Egyptian President Abdel Fattah al-Sisi speaks during the opening session of the COP27 climate summit, in Sharm el-Sheikh, Egypt November 7, 2022. REUTERS/Mohammed Salem
Activists and analysts have expressed growing concern about South Africa’s increasing loans to fund its Just Energy Transition Programme (JETP) following more than R10 billion in loans from European countries.
France and Germany have signed loan agreements for the two European nations to each extend €300 million, or a combined least R10.7bn, in concessional financing to South Africa to support the country’s efforts to reduce its reliance on coal through a just transition to cleaner energy sources.
The announcement was made yesterday amid the ongoing United Nations Climate Change Conference, or COP27, in Egypt.
The loans are provided by the French and German public development banks, AFD and KfW, directly to the South African government via the National Treasury.
They are part of investment plans to the International Partners Group (IPG), which has pledged $8.5 billion to facilitate South Africa’s just energy transition.
But the Fair Finance Coalition of Southern Africa yesterday said it had been frustrated by the lack of publicly available information on the JETP since its announcement last year at COP26.
The coalition is made up of civil society organisations including 350Africa.org, the African Climate Reality Project (ACRP) and the Centre for Environmental Rights.
The coalition said it was concerned about the additional debt burden occasioned by the $8.5bn offer, which primarily takes the form of loans.
Alia Kajee, public finance campaigner for 350Africa.org, said civil society was not adequately included and consulted.
“Civil society continues to demand that climate finance for South Africa does not result in additional debt,” Kajee said.
“Civil society can support the JETP process if it is transparent, inclusive and committed to ensuring that the people are at the centre of the just transition.”
Amy Giliam Thorp, branch manager for ACRP, said they were calling for climate finance that was fair, transparent, and inclusive, without locking the country into further debt.
“Given their developmental mandates, PFIs have an important role and obligation to finance a just and equitable society. As the findings from our policy assessment show, PFIs in southern Africa, like the African Development Bank, have much work to do to ensure transparent public finance that helps address the climate crisis,” Thorp said.
Through the Integrated Resource Plans of 2010 and 2019, South Africa has a clear path to decarbonisation through a new technology mix and the decommissioning of Eskom’s plants.
President Cyril Ramaphosa this week told delegates at COP27 that South Africa will need R1.5 trillion in investment to support its just transition over the next five years.
The Treasury’s acting director-general Ismail Momoniat said funding from France and Germany would assist in addressing the challenge of financing the critical adaptation and mitigation programmes and supporting a resilient, sustainable and inclusive growth.
“These loans are concessional and contribute to the government’s efforts to mitigate rising government debt costs,” he said.
However, independent energy analyst Lungile Mashele questioned how much of this funding was concessional and how much was commercial funding.
Mashele asked why the government could not access grant funding especially since South Africa was being used as a test case for an accelerated transition.
“These amounts including the R1.5 trillion total request were not subjected to any macroeconomic modelling or tariff sensitivities. South Africa's total debt stands at R4.7 trillion, adding another R1.5 trillion and not providing a time frame or source of repayment raises concern,” Mashele said.
“The $8.5bn does not and will not address load shedding and the issue of energy security. Despite the government and Eskom mentioning that the funds will be used for power plant repurposing, there is already a mismatch between what is being decommissioned versus what is being planned. For instance, Komati power station is replacing 1 000MW of coal with 220MW of variable renewable capacity, not energy.”
BUSINESS REPORT