South Africa’s energy transition plan needs $46.5bn: sources

South Africa’s plan to kick-start its transition from coal to renewable energy will need $46.5bn (about R855bn), more than five times the $8.5bn (about R156bn) western nations have pledged to the project over the next three to five years.

This is according to three people familiar with the matter, who said the investment plan, submitted to donor countries this month, is provisional and the figures could change ahead of the agreement being signed.

It is not clear how the remaining $38bn will be funded or how the bill breaks down. One source said private-sector investors would step in. Another said it would be a mix of private, bilateral and multilateral funders. Another said the African Development Bank Group was expected to make a big commitment.

“The bank continues to work with South Africa to explore concessional financing options to support its just energy transition,” the bank said when asked about its commitment.

Vincent Magwenya, spokesperson for the presidency, the only local authority that can speak on the matter, said he could not discuss details until the plan is publicly presented and declined to confirm the cost.

Negotiators are racing to complete the deal before UN climate talks next month in Egypt, where it could serve as a model for other emerging economies seeking to wean themselves off coal with western support.

If successful, the plan will see Africa’s most industrialised nation gradually shut down its coal-fired power stations and mines, replacing them with wind turbines and solar panels at a significantly faster rate than it was planning to do before the partnership with the US, UK, France, Germany and the EU.

South Africa is also seeking to become a hub for green hydrogen and electric-vehicle manufacturing, both of which could attract significant private-sector investment.

South Africa is the world’s 13th biggest carbon emitter, pumping out 452-million tonnes of CO₂ in 2020, according to the latest data from the non-profit Global Carbon Atlas. This puts it four places in front of Britain, an economy eight times as big, and ahead of Mexico and Australia.

It is also blessed with some of the world’s best sun and wind resources, and vast stretches of land on which to harvest them.

Coal makes up four-fifths of South Africa’s power generation, so turning state utility Eskom to renewables is a priority for the government. However, the issue is politically divisive as unions fear the loss of about 90,000 jobs. Any plan will have to offset these losses, officials said.

Even so, the tide may be turning.

“There are no new coal plants being built and no bank will fund new coal plants in South Africa, not even the Chinese banks,” said energy analyst and MD at South Africa’s EE Business Intelligence consultancy Chris Yelland.

“The only new thing happening is wind and solar and battery storage. The energy transition is going to happen.”

Moving the economy into greener energy will require vast funds in the longer term, with some analysts estimating at least $250bn (about R4.6-trillion) over the next three decades.

Reuters