President Cyril Ramaphosa says it is time for South Africa to “grasp the nettle” and embark on a “transformative path” towards a climate-resilient society both to fulfil its moral obligations in the face of an intensifying crisis, but also to seize the economic and job opportunities that are arising around the transition.
Speaking during the third formal meeting of the Presidential Climate Commission (PCC), which he established in December 2020 and chairs, Ramaphosa said that, given the primacy of the climate crisis on the international agenda, South Africa could no longer be debating whether or not it should transition to a low-emissions society.
“It is a must, otherwise we will be left behind on a number of fronts.
“But the transition has got to be just, it’s got to be the type of transition that will take the interests of our people into account,” he said.
Ramaphosa also agreed with Anglican Archbishop of Cape Town Dr Thabo Makgoba, who spoke on the same virtual platform on Friday, that the climate crisis represented a new “Kairos moment”, or a moment of truth, for South Africa – in the 1980s the South African church published the seminal Kairos Document, which outlined the church’s active opposition to apartheid.
“I welcome this, particularly as he [Makgoba] raises the fact that climate change is a moral issue and calls on us to look at this challenge that faces us – and may I add opportunity really – as a Kairos moment.”
A just transition, the President argued, offered South Africa “great opportunity” for innovation and investment into the green economy, supported by financial commitments that were being made by developed countries to assist developing countries to mitigate and adapt to climate change.
Although there were lingering questions about whether developed countries would honour their pledges to mobilise $100-billion a year in climate finance to support climate investment in developing countries, Ramaphosa said there were growing indications that funding would indeed be forthcoming.
Forestry, Fisheries and the Environment Minister Barbara Creecy said that this financial commitment had been the subject of much discussion during the recent Climate Ministerial meeting hosted in London, in the UK, in preparations for the COP26 climate negotiations scheduled for November in Glasgow, Scotland.
Ramaphosa related that in her report back to him, Creecy indicated that it would be possible for South Africa to “attract a great deal of funding if we take a clear, clear stance, and bold one, on our trajectory” for reducing emissions”.
“We are going to be going to COP26 . . . and we need to state our country’s position very clearly,” Ramaphosa said.
JUST ENERGY TRANSACTION
Earlier PCC deputy chair Valli Moosa argued that South Africa should use the gathering as a platform to position the country as a preferred global destination for foreign and domestic decarbonisation investment and to support Eskom’s Just Energy Transaction.
The utility has indicated that it could seek to raise about $10-billion in low-cost climate finance to initiate its transition from coal - concessional finance that would be secured in return for an accelerated decommissioning of some of its coal-fired power stations.
Eskom CEO Andre de Ruyter told the PCC meeting that the utility was proposing a Just Energy Transition (JET) funding facility to enable and accelerate the transition from coal to other forms of electricity generation.
Proposed is a multi-tranche, multi-year facility, funded by a multi-lender syndicate that provides concessional funding to JET projects on a “pay for performance” basis.
Several energy and non-energy JET projects have been identified, and it is estimated that some 300 000 net jobs could be created in rolling out renewables and grid infrastructure.
De Ruyter reiterated that the Komati power station, which first came into operation in 1961, had been identified as the flagship site for its first JET projects, with the power station’s last unit scheduled to be shut in 2022.
ESKOM DEBT SOLUTIONS?
Deputy Finance Minister Dr David Masondo indicated that the National Treasury supported Eskom’s plan to secure cheaper finance to support its JET projects.
However, Masondo stressed that Eskom’s unsustainable legacy debt also needed to be resolved, with the help of the “sovereign”, while personally rejecting calls for the debt to be transferred to the sovereign.
Instead, he raised three possible alternative scenarios for addressing Eskom’s debt, including:
- listing a portion of Eskom on the JSE to inject fresh equity;
- inviting foreign State-owned companies to invest in Eskom; or
- pursuing a $20-billion debt-for-climate swap, whereby the sovereign reached agreement with existing or new creditors on “some debt forgiveness” on the basis of a decarbonisation schedule at Eskom, which would receive an equity injection to the same value.
He stressed that none of the debt solutions had been endorsed by government and indicated that the National Treasury planned to host a workshop on the issue in the not-too-distant future.
Mineral Resources and Energy Minister Gwede Mantashe was, however, less upbeat in his assessment of the energy and economic potential associated with the transition, arguing that the PCC needed to have an appetite to “engage with different views” on the transition to avoid developing “blind spots”.
He continued to make the case for “cleaner coal”, imported and domestic gas and modular nuclear as part of a future electricity mix that guaranteed the “affordable, accessible and reliable” energy required to support growth.
“The transition is not and cannot be a one-size-fits-all; violent pendulum swings from one extreme to the other.”
Mantashe also argued that the just energy transition should be “pragmatic” and guided by: “The desire for realistic employment protection, diversification of opportunities for existing workers, compensation for the social and economic impact of the transition, economic rejuvenation, especially in coal areas, and importantly ensuring energy security in terms of both supply and affordability.”
Ramaphosa, meanwhile, also underlined the importance of attracting manufacturing investment associated with the green economy and creating employment and business opportunities and in transitioning coal mining regions.
BIG MINING OPPORTUNITY
However, Anglo American CEO Mark Cutifani also underlined the direct mining opportunities being created by the energy transition outside of coal, noting that South Africa was already producing several of the metals and minerals required for the transition to a more renewables-led and electrified energy system.
“Many people haven’t connected that the transition from one form of energy to another means that mining doesn’t reduce it actually accelerates, because the minerals we need to support that transition are even more critical,” Cutifani explained.
He noted that a wind turbine required up to 6.4 t of copper per megawatt installed, while a battery electric vehicle contained three times more copper and 20 times more nickel than an internal combustion engine equivalent.
“Likewise, a fuel-cell vehicle contains 1.7 times more platinum group metals [than and internal combustion engine vehicle] and that is a particularly important statistic for South Africa.”
Ramaphosa further agreed with Archbishop Makgoba that South Africa should be seeking to emulate the example of Chile, which had already raised the contribution of renewable energy to 40% and was moving to close coal-fired power plants.
While he did not comment on Makgoba’s description of gas as a “tempting quick fix” that should be avoided, the President agreed with the archbishop that it was “time for us to grasp the nettle”.
“This is the time for us to embark on a very transformative path, which will make a difference to the lives of our people.
“And if there ever was a time in which we can also, through our climate change [response], inject greater economic growth and create jobs and give mining towns, Minister Mantashe, hope for a future [that time is now].”