in funding from the package in 2023/24.
The recommendations from the PCC would help inform the work the Treasury was doing to put in place financing models for climate action and the just transition.
Deputy finance minister David Masondo told the symposium the Treasury was working on finding innovative financing models to crowd in private sector investment to support climate action.
“National Treasury is working on financing strategies, including private-public participation and new institutional arrangements, to mobilise financial resources for sustainable development. These models will enable us to attract private sector investment and leverage public funds to achieve greater impacts.”
Masondo said details of these funding mechanisms would be announced during the medium-term budget policy statement in October.
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