Daniel Mminele: Eskom “integral” in SA’s just transition solution

  • Eskom is integral to South Africa’s efforts to decarbonise and support the response to the climate crisis, says Daniel Mminele, head of the Presidential Climate Finance Task Team.
  • Electricity production is the country’s only major emitter.
  • Mminele says the work team is working closely with Eskom.

Eskom, a struggling electricity company, is “integral” to the solution to decarbonise the South African economy, says Presidential Climate Finance Task Team head Daniel Mminele.

Mminele was the keynote speaker in a virtual discussion on finance for a just transition in South Africa on Monday. The Mapungubwe Institute for Strategic Reflection organized the discussion.

During a question and answer session, Mminele talked about Eskom’s significance in the country’s just transition to a low-carbon economy and climate-resilient society.

“There is no way Eskom can be overlooked in this process: they are an integral part of the just energy transition in South Africa.”

Eskom is one of three priority areas identified in COP26’s commitment by international partners – the UK, France, the US, Germany and the EU – to assisting South Africa’s just transition. Countries have pledged to mobilize $ 8.5 billion over three to five years: the funding will support the decarbonisation of the electricity sector.

The partnership also supports the development of green technology sectors such as green hydrogen and electric vehicles. A key part of the transaction is ensuring the transition is just, taking into account the impact on affected workers and communities dependent on fossil fuels for livelihood, Mminele explained.

The energy and transport sectors hold the highest emission reduction potential in South Africa, Mminele said. This explains why the $ 8.5 billion offering is aimed at these sectors.

The main contributor to South Africa’s emissions is electricity generation, which accounts for just over 40 percent of emissions, Mminele said.

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‘Working closely’ with Eskom

“Eskom is integral to the solution to how we decarbonise,” said Mminele. “There is no way we can hope to be successful if we don’t emphasize ensuring that Eskom is an integral part of this process and we are working closely with them in that regard,” she added.

Mminele was unable to comment further on the future of the utility, but said it is an “integral part” of the just transition solution.

“Their [Eskom] have done a good job and have dedicated resources to a just energy transition office that they have set up there, “he said. Mminele also reiterated that the Presidential Climate Finance Task Team is working with Eskom and international partners to see how through the partnership , the “hard problems” of the power utility can be solved.

On several occasions, Mminele had to state that the task team would make sure that the agreements concluded were “fit for purpose” as they would be in line with the country’s priorities and ambitions. The task team is still in the process of understanding the ins and outs of what is being offered. Mminele said international partners know the transaction must be aligned with the country’s ambitions and priorities.

Mminele affirmed that it is a “complex task” that implies “systemic change” and affects various policies such as the environment, trade, industrial, social, employment and fiscal policy. “This is a big, broader economic transformation problem that needs to have these right components given due attention. So, at this stage, we still have to get into more technicalities around the negotiations,” she explained.

Blended finance: grants and loans

What is expected is a mixed financing solution, which includes grants and soft loans at more “advantageous” rates than those obtainable on the market, explained Mminele. Mminele assured that South Africa’s unique fiscal and budgetary circumstances are taken into consideration.

READ | “Much work to do” to finalize the COP26 – Mminele billions

Mminele stressed that the impact on livelihoods is crucial in considering the final financing package and investment plan.

“… We need to understand that this is a different paradigm that may require a different approach to issues such as risk allocation, return expectations and the investment horizon,” he said. Although it is too early to say what financial solutions might be, Mminele agreed that they need to be innovative. “… We have to think outside the box in terms of this not being as usual and require us to look at new ways to understand the problem and find appropriate solutions,” she said.

The solution also requires a transition in policies and in the way things are done more broadly, as the consequences of climate change are an existing reality and not ones to be addressed in the future, Mminele explained. “They are with us today and need to be addressed urgently. This alone should inform a different approach than previously implemented approaches.”

No compromise

Answering a question about how geopolitical dynamics, such as the impact of the Russia-Ukraine war and the Covid-19 pandemic on the priorities of the global north, could affect accessibility to finance for developing countries, Mminele shared. that there can be no trade-offs between these problems.

“… We cannot trade issues related to climate change as to what needs to be hijacked to potentially support conflict resolution initiatives in Ukraine or continue to fight the pandemic. These things must all be pursued in parallel and will do so. hard, “said Mminele.

Once resources become scarce, there is a need to discuss where these resources can best be used to have the greatest impact, and then prioritization will be important, he explained. But on the whole, he thinks it’s a difficult situation because one of these problems is not more important than the other.