‘The eyes of the world are on SA.’ Mminele says the $ 135 billion climate deal must be a global model

The head of his negotiating team said South Africa’s planned $ 8.5 billion (R 135 billion) climate finance deal with some of the richest nations in the world could serve as a model for other dependent countries. from coal.

The potential funding, which will be made available over three to five years, was announced at COP26 climate talks in Glasgow in November. Under the agreement, the United States, United Kingdom, Germany, France and the European Union intend to provide funding to help the country reduce the use of coal, which is used to generate more than 80% of its electricity.

“We are deeply aware that the eyes of the world are on us,” Daniel Mminele, former SA Reserve Bank governor appointed to head the talks for South Africa, said in an interview in the Bloomberg office in Johannesburg on Tuesday. . We’d like to see it “at best as a model or benchmark that can be emulated,” he said.

South Africa, of the world 13th largest emitter of greenhouse gases, was seen as an ideal prototype for the climate finance deal due to the advanced age of its coal-fired power plants and sophisticated capital markets. Commitments made by the government and Eskom to reduce emissions and account for the impact of a clean energy transition on coal-dependent communities have also encouraged lenders, Mminele said.

Other nations that are in talks to benefit from similar agreements are Indonesia, Vietnam and India. Mminele, 57, said the goal is to be able to announce significant progress before the COP27 conference takes place in Egypt later this year.

“Initial discussions are underway and as we move forward we will share with countries who may look to similar programs,” he said.

South Africa’s battles with energy security have given the talks urgency. Africa’s most industrialized economy was hit again this week with the intermittent load shedding that plagued it for more than a decade.

Even so, a powerful coal mining lobby and a sympathetic energy minister who was once a coal mining union leader proved to be obstacles to the rapid spread of wind and solar energy.

proponent of coal

In a February interview with TV channel Newzroom Afrika, Minister of Mineral Resources and Energy Gwede Mantashe said the country should not rush to shut down its power plants or bow to pressure to change its energy sources quickly. and who should be wary of the terms of financing offered. He viewed China, the world’s largest polluter, and Australia, the world’s second largest coal exporter, as role models, saying they had taken into account the needs of their economies.

While the transition to power generation from coal will be the focus of the deal, the money could also be earmarked to kickstart the green hydrogen and electric vehicle industries in South Africa, according to Mminele.

“These are the three things we will be addressing, but it goes without saying that electricity is the key priority area,” he said. “But those other two areas will be developed in parallel.”

Part of the money earmarked for electricity supply will need to be allocated to replace coal-fired power plants with renewable energy at the same sites, protect communities whose livelihoods depend on coal, and strengthen the grid in areas of the country that are energy-rich solar and wind energy potential has a weak transmission infrastructure.

Eskom debt

The new funds are expected to come in the form of soft loans and grants. The structure of the agreement, the details of which are still being worked out, is not expected to increase Eskom’s unsustainable debt burden by 416 billion rupees.

“I doubt we could proclaim success if we made things worse and added to what exists,” said Mminele, who was also CEO of Absa. “Debt problems are integral to what the solution is meant to help address. Our partners know this well ”.

Ultimately, more money will be needed from the private sector and other financiers to move the electricity industry away from coal and into renewable energy.

Eskom has proposed a nearly Rand 200 billion pipeline of renewable energy, gas and battery storage projects and must spend at least R120 billion on transmission lines.

“The funds from this transaction should be distributed in such a way that we can flock to and access much larger pools to carry this program forward,” said Mminele.

– With the assistance of Paul Burkhardt and Paul Richardson.