Long-standing path dependencies, labelled as the “minerals-energy complex”, have resulted in a conglomerate of mining industry, national banks and the notoriously indebted energy monopolist Eskom. Although South Africa was an early adopter of clean energy policies, only its highly credited energy auction instrument finally turned the tide by adding more than 5GW of clean energy to the national grid.
But this move was met with reluctance. This resulted in Eskom blocking grid access to dozens of renewable energy providers in 2018. South Africa’s energy transition shows signs of progress. But due to its market-driven impetus, the country can’t create green jobs in provinces such as Limpopo or Mpumalanga where coal mines will close and put 90,000 workers at risk.
And while more than 59,000 green jobs have been created, their healthier labour conditions aren’t met by wages that equal those in the coal industry. This is why trade unions watch the transition process with less enthusiasm.
On the road to Glasgow, South Africa had already underscored the need for a “just transition fund”, which would tap western financial sources and pave a way out of coal. Indeed, during the first COP26 days, a just transition partnership was announced as one of the most powerful commitments of the international community. The US, Britain, the EU, France and Germany mobilised $8.5bn (about R131bn) in concessional loans and grants to be channelled via multilateral development banks within the next three to five years to finance South Africa’s decarbonisation.
Yet at the same time the South African delegation to COP26 joined forces with India and China, demanding that one of COP26’s central statements regarding decarbonisation should “phase down” but not “phase out” coal. This slight change in wording profoundly weakens the political ambitions and undermines political consensus on decarbonisation. Phasing out would demand a rapid decarbonisation of the economy, including the whole value production chain. Phasing down would opt for a much slower coal exit.
In general, the finance instrument builds on the cheap pricing of clean energy and considers coal assets as too risky.
The just transition partnership with South Africa is the first of its kind. It uses an innovative instrument, the Accelerating Coal Transition facility, which was designed by the World Bank’s Climate Investment Fund. It will target energy governance, mining communities’ needs and infrastructural demands.
While the details of this particular partnership have not yet been laid open to the public, several points give an impression of its direction and aims:
Overall, this kind of partnership is laudable as far as it may support South Africa in overcoming its huge transition risk and in stabilising social peace. The move towards job conversion is remarkable, as a just transition scenario needs to reflect the social situation of mine workers and go beyond cheap talk.
To live up to this, government must foster strong cooperation with trade unions. Yet the managerial language of the accelerating coal transition instrument tells a different story, as the main aim is to “de-risk” energy governance, social tensions and infrastructural challenges. This managerial language makes greater cooperation with trade unions difficult. In this regard the package is a win for the minerals-energy complex, which will receive lavish support to transform its business model. The next year will tell what emerges.
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