$8.5 billion from rich countries: SA will spend most of the money on electricity infrastructure

The South African government will invest the bulk of an $8.5 billion (R152 billion) climate finance deal offered by wealthy countries to bolster its energy supply.

An investment plan released on Friday foresees that 90% of the funds will be used to dismantle coal-fired power plants alongside the development of renewable energy generation, the reinforcement of the transmission network and the modernization of the electricity distribution system. . The rest will go to the development of green hydrogen and electric vehicle industries.

The funding, pledged by the US, UK, European Union, Germany and France, was unveiled at last year’s UN-led climate talks in Glasgow, Scotland . The investment plan comes the week before world leaders meet at the follow-up summit in Egypt. The so-called Just Energy Transition Partnership is expected to serve as a prototype for similar agreements with coal-dependent developing countries such as Vietnam, Indonesia and India.

“The plan draws inspiration from South Africa’s energy and climate policies,” President Cyril Ramaphosa said in a foreword to the plan. “These policies reflect our determination to diversify our energy mix and to ensure that our transition to a low-carbon economy contributes to our efforts to fight inequality, poverty and unemployment.”

South Africa is the world’s 13th largest source of greenhouse gases, with 45% of its 452 million tonnes of annual emissions coming from electricity generation. The package is key to shutting down many of the country’s old and malfunctioning coal-fired power plants and replacing them with renewable sources.

The investment plan plans to invest $7.6 billion in electric infrastructure, $700 million in the development of green hydrogen projects and $200 million in the electric vehicle industry over the next five years.

These allocations are well below the $84 billion required by the government – ​​with $47.2 billion needed for the electricity sector, $21.2 billion for green hydrogen and $8.5 billion for electric vehicles.


The package “is not enough to meet the scale of our ambition going to COP27. That is the message we will get across,” Ramaphosa said in a webcast address. be fully and properly executed only if there are more grants and funding made available in the form of concessional loans and investment programs.”

Developed countries are open to South Africa’s request to make more money available, he said.

Of the $8.5 billion total, it is expected that $5.3 billion of funding will be in the form of low-cost loans, trade credits will account for $1.5 billion of the total and guarantee 1.3 billion dollars, according to the plan. The EU, US and France will each contribute around $1 billion each to the package, with Germany providing $968 million and the UK $1.8 billion, including $1.3 billion from guarantees.

Almost all of South Africa’s power is produced from coal by struggling power company Eskom Holdings SOC Ltd. and the country suffers from regular blackouts. Switching to cleaner energy sources will eliminate thousands of jobs, particularly in the eastern province of Mpumalanga, where 90,000 people are employed in mines and power stations.

“Without active intervention, coal-dependent regions will experience significant social and economic impacts from South Africa’s energy transition,” according to the plan.

Ramaphosa urged international and local investors to partner with South Africa to meet the twin challenges of tackling climate change and supporting economic growth.

“South Africa’s commitment to addressing climate change is longstanding and unwavering. This stems from the understanding that even though developing economies have contributed little to global warming, we must all do our fair share to address it,” he said. “A just energy transition can attract investment, create new industries and new jobs, and help us achieve energy security and climate resilience.”

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