South Africa pushes for fairer funding of the energy transition

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As representatives from South Africa attend COP30 in Brazil this month, the country finds itself in a markedly different position from when it secured an initial $8.5bn through a multilateral climate financing package in 2021. As the first African nation to chair the G20, over the past year it has sought to use this platform to push the world’s largest economies to reform climate finance and mobilise capital on terms better suited to African development priorities.

The stakes are high. Africa holds about 60 per cent of the world’s highest-quality solar resources, yet draws only about 3 per cent of global clean energy investment. When the Just Energy Transition Partnership (JETP) financing programmes — collectively amounting to roughly $45bn — began working with Indonesia, Vietnam and South Africa, the latter was still in the depths of a power crisis. Years of rolling blackouts suppressed growth and undermined confidence in the state-owned power company Eskom.

This crisis forced a policy shift. The government opened electricity generation to private producers, prompting a surge of investment in wind and solar power. A decade ago, renewable energy contributed less than 1 per cent of all energy sources in South Africa; today it forms a small but steadily increasing share of the grid. A new national plan aims to more than double generating capacity over the next 15 years, cut coal use in half, and build roughly 14,000km of new transmission infrastructure, backed by an estimated R2.2tn ($126.8bn) in cumulative investment.

“We’re opening up generation to competition aimed at finding least-cost energy,” says Crispian Olver, executive director of South Africa’s presidential climate commission. “Since solar and wind are already the cheapest sources, the transition is both economically rational and positive for emissions.”

Yet the country faces constraints familiar across other parts of the world. South Africa depends on coal for about 80 per cent of electricity and has per capita emissions of 6.7 tonnes a year. At the same time, unemployment remains high at nearly 32 per cent. Policymakers must therefore manage the transition in ways that protect workers and communities tied to the coal economy.

Financing is a particular challenge. The government argues that the $11.5bn pledged for its move to renewable energy through JETP falls short of requirements and relies too heavily on loans, adding to an already considerable debt burden.

Since taking up the G20 chair, President Cyril Ramaphosa has repeatedly called for African-led reform of multilateral finance, stressing that support must “empower African countries and not replace one dependency with another”.

The European Commission’s Global Gateway initiative has pledged €150bn to Africa by 2027, and a €545mn package for green energy development was announced recently. But Ramaphosa has insisted that financing structures must allow African states to pursue pathways that reflect local conditions and developmental needs, rather than externally determined priorities.

To meet its energy transition goals, Africa as a whole will need to more than double annual clean-energy investment to around $200bn. With appropriate reforms, at least three-quarters of private capital mobilised for climate investment is expected to go into the energy transition, says Mark Napier, chief executive of development agency FSD Africa. However, shallow capital markets and limited risk-mitigation tools keep limiting investment flows.

“While the continent is proven terrain for renewable energy, funders still want credit enhancements — some form of risk mitigation — to reach the scale required,” says Napier. One initiative expected to draw attention at COP30 is a pilot programme by the International Development Finance Club to use risk instruments enabling national development banks to lend more in local currencies. Olver describes such tools as potentially “game-changing”.

Beyond policy and finance, the transition’s success will also depend on how it affects communities. In Mpumalanga, the heart of South Africa’s coal belt, the closure of the Komati power station in 2022 was intended as a milestone towards a greener future. No permanent employees lost their jobs. Yet the surrounding community, heavily dependent on coal-linked employment, suffered immediate economic consequences. Many former workers now mine informally in nearby fields, while the country’s coal exports rise.

“The closure was devastating for the local economy,” says Janet Cherry, professor of development studies at Nelson Mandela University. “Until viable alternative livelihoods emerge, communities will continue to rely on coal because they have no other choice.”

The government says it has learned from Komati. When it later issued a call for proposals to develop new economic activity in coal-affected regions, it received strong responses from local firms, municipalities and community organisations. More than R70mn worth of projects — from agricultural ventures to circular-economy enterprises and mine rehabilitation initiatives — have already been matched to local needs.

“There is strong demand from the ground to participate in the green economy,” says Joanne Yawitch, who leads South Africa’s just energy transition unit. “The challenge is ensuring that new industries are viable, scalable and rooted in the communities most affected.”

At COP30, South Africa’s credibility will depend on whether it can demonstrate that decarbonisation and development can advance together — reducing emissions while generating new livelihoods. If it succeeds, it may offer a blueprint for other African economies navigating similar tensions. If it falls short, the gap between climate ambition and social reality could widen.

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