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South Africa’s new climate finance deal for the low carbon transition a step in the right direction


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South Africa’s new climate finance deal for the low carbon transition a step in the right direction

Mapungubwe Institute for Strategic Reflection logo

9th December 2021


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South Africa’s $8.5-billion climate finance deal to accelerate the transition away from fossil fuel dependency is a step in the right direction. The announcement of the finance deal, not just pledges, to assist developing countries like South Africa with their low carbon transition is progressive. South Africa secured a concessional finance commitment from developed countries through a partnership with the US, UK, France, and Germany from the negotiations held during COP26 held in Glasgow, Scotland. This partnership will enable South Africa to access funding in the next 2-3 years to achieve its nationally determined contribution targets. Financing remains the most critical component of the low carbon transition and this deal is a significant milestone for South Africa’s low carbon transition.

This finance will be used to procure investments in renewable energy and in developing electric vehicles and the green hydrogen sector. These plans for the funds are not surprising as South Africa is in a dire situation of power cuts and our state entity, Eskom, is struggling to provide adequate power and is also debt ridden. This finance will also go towards repurposing coal plants that are being retired; acquiring new sources of renewable energy and upskilling workers, as expressed by Eskom CEO André De Ruyter.


However, these plans aim to only address our immediate power issues and neglect the socio-economic challenges gripping the country. South Africa needs to rethink how we finance and structure the low carbon transition in the country to address inequality, unemployment, and poverty. A transition to a low carbon economy that does not address these challenges will not succeed.

President Ramaphosa gestured towards this in his announcement of this finance deal. He said “Climate change is an existential challenge that confronts us all, and South Africa is committed to playing its part in reducing global emissions. The partnership that we have established today is a watershed moment not only for our own just transition, but for the world as a whole. It is proof that we can take ambitious climate action while increasing our energy security, creating jobs and harnessing new opportunities for investment, with support from developed economies.” The creation of jobs will sustain livelihoods and must be central to any investments in the low carbon transition.


MISTRA’s forthcoming book, A Just Transition to a Low Carbon Future in South Africa, outlines other considerations that must be taken into account if the transition is to address some of our socio-economic challenges. Firstly, new renewable energy could not only stabilise the energy grid in South Africa. It also offers an opportunity to provide wider energy access in remote areas that Eskom has not been able to reach. This social aspect of the debate about renewable energy is often excluded in planning for a low carbon transition in South Africa.

Secondly, any financing mechanisms must address the need to make up for job losses. Communities in coal areas will require skills development programmes, and alternative economic development models must be implemented to sustain livelihoods in these areas. Financing mechanisms must include reskilling and upskilling workers to meet the demands of the new green sectors and so to facilitate employment.

Thirdly, South Africa will be disproportionately affected by climate change which that will in turn affect the most vulnerable to our society. Therefore, there should be provisions made to immediately provide funds for communities that need to rebuild or relocate in the event of extreme weather events or any other result of climate change. These are imminent threats to South Africa as we have seen our neighbouring county, Mozambique, which was hit by Cyclones Idai a Kenneth consecutively in 2019. Equally important is funding climate resilient development in communities facing the impact of climate change. Systems for development and funding should be included in the early stages of South Africa’s plans for a low carbon transition. Climate impact will affect poor communities most of all, and these mechanisms will ensure that climate impacts do not exacerbate inequality and poverty

Overall, climate finance is mainly focused on climate mitigation and there is a need to increase finance for climate adaptation. Developed countries providing funding neglect this equally important aspect of climate change and focus on curbing emissions. Climate adaptation is the cushion we need against climate change impacts while we are transitioning towards net zero targets.

A just transition framework for the low carbon transition in South Africa is fitting as it prioritises people. Any climate-related finance packages and mechanisms, including the one announced by President Ramaphosa, should include measures to prevent the exacerbation of inequality, unemployment, and poverty, as argued in MISTRA’s forthcoming publication.

The International Energy Agency (IEA) estimates that we are in line for a 1.8-degree global climate increase based on pledges from COP26. This global temperature increase will still have catastrophic climate change effects, which further underscores the importance of building climate-resilient communities. South Africa must strive for a people-centred low carbon transition that leaves no one behind.

Written by Nqobile Xaba, researcher at the Knowledge Economy and Scientific Advancement faculty at the Mapungubwe Institute for Strategic Reflection


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