All eyes on Ramaphosa’s high-stakes billion-dollar Eskom plan

President Cyril Ramphosa is set to address the holders of key capital for South Africa’s Just Energy Transition (JET) on Monday (7 October) at the United Nations Framework Convention on Climate Change (COP27) in Egypt.

The conference started on Sunday (6 November) and will stretch until 18 November. According to the presidency, Ramaphosa is set to enter roundtable discussions on the country’s JET and, later in the week, will deliver a national statement, with Eskom as a hot talking point and the possible loss of jobs as another.

Rich countries crucial to the funding of South Africa’s shift away from fossil fuels, particularly coal, will be present and waiting to be convinced that South Africa has done enough to secure funding.

Last year, Western nations, including the US, the UK, the European Union, Germany and France, pledged $8.5 billion to bolster domestic energy supply.

The funding has, however, become more tricky than expected to acquire, with the South African government admitting last month that it underestimated how complicated the offer was when it was made.

“There are several partners and development institutions involved, and they have their own terms and conditions based on their individual fiscal cycles,” it said.

It was required that the government provide a detailed and thorough plan on how it plans to use and allocate the funding if received.

On 4 November, Ramaphosa, under the Presidential Climate Commission, published a blueprint for South Africa’s energy transition. The new investment plan lays the groundwork for how the $8.5 billion will be spent and specifically focuses on electricity infrastructure.

The investment plan envisages 90% of all the funding being used for decommissioning coal-fired power plants and developing new renewable energy systems.

Eskom has been a sore point for not only South Africa because of its failure to supply stable electricity but also because it is the world’s largest emitter of sulfur dioxide and is predominately reliant on coal.

When looking into the JET, social issues arise when taking into account that 90,000 people are employed by coal mines in South Africa, and there are more employees for companies reliant solely on coal.

Domestic figureheads such as energy minister Gwede Mantashe have pushed back against the deal but have subsequently been overcome. As reported by EWN, speaking as Ramaphosa was in Egypt, Mantashe noted that the JET should not come at the expense of coal mining communities.

“That transition should not be insensitive to people in communities. You can’t just talk of transition and ignore that the tender was continuously in Mpumalanga in the coal belt…there will be ghost towns…starving families, and the transition must talk to those issues.”

Under the JET, the government has put in place measures to ensure social stability and livelihoods are protected – these will also be taken into account by the Western funders.

Finance minister Enoch Godongawna said that even Eskom itself had developed a comprehensive JET strategy, placing equal importance on the “transition to lower carbon technologies, and the ability to do so in a manner that is ‘just’ and sustainable.

This follows Godongwana showing the president of the World Bank, another funder to South Africa’s just transition, around the recently decommissioned Komati Power Station.

“Komati is set to become the first major coal power station in South Africa to be converted into a site for renewable energy generation as the country gradually transitions from fossil fuels to clean energy resources,” said the head of the National Treasury.

Eskom is converting one of its oldest power stations into a major new solar and wind energy project

In light of the plant transition, the Komati Training Facility has been developed to facilitate the reskilling, retraining, and upskilling of Eskom employees and members of the community, said the minister.

Financial topup

Andre de Ruyter, the CEO of national power utility Eskom, said that the $8.5 billion is a clear good start, but it is not enough. “We need more to unlock new investment.”

“We shouldn’t imagine for one moment that there is an infinite pool of concessional financing available; we need to come up with our own solutions that will enable us to make this transition, and therefore, the more we rope in different sources of financing, the better the outcome will be.”

One of the ways put forward has been by big business. Speaking to BusinessLive, Daniel Mminele, the head of the presidential climate finance team, said that the private sector is ready to lend a hand to further finance the transition.

Mminele said that up to R500 billion of the estimated R1.5 trillion total JET plan could be covered by big business – with the international $8.5 billion being a catalyst to get the ball rolling towards a greener energy supply.

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