/ 25 November 2021

‘South Africa will decline finance deal on energy if terms are bad’

Cyril Ramaphosa Gcis
President Cyril Ramaphosa. (GCIS)

The terms of South Africa’s energy finance deal with a few wealthy countries will determine whether it accepts the offer. President Cyril Ramaphosa told parliament during an oral question and answer session on Thursday that the deal must not put the country’s ficus in a worse-off position.

Discussions were also ongoing to find a solution to state power utility Eskom’s massive R401-billion debt, including the possibility of selling that debt off, or transferring it to the treasury’s balance sheet, the president told MPs.

Ramaphosa said the pace and extent of decarbonisation in South Africa would be determined by the financial support available and would take into account the country’s social and economic challenges.

The energy deal gives effect to some of the obligations wealthy countries have towards developing countries such as South Africa in international agreements like the 2015 Paris Agreement, he said.

“The Paris Agreement places an obligation on developed economies that are responsible for some 76% of historical emissions, to provide support to developing economies to adapt to the effects of climate change, and transition to a lower carbon future,” said Ramaphosa.

Facing tough grilling and questioning from sceptical MPs about the financial announcement and what it means for the country’s development, the leader of the governing party addressed concerns about whether South Africa had already accepted the finance offer. 

“This funding will be mobilised over the next three to five years with a view to longer-term engagement, if we finally reach agreement and accept the offer. This is an initial commitment. It may increase as discussions progress and further funds are identified,” he said, adding that, “This commitment from international partners does not mean we need to accept the offer or that we need to accept any unfavourable terms, especially if the financing arrangements could impact negatively on the public fiscus.”

The political declaration between South Africa and the US, UK, France, Germany and the European Union, on just energy transition financing was announced by the UK at the recently concluded UN climate negotiations (COP26) in Glasgow, Scotland.  

At the time, Ramaphosa described the political declaration as a “watershed moment, not only for our own just transition, but for the world as a whole”.

A task team is meant to flesh out the details of the deal over the next few months. Ramaphosa told parliament on Thursday that nothing was set in stone, stressing that the country would be pushing for a large portion of grant finance, rather than loans; coupled with concessional finance and very low interest. 

“We will be seeking to have negotiations in a very transparent manner, where we will not just want to roll over and accept any conditions. The last thing we want to do is to be lumped with conditions that are going to restrict our ability to continue with our developmental path.”

Ramaphosa said his government would bring in a team of people from the private sector, the public sector and trade unions to join it in ensuring that the agreements were beneficial to the country.

Economic Freedom Fighters leader Julius Malema raised issues about the fact that the announcement was not made by South Africa but the UK, and pointed out that wealthy countries in the north were most responsible for climate change and should carry the responsibility of the energy transition. 

‘Undermining sovereignty’

“I was a bit worried when some of these developments were announced by a president [of]  another country, which somehow suggested that they were undermining the sovereignty of our country, because such a development ordinarily should have been presented to us and the world by our place,” Malema said through a virtual feed. 

Ramaphosa responded: “Honourable Malema, you’re absolutely right. The countries in the north are the biggest emitters of greenhouse gases and a number of them are still reliant on fossil fuel to generate their energy. Through the devastating effects of [emissions] we now have a climate that is changing. But the unfortunate part of it is that it is changing for all of us. We are now paying for the damage that they have caused to the climate and its effects are being felt by those who contributed least to that damage. We are depicted as number 12 in the world as an emitter of greenhouse gases.”

The finance, if accepted, will also be allocated towards the development of new sectors such as electric vehicles and the implementation of the green-hydrogen sector master plan, Ramaphosa said.

“More importantly, the declaration recognises that a transition to a lower-carbon economy must also address the needs of workers as well as the needs of communities that reside in areas where our power stations are,” he added.

The money being offered through the political declaration, Ramaphosa said, “will be used for target programmes of reskilling, of upskilling, creating employment and providing other forms of support to ensure that workers, women and young people are the major beneficiaries of our shift to a greener future”.

The president told parliament that South Africa was done “dilly-dallying” with developed countries on their commitments in various climate agreements to support the developing world deal with climate change. 

A slow turning  of the tide

Ramaphosa said although load-shedding by Eskom was inevitable owing to the age of its  coal-fired generation fleet, the government was not going to sit around and do nothing. 

He said 1 600 megawatts of new power had been connected to the grid as at the end of June and 400MW was still to be connected by the end of the year. 

The government expects an additional 2 000MW of power to reach the grid in the next 12 months after the approval of the emergency risk mitigation independent power procurement programme. In addition, the 25 new successful bidders in the latest round of the independent power producer programme for renewable energy will see 2 600MW of solar photovoltaic electricity added to the country’s constrained grid over the next few years. 

Ramaphosa said a number of municipalities were also getting ready to procure power independently. 

“Eskom has been implementing a generation-recovery plan to improve the availability of generating capacity and minimise the risk of load-shedding. We’ve been undertaking a number of other measures to fundamentally change the trajectory of the generation of electricity,” he said. 

Eskom is separating into three entities; Ramaphosa said the transmission unit would be legally separated on 31 December, and that generation and distribution would follow suit next year.