The great green reset of SA’s economy demands urgent and essential action

7 Feb 2023

For South Africa to launch its transition to green energy for broad-based industrialisation requires rapid actions – not words. Actions are required for credibility to be rebuilt.

South Africa’s economy is currently at a dramatic fork in the road.

The first of two starkly different options is to put a green growth and transformation agenda at the forefront of the country’s development plans. Such a path will require significant investments to realise South Africa’s world-leading potential yields in green energy (notably wind and solar).

This is in line with the finding that development finance institutions need to take on a more prominent role in climate funding to cover the gap left by the private sector.

The second path is the one we are on.

We continue to bury our heads in the sand, and commitments at the COP27 meetings are not matched with action. Staying on this path worsens already dire climate change metrics to new record levels, ensuring our failure to achieve even the most conservative 2050 targets.

This second path includes the many voluntary commitments to net-zero targets which are not worth the paper they’ve been written on. Clear rules and incentives need to be enforced. In the absence of sufficient accountability and punishment for non-compliance, the biggest emitters gladly opt for a wait-and-see approach, along with their latest greenwashing advertisement or product line.

On this path, the longer we wait, the more aggressive we will have to be with the high costs of inaction against climate change as we adjust to the accelerating changes we failed to address or prepare for.

On the flip side, there are positive tipping points where breakthroughs can set off feedback loops to drive lower costs, including in electric vehicles and green ammonia for fertiliser.

South Africa is on the front line of these hard choices as it is both in a climate hotspot and has incredible renewable energy potential.

Moreover, we have major trading partners looking to ensure their industries are sufficiently protected and supported to meet their climate change mitigation targets. The European Union’s Carbon Border Adjustment Mechanism is one example where South Africa’s exports are at risk.

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South Africa’s agenda and ambitions heading into the COP27 negotiations focused on ensuring a just transition. This led to the $8.5-billion Just Energy Transition Partnership between South Africa, Germany, France, the European Union, the United States of America and the United Kingdom. It was welcomed as a landmark step towards addressing many of South Africa’s infrastructural and investment challenges.

However, it is unclear if it will provide handouts we could do without to a few large fossil fuel-based companies or contribute to ensuring a climate-resilient future and justice. COP27 did not produce concrete adaptation measures.

Genuine partnerships are required to build coalitions to unlock South Africa’s green economy and direct funds for massive investments in rapid structural change.

Building these coalitions must be central to South Africa’s green economic and industrial future vision. However, the economic and industrial structure that has persisted since the apartheid era makes coalition building incredibly difficult.

Why is this so? What structural and systemic problems are behind South Africa’s slowness to act?

In essence, the just energy transition challenge relates to changes required to the minerals-energy complex (MEC) in South Africa. Much of South Africa’s industrial and, by extension, climate challenges can be traced back to decisions that built the industrial base on a set of carbon-emitting industries.

Corporations such as Eskom, Sasol and ArcelorMittal South Africa were globally low-cost producers dominating key productive sectors such as chemicals, steel, and, of course, energy.

The MEC represented an example of concerted coordination and linkage building at the heart of the apartheid economy. The concentration of economic power is linked to failure to diversify the economy and vulnerability to any moves away from coal. This includes a lack of investment in new, diversified energy sources and the necessary infrastructure, compounding the costs by the day.

The well-documented fragmentation of the state has contributed to an economy at a standstill, with rent-seeking undermining investment, diversification, employment creation, and, ultimately, the economy’s structural transformation.

The immense potential of solar and wind offers the chance for a green economy reset. However, history may repeat itself if the MEC-linked companies dominate the changes in enclaves disconnected from the wider economy.

What confidence should we place in the ability of the growing smorgasbord of strategies, roadmaps, and public and private actions to achieve the just transition goals if most of these plans are built around these companies? How can the government lead in shaping development in the green hydrogen era?

For South Africa to launch its transition to green energy for broad-based industrialisation requires rapid actions – not words. Actions are required for credibility to be rebuilt.

First and foremost, the transmission grid must be separated from generation, and investment fast-tracked in this essential infrastructure. Nobody will take South Africa seriously without investment in the grid.

Second, the government must build a determined coalition of interests with a stake in a green industrial ecosystem which links to downstream industries and communities beyond the mining and energy-intensive enclaves.

An ecosystem is framed around a green political settlement to drive investments in the green economy, with reciprocal transparent commitments to build linkages and not to exploit market power.

Third, this green political settlement must ensure an even distribution of the benefits to rebuild social solidarity and realise our potential of a structurally transformed and reindustrialised economy driven by a collective green economic vision. DM

Jason F Bell is a Researcher at the Centre for Competition, Regulation and Economic Development; School of Economics at the University of Johannesburg. Professor Simon Roberts is a Lead Researcher at the Centre for Competition, Regulation and Economic Development at the University of Johannesburg.

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