OPINION | Our public finance institutions are fuelling climate change

On Human Rights Day we commemorate those that fought for our country’s liberation and the rights we have today — equality, human dignity and life.

Many South Africans, however, are still living in the long shadow of the apartheid-era industrial development agenda. One that centred on polluting, extractive industries, and continues today under the guise of “economic renewal”.

In Southern Africa, environmental racism has put poor, black, indigenous, and people of colour communities in the path of polluters and the climate crisis, one of the biggest threats to our efforts to ensure human rights for all.

This past Wednesday, civil society organisations hosted a virtual event to brief parliamentarians about the link between climate change and our public finance institutions (PFIs), specifically the Development Bank of Southern Africa (DBSA), the Industrial Development Corporation (IDC) and the Export Credit Insurance Corporation (ECIC).

These public institutions have special and specific responsibilities to serve the broadest long-term interests of all South Africans. We urged MPs to exercise oversight, demand transparency from these institutions in their investments, and highlighted the need for them to stop financing fossil fuels.

Burning these fuels is the biggest contributor to climate change. We can’t turn off coal-fired power plants tomorrow, but we can stop financing new fossil fuel projects. Private banks have committed to not finance new fossil fuel infrastructure because they recognise just how poor a business model it has become — but our PFIs, with their specific development mandate, have not.

In addition, PFIs are not fully transparent about the projects they fund or consider funding. Not only are they financially exposed to climate-related risks, their support of fossil fuel industries comes at the expense of the poorest members of our society who are the most vulnerable to climate change and environmental impacts.

PFIs are mandated to promote economic development and growth. As institutions that finance the government's developmental agenda, the government is constitutionally obliged to ensure that the development financed by these institutions is sustainable and socially just.

Section 24 of the Bill of Rights guarantees everyone the right to an environment protected for the benefit of present and future generations. No environmental issue that could be solved today threatens future generations more than the climate crisis.

PFIs must therefore support sustainable development in two ways. First, by prioritising investment that supports sustainable development objectives, especially those reflected in socio-economic rights, such as housing, water, sanitation, and renewable energy infrastructure. Second, any decision to invest must consider the social, environmental, and human rights impacts to ensure that negative impacts do not outweigh the economic and developmental benefits.

Parliament and civil society also have an oversight and watchdog role to play, however without full transparency about what our PFIs are funding, this is almost impossible to do.

Sustainability should be reflected in the investment decisions of PFIs, guided by finance and investment policies and due diligence processes. If this was done, they would prioritise projects that support economic growth, sustainable development, and enable a just transition to a low-carbon economy.

Despite this, our PFIs continue to fund some projects that are at best questionable and at worst devastating for the communities most in need of support.

Funding fossil gas from across our borders

One of the largest recipients of SA public financing is the Mozambique Liquid Natural Gas (LNG) Project, led by Total, in Cabo Delgado, Mozambique. The ECIC and DBSA are providing a total of $920m (R13.5bn) plus an undisclosed amount from the IDC. This financing is fuelling an industry that has displaced over 550 families from their homes, fishing areas and farmland, and left them without livelihoods and reliant on food aid.

There is no evidence that the $50bn (R736bn) gas industry currently being developed will benefit Mozambicans: though the country has been a large fossil energy producer for years, only 30% of the population has electricity access.

Regional violence is deeply interlinked with the gas industry, with human rights violations committed by insurgents, the Mozambican military and SA mercenaries. PFIs' attitude is seemingly ‘business as usual’. Worse, the ECIC refused to make their EIA available, and ignored a request for public participation in their decision to finance this devastating project.

A fossil-fuelled economic zone

Closer to home, the DBSA and IDC are set to invest in the proposed Musina-Makhado Special Economic Zone (SEZ) with potentially devastating social and environmental consequences.

Emerging technology makes it quite possible to make steel without thermal or coking coal, yet the SEZ would house an antiquated 3,500MW thermal power plant, coking plant, steel plant and further heavy metallurgical industries reliant on coal for energy.

The Environmental Impact Assessment for the site clearing of the energy and metallurgical cluster indicates that “the potential negative impacts of the development in the natural, tourism, and agricultural environment of the site may in all likelihood outweigh the identified positive impacts associated with the potential social and economic development benefits”.

Neither the DBSA nor IDC have publicly confirmed financing for the SEZ, but both are considering investments. The project has received significant support from the national government, bolstering bilateral economic relations with China.

Project management units have been established by the department of trade & industry within the relevant PFIs to determine whether funding should be provided to companies looking to set up in the zone. The Limpopo provincial government is publicly enthused that the IDC and DBSA will be providing financing.

To ensure our PFIs support sustainable projects that respect social, environmental, and human rights standards, we must be able to exercise vigilance and oversight over their decision-making. We must have access to information detailing the companies and projects funded, and how the decisions were made to fund them.

It is only with this information that the public, through parliament, can ensure that public investments contribute to healthy, sustainable development.

• Piece authored by 350Africa.org, African Climate Reality Project, Catholic Parliamentary Liaison Office, Fossil Free South Africa, Justiça Ambiental (Friends of the Earth Mozambique) and the Life After Coal campaign