Unlocking capital investment for South Africa’s Just Energy Transition

Eliza Macmillan-Scott, Katherine Stodulka, Mark Meldrum and Mike Kennedy (Blended Finance Taskforce), and Professor Mark Swilling, Nina Callaghan, Dr. Nthabi Mohlakoana, and Erica Johnson (Centre for Sustainability Transitions)

The report entitled “Making Climate Capital Work” produced in 2022 by Centre for Sustainability Transition at Stellenbosch University and the Blended Finance Taskforce. This report comes after the $8,5 billion (bln) pledge by the International Partner Group. The reports offered a strategic framework for South Africa’s Just Energy Transition, focusing on how the $8,5 bln can be used as the catalyst for the $250 billion estimate required to transform the country’s electricity system between 2022 and 2050.

While the $8.5 billion pledge represents only about 3% of the total $250 billion need, the report argues it can be a “fit-for-purpose” catalyst if deployed correctly. The total capital requirement is estimated to be $250 bln. The investment requirement is categorised into five categories:

1. Renewable Energy ($125bln): Targeted installation of 150 GW of wind and solar by 2050
2. Grid Infrastructure ($50 bln): Evenly split between transmission($25 bln) and distribution ($25 bln) to connect remote renewable zones to demand centre
3. Flexibility and Storage ($44 bln):∗∗Including battery storage($18 bln), gas for flexibility ($18 bln),and pumped hydro($8 bln)
4. Coal Decommissioning ($24 bln): Concessional funding to offset profits foregone by the early retirement of coal plants by 2040
5. Climate Justice Outcomes (Up to $10 bln): Supporting the 125,000 workers in the coal value chain through compensation, retraining, and relocation, alongside community rehabilitation.

The report also offers a critical view on the risk of the $8,5 bln becoming a “cautionary tale” rather a blueprint. This is because of evidence suggests the majority of the pledge consists of sovereign loans with limited concessional terms, rather than the grants needed for “non-investable” social costs and coal decommissioning. Furthermore, there is significant scepticism due to fragmented coordination between donors and a lack of clarity regarding the terms and source of funds. To address these concerns, there is a need for deeper engagement with South African financial institutions (like the DBSA and IDC) and civil society to ensure the funding is demand driven.

Long-term capacity expansion & investment planning

June 2022