Little progress has been made in finalising the multibillion-rand funding for the Just Energy Transition, six months after the announcement, with suggestions that political pressure should be put on donor countries given the electricity constraints in SA.
In November, the US, Germany, France and the EU agreed to mobilise R130bn in concessional finance and grants over the next three to five years to help with SA's energy transition.
SA, the world’s 12th-biggest emitter of greenhouse gases, is dependent on coal for more than 80% of its power. The transition will include investments in renewable projects and other innovative technical developments and investments in areas such as electric vehicles and green hydrogen.
The investments were expected to start flowing into the country in the second half of this year once funding agreements have been finalised.
On Friday, during the presidential climate commission meeting, Daniel Mminele, the head of the presidential climate finance task team, said discussions are complex and the team “wants to ensure that we focus not just on quantity, which in itself is relatively small [compared] to what we need, but on quality of financing”.
When the announcement was made, “we were dealing with a strong commitment of conditional intent. It was a story of saying yes, we are happy to support SA as it transitions, subject to a lot of issues,” he said.
I imagine this is putting Eskom in an enormously difficult position
— Valli Moosa, deputy chair of the presidential climate commission
Some of the discussions are around how money will flow, whether it will be to the fiscus, to entities or to a special purpose vehicle. There are also enquiries around a list of projects and which of those are ready, and also how much of that money is a grant, and what is the extent of concessionality.
“The key issues are being worked out ... the counterparts are asking about investment plans, sequencing, criteria of what needs to be done. We are not dealing with a homogeneous group, there are five different jurisdictions and some development finance institutions have different legal requirements. It is a little bit tedious but needs to be worked through.”
Mminele, who was appointed in February, said the impact of the finance must be well aligned to the country’s needs and the terms of the loan should, significantly, be more concessional.
He said there is a need to avoid shortcuts that could prove expensive later.
Valli Moosa, the deputy chair of the commission, raised concerns that nothing has happened. He said the matter had been brought to the commission’s attention as a matter of urgency because it was being said “rich countries were falling over themselves to give us money and we need to agree to this thing”.
He said he had thought by now there would have been progress given that discussions that led to the Cop26 funding commitments in November have been ongoing for 18 months.
“Surely Eskom has to plan its work. It can't plan on the basis that there is a finance facility that exists but doesn't really exist. I imagine this is putting Eskom in an enormously difficult position,” Moosa said.
SA’s ranking as one of the world’s largest emitters of greenhouse gases.
— IN NUMBERS: 12th
Minister of trade, industry & competition Ebrahim Patel, who is one of the commissioners, said while the $8.5bn was proposed as a bucket of resources for the first phase — three to five years — during that phase there will be engagement for further amounts.
He said the longer the delays in getting the money in tangible forms and using it, the further it stretches out the discussions for new funding since a lot of climate funding is long term.
“I think we need to find a way to increase pressure points on our counterparts.”
He said Mminele and his team are doing excellent work but are “constrained by the appetite and agency of their counterparts and that it is ultimately a function of political direction rather than technical discussion.”
Patel said he heard that the German and French discussions have been more helpful than those of the US and the UK. “Perhaps the head of state could help in that regard,” he said.
Patel added that there is also a need to increase the proportion that is grant funding, “the gold in the sum — the rest can be of some value but the most significant part is that”.
