Energy transition in SA will need blended finance, collaboration

20th October 2023 By: Rebecca Campbell - Creamer Media Senior Deputy Editor

A key question facing South Africa, regarding the just energy transition, was how to finance it. So highlighted University of Stellenbosch Centre for Sustainability Transitions co-director ProfessorMark Swilling at the Windaba Connect symposium, at the Cape Town International Convention Centre, on Tuesday. Windaba Connect is a precursor to the Windaba Conference.

He noted that South Africa was already deep in a transformation. Its economy had been built on cheap coal and cheap black labour, and this model had been disintegrating.

The just energy transition would, it had been calculated, cost the country $250-billion (he used the dollar figure). This put the $8.5-billion, offered by major economies to South Africa to support its transition, into perspective.

Retiring coal generation early would require $24-billion, he further reported. Social investment needed for the just transition would come to another $10-billion.

But the big issue was transmission. The country needed a grid into which new electricity generation sources could be fed.

“Where’s the money going to come from?” he queried, rhetorically. He noted that a number of finance institutions were considering this question.

The private sector, he observed, could provide some of it, but not all of it. The South African State was in no position to provide any funding at all.

The answer, Swilling proposed, was blended finance. And the main source would have to be South African pension funds. Collectively, these had a total value equivalent to half of the country’s gross domestic product.

The next question thus was: how were pension funds mobilized? The answer was, he pointed out, only if there was investment viability.

Speaking at the same event, Land Bank partnership development and programme lead Litha Kutta highlighted that the institution had established a R2-billion energy fund to help farmers deal with the energy crisis, which saw national electricity utility Eskom executing rotating scheduled power cuts. The aim of the fund was to help farmers develop off-grid power sources, to reduce or even eliminate their dependence on Eskom.

The function of the Land Bank was to invest in agriculture. The energy crisis was threatening the country’s food security by disrupting agricultural production and processing, he explained. Hence the creation of the fund.

The concern was that black and emerging farmers, unlike better-off white farmers, wouldn’t be able to come up with innovative solutions to the energy crisis. However, he noted, some of the country’s wind power projects were located in rural areas. The wind power developers could collaborate with the Land Bank (which was represented almost everywhere in rural South Africa) to ensure that emerging farmers around those projects would have access to wind-powered electricity.

Kutta expressed the hope that the Land Bank would indeed be able to collaborate with renewable energy companies, to create joint projects, to provide electricity to rural communities. He urged renewable energy companies not to be like mining companies, which were often unpopular in rural areas because they were seen as completely uninterested in rural communities.