South Africa needs an additional R700 billion to cover a funding gap for its Just Energy Transition before 2027, according to government data analysed by PwC.
PwC released a report last month analysing how Africa can fund the transition to renewable energy and said the continent would need to spend $3 trillion this decade to complete the transition.
South Africa’s Just Energy Transition Plan (JETP) was hailed as an example of how countries on the continent can leverage international financing to fund their climate ambitions.
The country emits the most CO² per capita among countries in the G20 due to its heavy reliance on coal for electricity production.
In November 2021, the governments of France, Germany, the UK, the USA, and the European Union pledged R128 billion of financing to fund its transition away from coal.
A year later, the country published an investment plan for its just transition, laying out the financing required for the various projects envisioned.
To date, the pledge from foreign nations is the only substantial funding pledge for the JETP. These nations are expected to crowd in funding from development finance institutions and international organisations for an additional R150 billion of funding.
According to the government’s financing plan, the private sector in South Africa is also expected to provide an additional R500 billion in funding, which is earmarked solely for electricity generation.
However, this is still nowhere near enough financing for the government’s ambitious projects ranging from electricity generation to electric vehicles and green hydrogen.
The government expects to spend R711 billion on electricity generation and transmission alone before 2027, with a further R638 billion spent on green hydrogen projects and municipality capacity. R128 billion is reserved for electric vehicles.
This leaves a funding gap of R702 billion across the JETP. PwC noted that by mid-2023, there are still no further details regarding potential funding for the transition and that the Finance Minister made no mention of it in February’s Budget Speech.
PwC said this suggests the government is not planning to make up the funding shortfall by repurposing budget allocations or raising debt.
The funding sources for South Africa’s just transition remain largely uncertain, despite the government being well aware of the severe funding constraints.
The government has previously said it hopes the initial funding will serve as a catalyst to mobilise additional local and international private-sector financing.