/ 2 November 2021

South Africa strikes historic R130bn deal with rich countries to move away from coal

Miners at work in a coal mine in Turkey's Black Sea city of Zonguldak.
At the coalface: In a statement, President Cyril Ramaphosa described the political declaration as a “watershed moment not only for our own just transition, but for the world as a whole”.

The US, UK, France, Germany and the EU have struck a R130-billion deal with South Africa to accelerate its shift away from coal towards renewables and support coal workers and coal communities.

The first-of-its-kind just energy transition partnership, which was announced at the COP26 climate summit in Glasgow on Tuesday will see the wealthy partner countries mobilise an initial $8.5-billion over the next three to five years to support the country’s just transition to a low-carbon economy and climate resilient society.

In a statement, President Cyril Ramaphosa described the political declaration as a “watershed moment not only for our own just transition, but for the world as a whole”.

South Africa, he said, had submitted a revised nationally determined contribution (NDC) to reduce domestic carbon emissions to within a target range for emissions of between 420 tonnes of carbon dioxide (CO2) equivalent and 350 tonnes of CO2 equivalent by 2030. 

“This revised target is compatible with the ambitious goals of the Paris Agreement and represents our country’s best effort to confront climate change, which will have a devastating impact on sub-Saharan Africa without large-scale mitigation and adaptation efforts.”

The funds will be mobilised by partner countries through a range of instruments, including grants and concessional finance, to support the implementation of the country’s revised NDC.

The highly concessional finance that will be mobilised will accelerate investment in renewable energy and the development of new sectors such as electric vehicles and green hydrogen.  

“This will provide a significant boost to investment and growth while ensuring Eskom can access resources to finance repurposing of coal-fired power stations due for decommissioning over the next 15 years.”

Climate change, Ramaphosa said, is an “existential challenge that confronts us all”, and South Africa is committed to playing its part in reducing global emissions. 

“Today’s political declaration represents a first-of-its-kind partnership to turn these commitments into reality, and a model for similar forms of collaboration globally.

“At the heart of this partnership is the importance of a just transition, which includes support for workers and communities affected by the transition away from coal and enables the creation of quality green jobs.” 

For the transition to be just, decarbonisation must be implemented in a manner that promotes and sustains employment, livelihoods and economic inclusion for historically marginalised communities and sectors of our society.  

A joint task force will be established to take the partnership forward over the coming months.

In a statement, UK Prime Minister Boris Johnson described the partnership as a game changer, which will “set a precedent for how countries can work together to accelerate the transition to clean, green energy and technology”.

US President Joe Biden said: “Right now, South Africa is the largest emitter in Africa due in large part to the heavy reliance on coal for power. By closing South African coal plants ahead of schedule and investing in clean power alternatives for the people of South Africa and supporting an equitable and inclusive transition in South Africa’s coal sector, we are following through on the pledge the G7 partners made in Cornwall to accelerate the transition away from coal in developing countries.”

French President Emmanuel Macron said the new partnership “mobilises very significant support for South Africa’s ambitious decarbonisation project for a just energy transition … and we hope it will set the standard for other such partnerships in the future”. 

German Chancellor Angela Merkel said she is very pleased that Germany is part of this important partnership with South Africa. “We are committed to supporting both the decarbonisation of South Africa’s electricity production and the development of new economic opportunities for affected communities.”

Ursula von der Leyen, the president of the European Commission, said the partnership is a global first and could become a template on how to support just transition around the world. “By joining forces, we can speed up the phasing out of coal in partner countries, while supporting vulnerable communities that depend on it.”

The Life After Coal campaign said South Africa’s first climate finance deal is a “promising start” but is only a first step.

“The partnership sends a strong and important political message of both the acknowledgement by northern countries of their climate debt and their commitment to support South Africa’s just transition from coal,” said a statement by the campaign, which comprises environmental justice groups groundWork, Earthlife Africa and the Centre for Environmental Rights (CER).

“It also affirms that South Africa is a country with the potential to transform its economy to be zero carbon and climate resilient through a just transition for workers and for affected communities.”

However, groundWork director Bobby Peek said while the partnership is a step forward, South Africa’s need is much greater than the $8.5-billion proposed. “To achieve a just transition to a zero carbon economy, South Africa needs climate finance that is transformational. For Mpumalanga alone, at least $1-billion is needed only for worker support and other direct just transition interventions,” he said.

Melissa Fourie, the executive director of the CER, said a lot more detail is required on the terms of the deal “to establish whether this finance is of sufficient quality, and to determine the potential broader implications for South Africa. 

“Some of our questions include: How much of this amount is, in fact, new funding? Does the deal commit South Africa to new debt? What are the terms of the deal, described as a ‘range of instruments, including grants and concessional finance’? How much is grant funding, and how much is concessional finance?’”

For concessional finance, which is described as “highly concessional” in the announcement of the partnership, Fourie asked “What is the nature of the concessionality? What is the ‘grant equivalent’ of the deal?” 

“Does the deal provide for the establishment of a just transition fund for workers, small, medium, and micro-enterprises, and coal communities? How much will be used for on-the-ground projects?”

Fourie asked who will manage the funds, including the just transition fund and “how will we control how the funding is to be spent? What will be the role of local public finance institutions like the African Development Bank, the Development Bank of Southern Africa, and the Industrial Development Corporation?”

There are also questions over how the task force will be established and composed. “Will it conduct its work transparently, and how will it be accountable to stakeholders? 

“It is vital that any agreement reached is transparent, and that there are appropriate accountability mechanisms, including at least quarterly reporting by donor countries to ensure actual delivery against financial commitments; and proper governance and oversight of how the finance is allocated and spent in South Africa.”

Happy Khambule, a climate change commissioner on the Presidential Climate Change Co-ordinating Commission, said: “The thing they’re trying to do essentially is address the problem that Eskom has been having because of its current fiscal position and yes, they’ve got concessional finance, they’ve got some grants in there, but that was always the nature of development aid. 

“The problem here is they’re not saying specifically what or how much or what region of decommissioning needs to occur so that the agreement can state value. Yes, they talk about decarbonisation, but we’re not sure if gas is what they think is part of the decarbonisation plan? And yes, because the state has to show some sign of decommissioning in terms of the decarbonisation agenda, they will decommission something, but we’re not sure if the replacement is going to be another fossil [fuel]. That’s where the gaps are really problematic.”

Khambule said the technical aspect of the deal in terms of what it is trying to achieve is still scant. “This is but one of the deals, one of the things that needs to happen … It’s a catalytic kind of partnership.”