Old Mutual has called on the government to urgently address gaps in its green energy policies which it says are holding back investments critical for the country’s energy transition.
Speaking to Business Day online while COP29 was under way in Baku, Azerbaijan, Robert Lewenson, head of responsible investment at Old Mutual Investment Group, said the company was ready and willing to invest but raised concerns about the lack of policy clarity, regulatory gaps and government’s urgency to put the tools in place.
COP29, which ran for two weeks, focused on the need for actionable climate finance, particularly for countries in the Global South. Closer to home, SA needs investment in green infrastructure, energy storage and technology transfer to phase out coal and ramp up renewable energy.
“We [Old Mutual] have asked for policy clarity and implementation actions,” Lewenson said, noting these are essential for enabling bankable green projects.
“We’re probably one of the biggest, if not the biggest, investors in the green economy in SA and Africa. We’ve got a lot of skin in the game. We have the funds set up.
“(But) we do need a bit more clarity around the political regulatory environment to enable this. We need very clearly defined terms, conditions and governance structures for the projects,” said Lewenson, stressing the importance of a well-functioning “clearing house” for managing funding and projects.
We’re probably one of the biggest, if not the biggest, investors in the green economy in SA and Africa. We’ve got a lot of skin in the game. We have the funds set up.
— Head of responsible investment at Old Mutual Investment Group, Robert Lewenson
Referring to the initial R100bn the continent reportedly needed, and which forestry, fisheries and environment minister Dion George later said SA required, Lewenson said: “OK, but can you (the minister) break it down? For instance, we need this much for green hydrogen, this much for electric vehicles, this much for infrastructure, for the transmission lines and moving renewable projects to trade centres, or for micro grids to take off. This is what we need. What does that pie look like in the R100bn?”
Only then will it make sense to a funder, he said.
“Then we get to say, OK, so we know what we’re driving for; what we’re negotiating for if we go to a concessionary funder, whether it be the developed world or China, and say this is how we break it up. This is what the SA financial sector is willing to contribute towards it. This is where the gap is.”
Recent revised funding models show poorer countries need R1.3-trillion by 2035. A study conducted by the Independent High-Level Expert Group on climate finance at COP29 revealed the countries need $1-trillion of the
R1.3-trillion by 2030, as economists believe waiting until 2035 is too late.
When Business Day asked George what numbers SA is negotiating with at COP29 — dubbed the “Finance COP” — there was no clear response, other than that it’s “difficult” to pinpoint a number. Instead, the publication was referred to energy and electricity minister Kgosientsho Ramokgopa, who did not attend the climate conference.
Lewenson agreed with the government that blended finance is the most impactful structure for climate funding in SA. The approach combines grants, concessional funding and traditional loans.
He was particularly vocal about the need for tax incentives for green hydrogen and renewable energy to unlock private sector investments.
“We’ve written or invited Dr George to an open discussion around this and, as an institutional investor, provided our viewpoint. We’ve written to the minister of electricity, to say, ‘How do we get, how do we nail down, the carbon taxes and incentives for renewables?’”
He mentioned the TLAB (2024 draft Taxation Laws Amendment Bill), which he said is “a good piece of legislation”.
However, he said: “We need to see those things come through because, again, no-one’s willing to put pen to paper unless they know there’s an underpin, there’s an incentive to get the tax advantages.”
Once blended finance arrangements and policies were in place, SA would enter a purple patch, he said.
However, at present “it feels like (we’re) one step short of a mature and well thought through financing ecosystem to allow the economy to take off”.
Lewenson also emphasised the need for leadership at the top, noting the new Climate Change Act (which, after months, is not operational) empowers George to lead the country’s energy transition.
“Our request to him is to step up and take the reins. Yes, there’s a lot of regulation that needs to come through, but let it come through and let him take charge.”
Our request of forestry, fisheries and environment minister Dion George is to step up and take the reins. Yes, there’s a lot of regulation that needs to come through, but let it come through and let him take charge.
— Head of responsible investment at Old Mutual Investment Group, Robert Lewenson
The urgency for SA to align its policies with global trends is growing. Lewenson said countries such as China and the US have made significant progress in their renewable energy transitions, supported by strong policy frameworks and government backing.
“It needs to happen and has to happen now because we want to deploy. Our investees — companies — want to deploy capital but they need policy certainty. They need to make strategic long-term plans.”
Once that “final step” is in place, he believes things can progress very quickly.
“I believe there is a lot of dry powder out there.”
However, if the final step continues to stall, “we are going to miss another opportunity”, he warned.
The department of forestry, fisheries and environment referred Business Day’s inquiries to the departments of energy, and trade, industry and competition (DTIC).
In response to a perceived lack of actionable detail in SA’s climate plans — such as specific funding needs for green hydrogen, EV infrastructure, renewable energy transmission and microgrids — the DTIC referred to its Industrial Policy and Strategy Review published in May.
“In the document we indicated the DTIC has made substantial progress in defining a pathway to take advantage of the transformed global economy with the launch of three landmark strategies: the new energy vehicles white paper, the green hydrogen commercialisation strategy, and the renewable energy master plan,” said DTIC ministerial spokesperson Yamkela Fanisi.
“SA is obligated under the Paris Agreement to decarbonise our economy and policy tools have started to operationalise the commitment. The private sector, as a responsible actor within our state, is a key to the commitments and enabler of our responsibilities.
“While the government is able to provide tools within its ambit, other actors in society must and should also help find solutions, such as solutions to our commitment to decarbonise all sectors and create value addition to our mineral resources.”
Fanisi said through the DTIC’s entity, the Industrial Development Corporation, financial support tools were available to enable the scalability of projects.
“The government always remains open to proposals from actors in society to help us find even more practical and pragmatic solutions that achieve our socioeconomic goals faster. We would welcome Old Mutual’s vision for what tools will enable them and other actors to move faster towards decarbonisation of our economy.”
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