South Africa’s R1.25 trillion shortfall

International financing for South Africa’s Just Energy Transition Plan (JET IP) has hit $13.8 billion (~R250 billion).

While this is a significant figure, it still falls ~ R1.25 trillion short of the approximately R1.5 trillion that the Presidential Climate Commission (PCC) estimates it needs to meet its commitments.

This update was provided during a recent briefing to Parliament’s Electricity & Energy committee by Joanne Yawitch, who heads up the Just Energy Transition Project Management Unit.

To keep climate change within manageable limits, scientists say global greenhouse gas emissions must be cut by 45% from 2010 levels by 2030, with a target of reaching net-zero emissions by 2050, which requires a transition away from coal, oil, and gas.

At the UN Climate Change Conference (COP21) in 2015, 196 parties signed landmark international treaty with the main goal of limiting global warming to well below 2°C above pre-industrial levels, with efforts to limit it to 1.5°C.

The agreement encourages countries to set and update their own climate action plans, promote climate resilience, and provide financial support to developing nations.

Several nations have made progress in transitioning to cleaner energy. However, many are lagging primarily due to insufficient funding for a very costly project.

South Africa became a key focus for a major climate finance initiative. With coal powering over 80% of its electricity, the country is one of the top 15 global emitters of greenhouse gases from fossil fuels.

In Glasgow, the International Partners Group—comprising France, Germany, the UK, the US, Denmark, and the Netherlands—committed $8.97 billion to assist South Africa in decarbonising its economy.

The JETP Political Declaration that they committed to outlines the government’s goal to create a long-term partnership supporting South Africa’s transition to low emissions, climate resilience, decarbonisation of electricity, and the development of new green economy opportunities, including hydrogen and electric vehicles.

The base of South Africa’s transition is seen in its Just Energy Transition Investment Plan (JET-IP).

“Our JET IP for the five-year period 2023-2027 sets out the scale of need and the investments required to achieve the decarbonisation commitments in our Nationally Determined Contribution,” said the PCC.

It “outlines the rate at which South Africa plans to reduce greenhouse gas emissions and represents South Africa’s fair contribution to the goals of the Paris Agreement,” but in a just. that South Africa contributes ~1% of global greenhouse large proportion of the population are tied and rely on the fossil fuel industry.

The JETP identifies three priority areas to support the economy of the future: the electricity sector, New Energy Vehicles (NEV) and Green Hydrogen.

Countries that have made pledges include Canada, Denmark, France, Germany, Netherlands, Spain, Switzerland, the UK and the US. 

Multilateral development banks that have made pledges include the African Development Bank, Climate Investment Funds and World Bank. 

A breakdown by The Outlier has shown that this amount has since risen to $13.8 billion, made up of:

This is in the form of concessional loans, guarantees, commercial debt, and non-repayable grants.

Concessional loans, which account for $7.6 billion (over half) of the funding, are loans offered at more favourable terms, such as lower interest rates, but still require repayment.

Grants represent 7% ($820 million) of the pledged funding. Citing the presidency’s grant register, The Outlier outlines that $613 million of this amount is allocated across 152 projects, with 48 completed and 87 in the implementation stage.

While these loans help reduce borrowing costs for South Africa, some critics argue that they impose a signifcant financial burden on predomininatly the Global South, which already grappling with climate adaptation and socio-economic challenges.

These are countries which contribute far less emissions, but are bearing the brunt of climate change’s impact.

Funding in question

This is not the first time that questions have been raised about how realistic these financing commitments are.

If countries like South Africa are to make good on their climate target objectives, annual climate financing commitments from developed countries need to increase more than tenfold to “at least $1.3-trillion (~R23.02 trillion)” annually.

This is the view presented by Forestry, Fisheries and Environment Minister Dr Dion George speaking at the National Stakeholder Consultation on South Africa’s negotiating mandate for the upcoming UN Climate Change Conference (COP29) in Baku, Azerbaijan.

In 2009, at the Copenhagen Summit, developed nations pledged $100 billion annually to support developing countries in addressing climate change.

This commitment was extended under the Paris Agreement to 2025.

While the $100 billion target was finally met in 2022 (with $115.9 billion mobilised) critics, including the World Economic Forum, argue that the funds’ effectiveness in driving climate action remains uncertain, and there are concerns about the growing debt burden on recipient countries.

George highlighted that current financing mechanisms are insufficient, pointing to the urgency of a new model that ensures predictable, accessible, and adequate funding.

He called for grants and concessional loans that are specifically designed to de-risk investments and accelerate transitions to clean energy.

An in-depth report on South Africa’s Just Energy Transition can be found in this feature by The Outlier.

Read: What South Africa’s new climate change laws mean for businesses