The decisions by US President Donald Trump to suspend USAID funding to countries such as South Africa and to pull out of the global Just Energy Transition Investment Partnership (JET-IP) have caused worldwide concern.
While the immediate impact is most acutely felt in developing countries, the ramifications extend into global energy dynamics, climate commitments and geopolitical strategies.
USAID, through mechanisms such as the Power Africa initiative, has been instrumental in developing projects in Africa by providing project preparation funding and technical assistance. The JET-IP, in turn, was established to support South Africa, Vietnam and Indonesia and others to transition from fossil fuels to more sustainable energy sources.
The link between the USAID and JET-IP was symbiotic: the former funded early-stage work and the latter focused on implementing projects geared towards achieving a just energy transition. More specifically, the JET-IP aims to provide financial backing and technological assistance to ensure a smooth and equitable transition, addressing social and economic impacts.
In Q3 2024, JET-IP funding from sovereign bilateral partners stood at R11.09bn, with the top five contributors being Germany (R5bn), the Netherlands (R1.06bn), the EU(R1bn), the US (R981m) and Switzerland (R891m).
As of this month, with the US withdrawal from the pact, the total funds are R10.29bn. Notwithstanding the significance of the US contribution, its withdrawal will not stop the planned energy transition.
The timing of the US withdrawal from the JET-IP is critical and coincides with several significant global events and commitments. In December, the US will assume the G20 presidency, placing it in a commanding position of substantial global influence.
The US decision to withdraw from the JET-IP raises questions about its commitment to emissions goals and its willingness to lead by example in the global fight against climate change.
An additional layer of complexity was added when Chris Wright, the US secretary of energy, recently delivered a powerful message directed at African nations. Speaking in Washington DC, Wright emphasised that concerns over climate change should not impede Africa’s development of its fossil fuel resources.
It’s a paternalistic post-colonial attitude that I just can’t stand
— Chris Wright, US energy secretary
“This government has no desire to tell you what to do with your energy system,” he said. “It’s a paternalistic postcolonial attitude that I just can’t stand.” The statement highlighted the tension between advancing economic development and addressing global climate change.
US funding for the JET-IP was primarily commercial. This means that while the US withdrawal reduces the overall funding pool, the impact is mitigated by the nature of the funding. While the total amount of donor aid from the JET-IP to South Africa was substantial, the US contribution was only 8.9%. The continued support of other partners like the EU and Britain can ensure that South Africa still receives significant assistance.
The US withdrawal does, however, present an opportunity to rethink the approach to the energy transition. Diversifying the energy mix, becoming more self-reliant and restructuring funding to better suit local needs and requirements are immediate alternatives to explore for aid recipients.
The funding model for the energy transition should be re-evaluated to ensure it aligns with local priorities and is affordable. This might involve a mix of public and private investments, grants and concessional loans. It also affords an opportunity for local or regional development finance institutions to provide local-currency-denominated funding and greater investment in consolidated projects by asset managers.
By leveraging various funding sources and modalities, countries can create a more sustainable and resilient transition framework; there is an opportunity to craft a better deal, tailored to the unique needs and strengths of the African continent. This includes leveraging its vast reserves of critical minerals, which are essential for renewable energy technologies, and asserting greater sovereignty over its resources and energy policies.
The EU approach of negotiating as a bloc has proven effective in ensuring collective bargaining power; likewise, by presenting a united front, African nations can enhance their negotiating power, attracting better deals and more favourable terms for their energy transitions.
For asset managers and investment management firms, the transition towards sustainable energy and shifting dynamics within global partnerships present real opportunities. The re-evaluation of funding models to include a mix of public and private investments, grants and concessional loans, could create new avenues for investment, allowing asset managers to diversify their portfolios and support crucial projects within the energy sector.
This provides an opportunity to develop innovative financial instruments that will unlock pension fund capital into energy infrastructure projects.
Adopting a collective bargaining strategy (a bloc of African nations, for example) could enhance South Africa’s negotiating power and enable better terms for transition investments. Domestic finance institutions and investors from the rest of Africa can influence the structuring of deals to be more favourable and mitigate risk.
Crafting a tailored energy transition deal for Africa may offer investors a chance to invest in ventures that promise long-term growth and energy independence. Credible ventures could produce high-yield investments in local industries, home-grown technologies and infrastructure development that will enhance the Public Investment Corporation’s portfolio while contributing to sustainable development on the continent.
As the old adage goes, money follows politics; never has this been truer than in 2025.
• Mashele is an economist and energy and infrastructure specialist at the PIC
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