In the end, it worked out well. President Cyril Ramaphosa and his team went to the COP27 climate summit in Sharm el-Sheikh, Egypt, armed with a Just Energy Transition Investment Plan (the JET-IP) he’d worked out with Britain, France, Germany, the US and EU in 2021 at the COP26 in Glasgow. They had agreed they would make an initial $8.5bn available to SA to help it lower carbon emissions.
The plan was received with much celebration. “Congratulations dear @CyrilRamaphosa on your Just Energy Transition Investment Plan,” tweeted the president of the EU Commission, Ursula von der Leyen. “A road map to a greener, cleaner future for (SA) supported by your EU friends and other global partners. Our partnership can show the world how to achieve a just transition everywhere.”
The photo-opportunity was pure gold for Ramaphosa as Van der Leyen, UK Prime Minister Rishi Sunak, French President Emmanuel Macron, German Chancellor Olaf Scholz and US President Joe Biden’s climate emissary, John Kerry, poured affection all over him. “Everyone loves Cyril,” a former diplomat had reminded me the day before.
Primarily, the JET-IP details SA’s plans to reach carbon net zero by 2050 and how the funding will be used, mainly by Eskom but also to spark efforts to create a green hydrogen industry and invest in producing electric vehicles.
The $8.5bn is a lot but not nearly enough. Ramaphosa briefly stumbled by announcing that SA needed $90-trillion to complete the transition away from coal, a slip that reminded some of another leader who had trouble with numbers. Even so. The real number is about $90bn (depending on the exchange rate). Ramaphosa likes to use the rand equivalent of R1.5-trillion. In his mind it is $100bn. Sounds low to me.
The events in Sharm el-Sheikh demonstrate three things. First, the Western leaders who lauded Ramaphosa’s plan needed to give the money away, or lend it, almost as badly as Ramaphosa needs to spend it. None of the people on the photograph will have read the JET-IP. That’s for officials. But their relief that a major developing world polluter like SA could produce a plan of any kind was palpable, a victory for them all.
Second, the notion in SA that we are somehow being “captured” by these big Western powers to do their bidding is widespread and insane. We are, in every way possible, light years behind all of them in the introduction of green energy. In the UK, renewable power regularly contributes more than half of the energy that economy consumes. In SA, renewables contribute less than 10% a day.
Yes, the Russian invasion of Ukraine has created a crisis in Europe as gas prices soar, but it’s a gas price crisis, not a renewables crisis. Russia’s actions will simply speed up the adoption of green technologies and we risk falling further behind.
The third lesson concerns an idiosyncrasy we may not fully appreciate about Ramaphosa. He’s cautious and doesn’t deliberately set himself up for failure. Think about it: R1.5-trillion is roughly the same number Ramaphosa used as his “investment target” when he said back in 2018 he would raise $100bn (it became a R1.2-trillion target) in new investment and sent envoys into the world to get it.
The fact that he is almost there a year early is less a sign of success than it is of it being an easy target. We can see with our own eyes how little difference the R240bn a year has made. For the most part this has been simply companies investing what they need to in order to continue functioning. You would have had to double the target to make a difference.
Investment as a percentage of GDP in Botswana is about 26%, Australia 24% and France and Germany 24% and 23%, respectively. In SA, investment as a percentage of GDP runs at about 14%, below even Cameroon, Brazil or Argentina. Basically, if you’re trying to attract enough investment to grow your developing economy you have to be targeting north of 25% of your GDP, and Ramaphosa didn’t even try.
So, if the JET is also going to cost $100bn Ramaphosa should get there easily. He reckons local businesses will themselves spend R500bn on renewable energy for their own use, and the rest will come from either foreign investors (as is the case currently with renewable bidding windows) or as soft loans from development finance institutions like the World Bank or Development Bank of Southern Africa.
But the big question is whether he can spend the money constructively given the near total collapse of the institutions around him and the poor support he gets from his close circle. Already the 2,500MW renewables Bid Window 5 is failing, with only two or three of 25 approved projects finding finance. The delay in launching a first bid window for a mere 513MW of battery storage is approaching two months.
You’d expect more urgency in a crisis. Success on the international stage will help Ramaphosa in his party — the just transition plays well with union allies — but our reality remains awful and it’ll soon reclaim him.
• Bruce is a former editor of Business Day and the Financial Mail.
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