A senior World Bank executive says the decommissioning of coal-fired power stations by South Africa was justified in speeding up the just energy transition, despite opposition from some quarters.
Victoria Kwakwa, World Bank regional vice-president for Eastern and Southern Africa, said resistance to the transition to cleaner energy was playing out around the world and wasn’t just a South African phenomenon. However, a strong case has to be made to convince all stakeholders of the correctness of this path, she added.
A decisive decabornisation drive would also help kick-start the economy and fortify a new sustainable growth trajectory, Kwakwa said.
“The government has laid out its plan for decommissioning coal-fired power plants and it’s beginning to go in that direction.”
That the energy transition was being resisted in some quarters was “natural”, Kwakwa said in an interview with Business Times.
“You have to recognise that globally, and not just in South Africa, policy decisions which involve major shifts are not uncontroversial.
“And you’re never going to get everybody on the same page immediately.
“So it takes time and effort to build coalitions to explain and to demonstrate that the path that is being travelled, or needs to be travelled, is the right path to travel.”
Kwakwa added it was necessary to make the case for the transition to renewables in a “convincing manner to all stakeholders and then also to understand who stands to lose” and “to allay the fears of those who stand to lose and say, ‘this is what we’re going to do to bring everybody along.’ And I think that’s why the word justice must be there.”
Policy decisions which involve major shifts are not uncontroversial ... it takes time and effort to build coalitions to explain and to demonstrate that the path that is being travelled, or needs to be travelled, is the right path to travel
— Victoria Kwakwa, World Bank regional vice-president for Eastern and Southern Africa
The closure of Eskom’s Komati Power Station, with the help of a $400m loan from the World Bank, has been widely criticised — even by senior government leaders — as premature and unjust.
News24 reported on Wednesday that Minister of Environment, Forestry and Fisheries Barbara Creecy, who was answering questions in the National Assembly, said she told the World Bank at a meeting that the “unjust transition” involved in closure of the Komati Power Station had undermined the just transition.
The coal-fired plant in Mpumalanga, which had nine generating units with a total installed capacity of 1,000MW, had reached the end of its 40-year life cycle when it was decommissioned in October 2022 by then CEO Andre de Ruyter.
It is being repurposed as a renewable energy site powered with 150MW of solar, 70MW of wind and 150MW of storage batteries through a concessional loan facility from the global financial institution.
However, an impact study by the Presidential Climate Commission (PCC) published in October found that “engagements before the shutdown fell short of being inclusive and participatory”. It said communities should have been informed of the decommissioning years in advance, and new jobs and skills training made available.
Creecy said she had asked the World Bank to work with the communities around Komati who were affected by the closure.
“I have recently had a meeting with the World Bank where I brought to their attention the study which the PCC did on the decommissioning process, and I have asked them to work directly with that community to identify projects and programmes that the community would like to see that would deal with socioeconomic consequences of unjust transition,” she told parliament.
Both the loan to decommission Komati, and another $1bn policy loan that was approved last month, were requested by the National Treasury and approved by the government. South Africa was offered an $8.5bn package by the US, UK, France and Germany in Just Energy Transmission Partnership grants and loans at the COP26 summit in 2021. Denmark, the Netherlands and Spain have since added a further $11.8bn to the same kitty, but the country still has a R660bn just transition shortfall.
At the start of the COP28 in Dubai on Friday, rich nations pledged to contribute $260m to the Climate and Loss Damage Fund to help developing countries deal with the harm caused by global warming.
Kwakwa said the bank supported a just energy transition that doesn’t leave anyone behind. “You don’t want just any green transition; you want a transition that is just and doesn’t leave anybody behind. I think that’s super important.”
That is what the bank was witnessing in South Africa, she said.
“We see some of the work being done to transform the energy sector, to support the unbundling of Eskom, and to begin to put the energy sector onto a path of renewables. And we see the invitation extended to the private sector to participate in renewables production, and the strengthening of mechanisms for pricing carbon.”
The $1bn loan was supporting those efforts at restructuring and reforming the energy sector so that it performs better over time for all the people of the country, Kwakwa said.
“What it’s also doing is promoting the green transition by encouraging the private sector to come in with the production of renewables through policy and also strengthening the pricing mechanisms around carbon. And so it’s supporting the reform of the unbundling of Eskom.”
I have asked them to work directly with that community to identify projects and programmes that the community would like to see that would deal with socioeconomic consequences of unjust transition
— Minister of forestry fisheries and environmental affairs, Barbara Creecy
South Africa could be at the centre of a green industrialisation project that could boost economic performance, create jobs and propel decarbonisation, she added.
Kwakwa, who is based in Washington, leads the World Bank’s engagements with 26 countries across East and Southern Africa. She recently visited Botswana, Namibia and South Africa, interacting with partners and governments about efforts to promote economic growth and eliminate poverty.
“All the countries I visited are looking for more rapid growth,” she said. “The Southern African countries, at least Namibia, Botswana and South Africa, are at much higher levels of per capita income than the majority of countries in Eastern Africa. And, as you know, as per capita income increases, the rate of growth tends to be a little lower.
It was evident that growth was required across the continent, but it has to be growth that benefits everyone, Kwakwa added.
“South Africa’s situation is no different. It hasn’t been able to grow much since the global financial crisis. If you look at the data since that period, growth has really been timid. All these countries need more growth to help them achieve where they want to go, to become high-income countries while simultaneously and fundamentally addressing poverty, which is still high.”
Kwakwa said the high levels of inequality across Eastern and Southern Africa were “constant”, though it was much higher in Southern Africa.
Still, there was a lot more growth potential in South Africa, she said.
“South Africa has a lot of sources of growth. You have a vibrant private sector, you have agriculture, you have manufacturing, you have green energy, you can get into an industry that’s related to the just energy transition to the green transition.
“I think there are so many sources of growth in South Africa, I think addressing some of the fundamental structural constraints to competitiveness, the energy, the transport sector, as well, making the ports more efficient, all of that is going to be important.
“South Africa can grow again, it has been very successful [before], you have your upper middle-income country, you can get to high-income country by addressing some of these bottlenecks that impact the competitiveness and have weighed heavily on competitiveness for quite a while to unleash growth again, and to let this vibrant private sector sort of continue to work.”
