Let’s talk about the just energy transition in South Africa

I had a conversation with a colleague last week about why South Africa agreed to a just energy transition. So, let’s talk about it. 

First of all, what does it mean for South Africa? The International Partners Group, made up of the United Kingdom, France, Germany, the United States and the European Union, agreed to give South Africa $8.5 billion. The money “aims to accelerate the decarbonisation of South Africa’s economy to help it achieve the ambitious goals set out in South Africa’s updated nationally determined contribution emissions goals”, a joint statement read.  

But the problem is that the money is predominantly loans. Writing in Business Live, Louise Naude said, “Only 2.7% of the offers are grants, with the other 97% in the form of loans.” 

Power utility Eskom has a debt problem and South Africa’s gross loan debt has increased significantly over the past few years from R2.5 trillion in 2017-18 to R4.3 trillion in 2021-22, Finance Minister Enoch Godongwana said in a News24 article.

Can South Africa afford these climate loans? What about the people employed in the coal sector — what will happen to their jobs? 

During his State of the Nation address last month, President Cyril Ramaphosa did say that the transition must be done at a pace the country can afford and it “must prioritise workers and communities in vulnerable industries and ensure no one is left behind”.

But there are certain points that can’t be ignored — the climate crisis and international pressure to decarbonise to reduce global warming.

The climate conundrum 

The nationally determined contributions are efforts by countries to reduce emissions and adapt to the effects of climate change. In essence, the money is meant to help the country reach its goal of net-zero carbon emissions by 2050.

Writing for the Mail & Guardian, Joanne Yawitch, the chief executive of the National Business Initiative, said net zero means that no carbon emissions will be emitted into the atmosphere. 

South Africa is a major carbon emitter — the 12th highest in the world and the highest in Africa, based on 2019 data, according to the Global Carbon Atlas. Worldometer, using 2016 data, puts South Africa at 15th globally. There is an urgent need for the country to reduce its greenhouse gas emissions, which include CO₂, methane, nitrous oxide and fluorinated gases.

Climate change and global warming are a serious risk to African countries, as noted in a report by the World Meteorological Organisation titled State of Climate in Africa. Some of the major consequences are drought, floods, agriculture damage, rising oceans and erosion. 

The goal is to keep global warming to under 2°C. Failure to do so could be catastrophic. A study published in April last year in the journal Nature found that “a two degree warmer world still represents what scientists characterise as a profoundly disrupted climate with fiercer storms, higher seas, animal and plant extinctions, disappearing coral, melting ice and more people dying from heat, smog and infectious diseases”. 

It’s clear from the evidence that South Africa must stop using coal-fired power stations. The money from the International Partners Group is crucial in assisting the country to move away from carbon-emitting energy. But coal provides close to 80% of the country’s electricity.

It seems there’s a double-edged sword: take the money and increase the country’s debt or don’t and mess up the climate. 

There’s a little more to it

In 2015, countries signed the Paris Agreement, a legally binding international treaty on climate change. But the agreement is largely toothless and there’s no real sanction for countries which don’t adhere to it.

In Yawitch’s article she noted that, “As a developing country, South Africa will need access to international financial, trade and capacity support. If we don’t have a bold commitment and a solid plan directed at contributing our fair share to the global net-zero by 2050 goal, our access to these support options are likely to be limited.” 

This view is echoed elsewhere. In February, the Center for Sustainable Development at the Brookings Institution released a paper titled Keys to Climate Action. Chapter 7: South Africa’s “Just Transition”: A Whole Economy Transformation. The paper discusses how, if South Africa doesn’t take mitigating climate action, it could jeopardise the country’s investment grade sovereign rating, which determines how risky it is to invest in it. This could only do further damage to the economy. 

Yawitch also noted how countries making the low-carbon leap will be reluctant to jump into bed with a carbon-intensive country, such as ours. 

Also, who wants to be an enemy of progress and contribute to climate change? If the whole world is talking about fighting the climate crisis and saying, “Here, take the money and fix your carbon emissions,” it’s questionable whether we should say “no”, even if that money is mostly in the form of loans. 

The cynic in me

In the new Calvin Harris and Ellie Goulding song Miracle, they ask: “Are you too cynical to believe in a miracle?” I’m not. I watched the team I support — Liverpool — win the English Premier League a few years ago, something I was convinced I would never do.

But I digress. I am too cynical to believe in a just energy transition. I think the money from the International Partners Group is seen by some leaders in South Africa as a chance to pocket dollars. With the country’s history of corruption — especially at Eskom, involving the state-capture Gupta family, and the more recent sabotage and theft that is exacerbating load-shedding — this view is not surprising  

Former Eskom chief executive André de Ruyter’s explosive interview on eNCA in February mentioned how a cabinet minister told him that “to pursue the greater good, you have to enable some people to eat a little bit”. This filled my cynical cup to the brim.  

Ramaphosa also said in his State of the Nation address: “This year the government received the first tranche of the $8.5 billion offer from the JET [just energy transition] partnership from Germany and France. This money has been transferred to the national treasury.”

Let’s wait and see what happens — and if some people end up “eating”. 

In the meantime, I’ll leave you with the following from the Center for Sustainable Development’s paper: “Its carbon-intensive economy, its socio-economic precarity and its chronic energy insecurity are the primary starting points for any exploration of South Africa’s economic transition. They not only frame and underpin the imperative for a just transition but render the task an even more difficult one to accomplish.”