Energy

South Africa needs new body to manage R168 billion energy transition

South Africa’s Presidential Climate Commission has recommended the country establish a body to guide investment in the energy transition and raise more money to help wean itself off coal.

The commission said that the office within the presidency that’s drawn up an investment plan for $9.3 billion (R168 billion) pledged for the transition by some of the world’s richest nations should also help prepare projects and raise funds. 

The commission said it should work with the Development Bank of Southern Africa, the Industrial Development Corporation, and the National Empowerment Fund to bolster its climate funding capabilities.

“The PCC is proposing the creation of a Just Transition Financing Mechanism,” the commission said in the 54-page report it sent to Bloomberg News ahead of its official release on Monday.

“The JTFM will raise and channel funds towards the just transition” and support the development and implementation of projects, it said.

The recommendations come amid frustration at the slow pace of the so-called Just Energy Transition Partnership that South Africa secured in 2021 with the US, UK, Germany, France and the European Union.

The alliance later won additional funds from the Netherlands and Denmark. 

Funding countries have said they haven’t been presented with enough viable projects to allow significant funds to flow to South Africa, one of the world’s most carbon-intensive economies. 

The $9.3 billion (R168 billion) offered in the form of grants, concessional and commercial loans and guarantees is a fraction of what the country will need.

Yet, it can be a catalyst for further investment from private companies and development finance institutions. 

South Africa’s JETP is seen as a prototype for similar partnerships that wealthy nations are developing with Vietnam, Indonesia, and Senegal, with a total pledge of more than $40 billion. 

The concept is to fund and facilitate the development of renewable energy plants while at the same time providing alternative opportunities to cushion the impact on communities dependent on coal for economic activity.

South Africa has the most coal-intensive economy of any of the Group of 20 large economies; it relies on coal for about 80% of its power generation. By some measures, only Mongolia and the Solomon Islands are more dependent on the dirtiest fossil fuel.

Still, South Africa also has some of the world’s best potential for wind and solar power generation.

The new body will need to match available funds with projects and also help prepare investable projects to attract more money, the commission said.

Initially, over a period of 18 to 24 months, the activities should be coordinated through a number of state bodies working together before “a more permanent and centralized entity” is established, the commission said.

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