It’s November 2021. The mood is electric at COP26 — the global climate negotiations in Glasgow, Scotland. World leaders are congratulating South Africa on its landmark Just Energy Transition Partnership (JETP) deal: $8.5bn in funding will be provided from developed countries to allow South Africa to wean itself off coal. It heralds a new era of renewables — and it’s a coup for a jubilant President Cyril Ramaphosa.
But there is one conspicuous absence from the conference floor: mineral resources & energy minister Gwede Mantashe is nowhere to be seen.
Fast-forward a year, to Egypt last November, where Ramaphosa is set to reveal a year’s worth of work at COP27 to turn those earlier pledges from the UK, EU, France, Germany and the US — known as the International Partners Group (IPG) — into a practical plan. Ramaphosa’s team has built on that $8.5bn deal to create a five-year, R1.5-trillion Just Energy Transition Investment Plan (JET-IP).
It’s a plan that ticks the boxes: South Africa will decarbonise electricity, develop “new-energy vehicles” and kick-start a green hydrogen economy.
Ramaphosa’s JET-IP shines brightly in Egypt. French President Emmanuel Macron describes it as a global “benchmark”; European Commission president Ursula von der Leyen calls it a “first-of-its-kind global initiative” for “accelerating” a just energy transition. US President Joe Biden and his Treasury secretary Janet Yellen echo the sentiments.
In reality, the $8.5bn (R128bn) pledged is still less than 10% of what Ramaphosa’s energy committee reckons is necessary to fund the transition in South Africa. But it’s indisputably a good start.
Only you wouldn’t think so, given Mantashe’s reaction back in South Africa. In early October last year, he comes out firing at the African Oil Week, telling delegates that the continent shouldn’t be “dictated to” when it comes to its energy transition. Within days he doubles down, saying African countries shouldn’t be “guinea pigs” for developed nations’ energy experiments.
And, even as Ramaphosa arrives in Egypt, Mantashe tells an ANC gathering that the price of the transition could be too high for South Africa. “There will be ghost towns ... starving families and the transition must talk to those issues,” he says.
Fossil fuels may be bad, he says, but hunger kills faster.
He ramps up the rhetoric at a parliamentary debate on the just energy transition, scoring points for coal by referencing the 700% increase in South Africa’s coal exports since Russia’s invasion of Ukraine last February. “Coal will continue to play a critical part in our just energy transition,” he says.
The message is clear: South Africa abandons fossil fuels at its peril.
This is entirely in character. Mantashe, a former leader of the National Union of Mineworkers (NUM), has long been a vocal supporter of the coal sector — and from those statements, it’s clear precisely why he is considered a stumbling block to the transition away from this fossil fuel in particular.
For all his intransigence, Mantashe may yet be left out in the cold: the cabinet has, after all, now pushed through both the investment and implementation plans for the JET-IP. But the concern is that he, and others of the same philosophical bent, could place more hurdles in the way.
Economic trade-offs
If it all seems a bit confusing, you’re not alone. The jargon in renewable energy circles is enough to make you long for the clarity of a Stats SA paper on producer inflation.
At its heart, the global energy transition is the shift from planet-warming fossil fuels to cleaner forms of energy. To make this move “just”, however, it needs to take into account the position of developing countries. Historically, they’ve contributed the least to the emissions that created the current climate crisis, even if they’re most vulnerable to dramatic swings in weather patterns.
Critically — and this is a point that allows Mantashe back into the conversation — a transition away from fossil fuels needs to take into account those in the coal value chain who will be negatively affected by that shift.
So, as developing countries push back against global emission targets, citing the need for economic growth that relies on the fossil fuels that rich countries once freely used, the discussion has turned to funding models to help poorer countries manage that transition.
The rallying cry — that “no-one gets left behind” — aims to mollify those who argue that abandoning coal will mean a slow death for mining workers and communities.
Don’t tell Mantashe this but, even in South Africa, the energy transition is not a question of if, but when.
The country is one of the world’s top 20 emitters of greenhouse gases, largely thanks to power utility Eskom’s legacy dependence on coal for electricity generation.
But beyond the climate imperative, there is a dawning economic reality: international trade treaties will increasingly impose carbon emissions penalties, raising prices on local goods and services. If it is to maintain its trade relations, South Africa will need to achieve net zero by 2050.
“If we don’t adapt we are going to be punished,” says Chris Yelland, energy analyst and MD of EE Business Intelligence. “Our goods are going to become uncompetitive globally.”
He adds: “The energy transition is a global wave, driven by climate change. What the Ramaphosa faction is trying to do is to ensure this transition happens in an orderly way, and that people are not left behind.”
In any event, coal itself is becoming more expensive by the day, says Yelland. Even China has pledged not to fund new coal power stations abroad, making access to capital for fossil fuel projects extremely difficult. And South Africa’s four major financial institutions — Standard Bank, Absa, Rand Merchant Bank and Nedbank — have either set targets to limit their involvement in coal-fired projects or made ambitious plans to divest entirely in the next decade or two.
“We have to do this right,” says Rudi Dicks, a former trade union leader who now serves as an adviser on the Presidential Climate Commission (PCC), tasked with overseeing the just energy transition in South Africa.
Lack of consensus in the ANC
South Africa is now at a crossroads: if it gets the transition right, it would be nothing short of an energy revolution. If it fails, it will miss a major development opportunity — and the country, as a whole, will be left behind.
Ramaphosa is clearly serious about it, and has stacked his just transition roster with business heavyweights. Former Absa CEO Daniel Mminele has been recruited to run the presidential climate finance task team. Eskom’s outgoing CEO André de Ruyter and former sustainability manager Mandy Rambharos have also been involved, planting the seeds of the JET-IP deal.
The team has done commendably, crafting a plan to make the energy transition more palatable, and laying the groundwork to prepare South Africa for a low-carbon future it can no longer escape.
But that hasn’t been without a fight. At last year’s Coal & Energy Transition Day, PCC executive director Crispian Olver was challenged by Mike Teke, former president of the Minerals Council South Africa and current CEO of Seriti Resources — one of the country’s largest coal miners.
It got heated: Teke accused Olver of being “anti-mining”, and Olver responded that coal miners were “in denial” about the inevitable. Importantly, Teke isn’t alone — many feel similarly, and they’re not just coal miners either.
Nonetheless, the JET-IP deal proves South Africa can still spin magic on the world stage when it gathers its best minds together. But like so much else in the political landscape, powerful interests are at play that threaten to derail things.
Peter Attard Montalto, MD for capital markets and political economy at Intellidex, says there is no consensus within the ANC or government on the JET in any practical sense.
“While there is a majority of the ANC that is able to force through various lines in January 8 statements and so forth,” he says, referring to the ANC’s anniversary event, “substantively there is a lack of political will to overrule those in power who have alternative views.”
Nor does it help that there are doubts about South Africa’s energy prospects as it is, given a failing Eskom that’s under immense pressure to end load-shedding while also losing key management figures, such as De Ruyter and Rambharos.
Attard Montalto believes these departures could hamstring the JETP’s progress. Still, he considers the power utility’s move away from coal to be inevitable. “It will ... get there in the end — there is simply no other option that is feasible within the domestic and global constraints.”
Mantashe, however, typifies the philosophy that threatens to short-circuit this move: a belief that coal is the economy’s golden goose, and that rich nations that caused climate change want to force harmful climate policies on countries in the developing world.
Why, they trumpet, should South Africa abandon coal when there is money to be made?
Mantashe’s intentions may be debatable, but he’s not entirely wrong about the moneymaking potential of a resource that SA still has in abundance. And therein lies the rub.
The (contested) case for coal
According to financial research company S&P Global, the Russia-Ukraine war drove coal prices to record levels in 2022 as demand from Europe, which sanctioned Russian fuel, squeezed supply. It may only be a short-term crunch, but it means coal is putting money in the bank.
A Chamber of Mines report shows coal mining alone contributed 2.3% to South Africa’s GDP last year, with 40%-45% of sales income attributable to the export market. The value chain cannot be discounted either: 90,000-odd people are dependent on the sector.
It is also a no-brainer that the coal industry is majority black-owned and a success story of South Africa’s empowerment policies. According to Bloomberg, black shareholders now own more than a third of the companies that supply coal to Eskom. If the ANC-operated government cuts coal, it will face a backlash from a large and influential constituency.
This is why the wisdom of the transition in the local context is being hotly contested — and not just by Mantashe.
Energy analyst Lungile Mashele, for example, doubts if the JETP is truly in South Africa’s best interests.
“This will largely be President Ramaphosa’s legacy, but at what cost to the nation?” she asks. “You can’t turn a whole country upside down for $8.5bn and an inadequate transition plan.”
The centrality of coal to the local energy market strengthens the hand of those opposing the move to renewables. But it has also given additional life to the feeding frenzy that accompanies fossil fuels: shady tenders and rent extraction schemes plague the coal and diesel sectors.
Try attending a coal lobby meeting without bumping into someone connected to the ANC or pro-coal union leaders. You’d have better luck finding an economic textbook in the EFF. Yet these groups are a powerful lobby promoting pro-coal policies and laws.
After all, it was the ANC that encouraged many of its resident entrepreneurs to invest in coal mines when big players such as Anglo decided to divest from coal in favour of “green” minerals.
Some of the politically connected won rich procurement contracts in the industry, and still have loans they took out to get their businesses started — loans that must be serviced.
“Now suddenly the government makes noises about a just transition and climate change,” says Yelland. “You’re mortgaged to the hilt, and people are talking about ending coal. These mining entrepreneurs are then quick to phone their political friends to make sure that this move away from coal is as slow as possible.”
Mashele argues that coal has long been the backbone of mining in South Africa — hence the reluctance not just from coal-mining firms, but also the 90,000 people dependent on the value chain. Coal, Yelland adds, still holds sway as the only energy source that many trust — and it delivers jobs. Those in the value chain struggle to imagine an alternative future.
Enter labour, a key constituency in the mining and energy sectors. It’s represented by heavyweights such as NUM — once also headed by Ramaphosa — and the country’s largest union, the National Union of Metalworkers of South Africa (Numsa).
NUM spokesperson Livhuwani Mammburu tells the FM the union isn’t opposed to the energy transition. But it is concerned that the government is overly influenced by rich countries that are oblivious to the realities of ordinary South Africans — especially those in the coal industry.
To this extent, Mammburu punts the continued use of coal — alongside the introduction of clean coal technology. But he’s concerned about the timelines, too.
“You talk about agendas from the coal lobby, but it is clear there are agendas on both sides. Who benefits from the transition to renewables?” he asks.
“Look, we don’t oppose the transition, but you can’t just get rid of coal overnight. Coal is literally powering this country — how do we just get rid of it in 25 years?”
It is rare for NUM and Numsa to sing from the same hymn sheet, but on the just transition, they’re in clear agreement.
Numsa spokesperson Phakamile Hlubi says the International Labour Organisation has clearly spelt out how a just transition should be defined and driven by communities and the working class.
She cites the example of the Komati Power Station, which was decommissioned last year with a view to converting it to an alternative energy source.
The plan is for Komati to be converted to a renewables plant, providing 150MW of solar power (backed by equivalent battery storage), and 70MW of wind power. Workers and local community members are set to be trained and reskilled. The project, funded largely by the World Bank, aims to create 430 permanent jobs and 7,700 temporary jobs by 2030.
Yet Hlubi is critical of its potential. “In a country with 44% expanded unemployment, clearly a deep crisis, and you have no social plan, no upskilling, no training plan, you are perverting the notion of a ‘just’ transition,” she tells the FM. “Numsa understands that there must be a transition, but it has to be driven by the working class and communities.”
Pie in the sky?
Perhaps the most common criticism of the JETP is that, in planning to cut coal, Ramaphosa is failing to address the current energy crisis — stage 6 rolling blackouts, the prospect of two years of continuous load-shedding and rising electricity tariffs.
This crisis reached a breaking point this month, with opposition parties threatening legal action and a cross-section of society planning protests.
In the darkness, and as businesses shut up shop due to load-shedding, talk of a complicated energy funding deal hasn’t landed particularly well. If anything, it has inspired yet more ire from South Africans who just want to keep the lights on, any way they can.
As the FM pointed out last week, the ruling party’s abysmal energy policies date back to 1998, when the government decided it wouldn’t expand its coal-fired fleet — followed, six-odd years later, by a rush to build new power stations. Then there was the disastrous directive to “keep the lights on” during the Soccer World Cup, which delayed critical maintenance.
The battles between the two ministers overseeing Eskom, Mantashe and public enterprises minister Pravin Gordhan, have resulted in terrible decisions — and indecision. In the case of De Ruyter, for example, Gordhan has offered precious little support.
Then there was Mantashe’s intransigence in raising the self-generation cap. Six months ago, Ramaphosa effectively overruled him by raising the threshold for companies to produce their own power without a licence to 100MW.
It must be said that the stultifying pace in getting the first bid windows of the renewables programme up and running has helped nobody. As for the most recent window, academic Mark Swilling writes in the Mail & Guardian: “Bid window 6 was supposed to yield 5,200MW (later reduced to 4,200MW), but less than 1,000MW was announced ... The reason is that the grid is not ready to take on large amounts of additional generation capacity. It will cost R150bn to upgrade the grid.”
In short, the government has dragged its feet in producing anything approximating a workable short-term solution. The National Energy Crisis Committee’s recent plan may offer some relief — but past experience likely leaves people with a threadbare sense of confidence that any solution will ever be implemented.
On Monday, in his weekly newsletter, Ramaphosa again stressed how dire the energy situation is — even as he trotted out the clichés: there will be no “quick fixes”, but there is also “cause for hope”.
Ramaphosa said the government had taken steps towards getting more power onto the grid by private producers. Since the licensing threshold for embedded power generation projects was lifted, he said, the pipeline of private sector projects has grown to more than 100, with over 9,000MW of capacity.
Given Eskom’s 6,000MW deficit, this could be a game changer.
In the political space, Ramaphosa seemed to be winning the energy tussle with Mantashe. But whether he’s on the political back foot after Mantashe was re-elected as ANC chair at the party’s December conference will only be known once he reshuffles his cabinet in the coming weeks.
A senior source within the government believes the president now has to accommodate Mantashe’s energy worldview to ensure his continued support, in the face of the radical economic transformation (RET) lobby.
That’s up for debate: the RET faction’s loss at the December conference has left it weak, leaderless and scattered. Only a handful of ANC leaders with clear links to the RET faction have found their way back to the national executive committee. Just this weekend, that faction was dealt a humiliating blow in one of its erstwhile strongholds — the Free State, former secretary-general Ace Magashule’s stamping ground — when Ramaphosa-aligned Mxolisi Dukwana was elected provincial chair.
Still, there are some who believe Mantashe is powerful enough to divert the country’s energy future. “Mantashe knows the president is politically beholden to him, and this has given him confidence to push his view of South Africa’s energy future,” the source says.
But Dicks rejects this view. He tells the FM the cabinet has taken the decisions to drive the investment and implementation plans for the JET — and Mantashe is part of that very cabinet.
“It is on track, we have not stalled,” he says. “Cabinet has adopted the investment and implementation plan and we are now moving into the implementation phase.”
Maybe, but Mantashe has secured one advantage, as the ANC has apparently resolved to move Eskom under his department. It’s a disastrous decision, says Attard Montalto — one that will create severe problems in securing funding for Eskom, while implying clear political interference in the power utility. And, he says, corruption.
Still, it’s doubtful how long the indecisive and fractured ANC will be calling the shots.
Analysts agree that if elections were held tomorrow, the ANC would be out on the street due to the energy crisis. After all, polling before the latest, severe blackouts put its support at just 40%. And even if the party scrapes through next year’s general election, it may lose its majority in the next one. If that happens, Mantashe’s presence at the just transition meetings won’t matter much anyway. — Additional reporting by Natasha Marrian
* This is the first in a series by news site explain.co.za on the just energy transition. Reporting in this series was made possible by funding from the African Climate Foundation. Future subjects will include implications for communities most affected by JETP, and SA’s future energy mix
The just energy transition partnerships offered by the International Partners Group — the UK, US, France, Germany and the EU — are the most evolved and ambitious of these deals.
South Africa was the first to land one, and make good on it with a detailed vision: the Just Energy Transition Investment Plan — Ramaphosa’s flagship proposal on how the money would be spent and used to attract more funds.
More than a third of the R1.5-trillion budget is needed just for the basic infrastructure to get green energy to the people. New transmission lines and distribution expansion costs add up quickly. Then one needs to factor in the battery storage required to smooth out the peaks and troughs of wind and solar supply, as well as increasing grid capacity.
The government also has a mandate to support municipalities and local administrations, and R319bn has been earmarked to manage local transitions — the exact amount budgeted to kick-start the green hydrogen economy.
All the same, grid modernisation and distribution infrastructure need to be managed by municipalities to ensure that property development and local industry comply with new regulations.
In short, for the plan to be successful, South Africa needs a rethink of all things energy-related.
— SA takes the lead
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