We must achieve financial scale for South Africa’s just energy transition to succeed

South Africa’s just energy transition requires substantial quantities of new finance, continually and over a long period. It could take up to 30 years to transition the country with estimates on the investment needed ranging from R4-trillion to R8.5-trillion.
Climate is front of mind following the conclusion of the COP27 conference in Sharm el-Sheikh last week. The launch of South Africa’s Just Energy Transition Partnership Investment Plan (JETP-IP) ahead of the summit, which details how South Africa will mobilise $8.5-billion in funding from the International Partners Group (IPG), has created significant hype in the media and has attracted interest from policymakers, regulators, development financiers and social and environmental advocacy groups across the globe.
Moreover, Indonesia has become the second developing economy that has entered a Just Energy Transition Partnership (JETP), which seeks to mobilise $20-billion in funding for its own energy transition in the next three to five years.
Despite all the excitement about the JETP-IP, there are critical gaps in South Africa’s preparations for its transition to a low-carbon economy that need to be addressed urgently to facilitate the massive amounts of private sector investments that will be required. Forging ahead without recognising and addressing these shortcomings would be like buying trains before laying down the railway tracks.
South Africa’s just energy transition (JET) requires substantial quantities of new finance, continually and over a long period. It could take up to 30 years to transition the country with estimates on the investment needed ranging from R4-trillion to R8.5-trillion. Public sector facilitated financing is currently given most prominence given the unique position South Africa finds itself in following the creation of the JETP at COP26 in Glasgow.
However, it is crucial to establish how private-sector financing can be scaled for the long term, long after the JETP is forgotten.
The African Climate Foundation’s new report, Financing South Africa’s Just Energy Transition, written by researchers Intellidex, considers how to evolve the plumbing of the financial sector to ensure that the scale of financing needed for JET can be delivered. It is the first of three such reports on similar themes.
The existing JETP has the potential to be a point of departure for the private sector, but a lot of hard work is required to achieve scale. There are several blockages in the existing capital market landscape that prevent stakeholders across the financial sector from fully participating in funding the transition in large enough size.
One of the most ...