18 October 2022 at 2:24 pm
Article originally published by Mail & Guardian.
When first announced with fanfare at COP26 in November 2021, climate and environmental justice groups in South Africa cautiously welcomed a partnership between the governments of South Africa, the US, the UK, France, Germany and the EU to mobilise $8.5-billion (R131-billion) over the next three to five years to support the implementation of South Africa’s just transition from coal-fuelled energy.
At the time, we said that the partnership sends a strong and important political message of both the acknowledgement by countries in the North of their climate debt, and their commitment to support South Africa.
We noted that this partnership was only a first step, and that South Africa’s need is much greater than $8.5-billion. In particular, we said that, for Mpumalanga alone, at least $1-billion is needed only for worker support and other direct just transition interventions. A more recent report by the Centre for Sustainability Transitions and the Blended Finance Taskforce estimated the cost of “climate justice outcomes for workers and communities” from 2022 to 2050 at closer to $10-billion.
We also called for transparency about the scope and conditions, and accountability by lenders, beneficiaries and the South African government. We asked many questions about the nature of the deal. How much of it was going to be new funding? What portion would be concessionary finance, and what portion grant funding? Would there be enough provision for workers, for small enterprises, for restoration of land and coal-affected communities? Who would manage the funds, and how would accountability for the spending of the funds be ensured?
It took time to establish structures and processes to prepare the investment plan South Africa was required to produce. Although civil society networks offered support and requested opportunities to participate directly in the development of the Just Energy Transition Partnership, or JETP, that did not happen. Our inputs were limited to one meeting and rushed written submissions, made without the benefit of access to the draft investment plan.
This made it impossible for stakeholders outside of the inner circle, and even more so for people who will be directly affected by the investments it contemplates, to engage substantively with the plan. The failure to publish drafts of the investment plan for public scrutiny seems a major missed opportunity by the government to demonstrate domestically, its ability to respond decisively to the political moment.
At the same time, over the past month there have been multiple announcements of bilateral agreements with individual partner countries — French, German and Norwegian development banks and agencies, and the World Bank — all in different currencies, with varied disclosure of the content of those agreements, and limited opportunities for stakeholders to be involved.
Do these agreements replace the JETP? Are they in addition to the JETP? What are the rates of concessionality for these loans, and how will it affect South Africa’s level of indebtedness? It is hard to tell.
Clearly, being a recipient country of transition or climate funding, particularly when those funds ostensibly come from a group of countries with different interests, poses particular difficulties. It requires appropriate infrastructure, financial and human capacity, appropriate financial instruments, and skilled negotiators.
It also requires broad political support, an active and involved civil society, and coordination — elements that have caused particular problems in South Africa, complicated by multiple financing transactions happening with different multilateral development banks outside of the JETP.
Last month, Environment Minister Creecy told News24 that the country had underestimated how complicated the process would be. She cited “development institutions with different terms and conditions, and dependent on their own fiscal cycles and so on”, highlighting the inevitable complexities of negotiating any deal with five different partners with vastly different requirements and priorities.
The difficulties posed by the JETP and climate finance in general are not limited to recipient countries. The world is not what it was at COP26 in November 2021, and it appears that, from the international partner countries, interests and political support for delivering against their political commitments have waned substantively. This has far-reaching implications for South Africa’s transition, and for transitions in other parts of the world.
Involving civil society and people in the development of an investment plan and in the discussions with international partners may seem tedious to those in the inner circle, but this is a short-sighted approach.
Not only will their involvement inform more appropriate spending plans, but can assist in holding international partner countries accountable and strengthen South Africa’s hand in negotiations about critical issues. Even more importantly, post any agreements, they must play a critical role in oversight of these deals, which is in the interest of all stakeholders, including the funders.
Building global just transition finance transactions is new and uncharted territory for everyone, and uncertainty always creates space for political manoeuvring and misdirection.
For one, such finance cannot be repackaged versions of finance or climate finance previously promised or committed — what would be the point of this for the recipient country?
Second, the JETP finance must not be used to subsidise private profit. Noting that many civil society organisations and labour unions in South Africa strongly favour significant public ownership of renewable energy, the JETP finance must not be used in sectors or initiatives that can be fully financed by the market.
Third, the JETP concessional and grant funding flows must support those aspects of the transition that are largely impossible to finance, namely project implementation on environmental and social aspects of decommissioning of coal mines and power plants.
And clearly, but perhaps it needs to be said again, the JETP deals cannot finance any investment in old or new fossil fuel companies or projects. This includes international partner countries using the JETP to finance new gas extraction in a recipient country to solve their own energy crisis.
Hard as the South Africa process has been, much is at stake. Firing up South Africa’s coal phase-out and just transition is critical for so many reasons, starting with significant savings in global carbon emissions that a coal phase-out aligned with the lower bound of South Africa’s nationally determined contribution (350mt CO2eq) would achieve.
But South Africa is also a country in economic recovery from a decade of state capture, the Covid-19 pandemic, and the $400-billion of debt owed by Eskom. This is crushing the country’s ability to invest in social programmes aimed at reducing its extreme inequality gap, and addressing faltering local service delivery. All of this is critical for South Africa’s stability and prosperity, and its ability to participate in the global post-fossil fuel economy. A chaotic and unsupported transition from coal in South Africa benefits no one.
Even more is at stake at a global level, where the successful transitions in other coal-reliant countries in the South offer major opportunities to strengthen markets, and to address the perpetual difficulties posed by migration of people to the North — an issue anticipated to accelerate significantly over the decades as the effects of climate change make life intolerable for many.
Although the concept of a JETP is still new, the principle of the Global North providing concessionary finance and grants to support just transitions from fossil fuels in the Global South is not. As long as the JETPs are not used to delay climate and transition finance; to limit or avoid adaptation or loss and damage funding; to serve the fossil fuel energy needs of donor countries; and as long as we all understand that one JETP will not be enough, both funder and recipient countries should do everything in our power to make this work.
There are other fossil fuel-reliant countries such as Vietnam, Indonesia, India, Senegal and Nigeria who will need to draw lessons from the South Africa JETP as an example of what is possible.
Whatever form it takes, if the South Africa JETP fails to deliver, it would not only be a major blow for South Africa’s own decarbonisation and climate justice, but also demonstrate that the fanfare about this deal by historical emitters of the Global North at COP26 was all smoke and mirrors.
Melissa Fourie is the executive director of the Centre for Environmental Rights and Wandisa Phama is the deputy director.