Western Powers Set To Give South Africa $8.5bn For Energy Transition

In a joint statement issued by the South African government and the African Development Bank (AfDB), it has been revealed that the countries of the United Kingdom (UK), the United States (US), France, and Germany, among others in the European Union (EU) have pledged an initial amount of $8.5 billion to South Africa.

The said fund is targeted to finance the country’s long-term ‘just transition’ process to reduce the carbon intensity of her electricity system, while also developing new sectors such as green hydrogen and electric vehicles.

South Africa submitted an ambitious Nationally Determined Contribution (NDC) prior to COP 26. At COP26, the South African government also forged the Just Energy Transition Partnership (JETP) jointly with the aforementioned western powers.

The objective of the JETP is to ensure a just transition for workers and communities that had historically relied on South Africa’s coal-based value chains for their livelihoods.

The scale of the challenge means that partnerships, including with the private sector and development finance institutions, would be indispensable to achieving desired outcomes, according to both the AfDB and the country’s government.

As part of its commitment to the development of Africa’s energy sector in line with its New Deal on Energy for Africa (NDEA) strategy, the AfDB is playing a leading role in supporting African countries on their energy transition journeys with policy advice, technical assistance, and financing.

In this context, the Minister of Finance of the Republic of South Africa, Enoch Godongwana formally requested the AfDB to support South Africa with technical assistance on its Just Energy Transition process.

The AfDB had responded favourably to the request of South Africa and had agreed to provide the demanded support through the COP26 Energy Transition Council Rapid Response Facility, financed by the Bank’s Sustainable Energy Fund for Africa (SEFA).

The technical assistance would be targeted at enhancing the capacities of relevant institutions in South Africa – primarily the Asset and Liability Management (ALM) Division of the National Treasury and the Presidential Climate Finance Task Team (PCFTT) – to engage and negotiate with external and internal partners of the South African Just Energy Transition process.

This technical assistance is reportedly independent, separate and not in any way linked to any further financial support that the AfDB may contribute towards South Africa’s just transition in the future.

The broad scope of the technical assistance had been agreed upon between the ALM Division and the PCFTT, which allows them to draw on financial, technical and other skills that enable them to fulfil their respective mandates and responsibilities to develop recommendations for the financing package offered under the JETP.

According to the AfDB, the details of the implementation of the agreed-upon technical assistance were currently being finalized with a launch of the assistance expected in the coming weeks.

The government and the AfDB had also reached an in-principle understanding that this rapid assistance may be followed by a larger SEFA technical assistance programme, supporting the medium-to-longer term needs of South African institutions in the Just Energy Transition process, once such needs become more apparent.

“This technical cooperation builds on a long-term partnership between the AfDB and the South African government, that is based on the recognition of the important emphasis that energy security and just transition play in the country’s climate response as well as the need to meet economic, environmental and social development objectives.” the joint statement concludes.

This kind of cooperation is indeed commendable, hence deserves every needed support and encouragement. Other countries presently in need of such an energy transition are therefore enjoined to leverage the opportunities this rare platform provides.