For South Africa to meet its commitments under the Paris Agreement, it needs to phase out the use of coal in its power and liquid fuel sectors by 2040. That’s a little over 20 years in which the country needs to manage a major transition. At the moment, however, there is not much of a plan for how this will happen.
Consider that Eskom and Sasol are both major contributors to the local economy in various ways. Their operations cannot simply be shut down without material social and economic consequences.
“If you think about what’s at risk – Sasol is the single biggest taxpayer in SA, and employs tens of thousands of people,” says Jon Duncan, head of responsible investment at the Old Mutual Investment Group. “Eskom also employs many thousands of people. There are also all of those people employed in ancillary jobs around the coal supply chain, such as those working at the Richards Bay coal terminal. Then you put a multiplier on that in terms of the households being supported by those jobs. We really have to be thinking quite carefully about what’s at risk.”
Managing the country’s economy away from these operations in a measured way that does not prejudice growth, the tax base and the livelihoods of those they employ is therefore imperative. It needs to be carefully planned and executed.
The right approach
“It is a transition – it is not a complete stopping of all coal tomorrow morning,” says Tracey Davies, executive director of Just Share. “And quite frankly the transition is going to happen no matter what any of us do, because just the economics of renewable energy already make that clear.”
As discussions at the Old Mutual Investment Group’s ‘Tomorrow’ event made clear this week, this transition has to be ‘just’. It must take into account that moving away from fossil fuel industries will inevitably impact on many people.
“Whether or not this transition will be just, or will leave the already poor and vulnerable in our society still poor and vulnerable and even more unable to deal with the impacts of climate change, is up to policy makers,” Davies says.
It therefore cannot be left to unfold in an unguided, unplanned way.
“Let’s not forget that the primary issues in this country are social in nature – poverty, unemployment and inequality,” Duncan says. “These are the things we must solve for collectively. Climate change is a massive multiplier of those risks.
“This is also something occurring globally, and South Africa as an economy is massively at risk if we don’t start to plan for an ordered transition,” he adds. “There is nothing worse than a disordered retreat.”
Solving for Eskom
It is also not as simple as assuming that everybody who now works in the fossil fuels industry will get a job at a solar energy plant or wind farm.
“I think it’s unfair to say that if we are going to transition from coal to renewable energy, renewable energy must employ everyone in the coal sector,” says Davies.
“That’s not realistic. Even if the numbers matched, which they don’t, it’s a completely different skill set.”
South Africa therefore needs to find innovative ways to move the economy along this path that takes businesses, the workforce and society along with it. That means seeing this as an opportunity as much as a challenge, particularly in the case of Eskom.
Duncan sees the current discussions around the potential establishment of a green energy fund backed by development finance institutions that will lend money to Eskom on condition that it accelerates the closure of coal-fired plants and the uptake of renewable energy as an encouraging step.
“It presents an opportunity for South Africa to not only address the financial risk that Eskom poses to the country, but also potentially to solve for some of the requirements to transition Eskom to something that is compatible with a two-degree outcome,” he says.
This however needs to be shaped by input from all those who will affected.
“It is going to require participation from all stakeholders in the broader energy system,” Duncan argues. “It is going to be uncomfortable for those in the renewable energy sector and for those facing the reality of job losses, but it is one of those things that unless stakeholders start talking to each other, we are going to miss the boat.”
In those discussions, one of the most important points will be how the country ensures that closing Eskom power stations doesn’t wreck local economies.
South Africa will have to explore the question of whether those who lose jobs will be compensated in some way, and how other opportunities will be afforded to them.
“There is talk about setting up renewable energy infrastructure in the existing coal mining areas to leverage the existing transition infrastructure, or creating renewable energy manufacturing industries in those areas,” says Davies. “The opportunities for job creation in the rehabilitation of the Mpumalanga coal fields also has huge potential.”
For this to be successful, however, there must be a collective appreciation of what needs to be done, and how it will be managed.
“What it takes is collaboration,” says Davies. “You are not going to retrain people, create entire new industries and new economic development zones, and transition to a completely different economy that treats everyone fairly if government, business, unions and civil society are all speaking in different languages and at cross-purposes.”