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UK waits R16bn guarantee for SA coal shift

About three-quarters or 74% of the country’s primary energy supply comes from burning coal.

  • The UK intends to guarantee around R16 billion of SA debt in an agreement intended to reduce confidence in coal.
  • Negotiations are still underway on how the guarantee works.
  • It is part of a larger funding package previously proposed by the UK, US, Germany, France and the EU.

The UK believes it is guaranteeing at least $ 1 billion – just under R16 billion – of South African debt as part of a deal designed to reduce the nation’s dependence on coal and a shift to green energy to drive.

Further negotiations are taking place on how the guarantee will work, some of which apply to debts provided by the African Development Bank, people familiar with the matter said, and asked not to be identified because the talks are not public.

The guarantee is part of a larger $ 8.5 billion financing package proposed by the United Kingdom, the US, Germany, France and the European Union. That deal – which those countries have previously said would consist of concessional loans and subsidies – is seen as a prototype for other coal-dependent nations such as Indonesia to reduce their greenhouse gases. South Africa, which is dependent on coal for more than 80% of its energy generation, is the 13th largest producer of global warming gases.

Yet $ 8.5 billion is only a fraction of what South Africa needs to finance its energy transition. A report this month from the Blended Finance Taskforce and the Center for Sustainability Transitions at Stellenbosch University estimates that the country needs $ 250 billion over the next three decades.

It is not clear what part of the UK’s contribution to the COP26 climate finance agreement will cover the guarantee, the celebrities said.

However, a British guarantee would reduce the pressure on the South African government to stand behind the debt owed by state-owned power company Eskom Holdings SOC Ltd. may be needed to fund their shift to renewable energy. By March, the National Treasury had extended 560.1 billion rand ($ 36 billion) in guarantees to state-owned companies, of which Eskom accounts for about 79% of that. The energy company has a debt of 396 billion rand.

South Africa’s debt is rated below investment grade by the three largest rating agencies in the world and the country has been warned to take up more.

South Africa also wants to ensure that coal-dependent communities are protected from the impact of job losses during the transition. The so-called Just Energy Transition is seen as the key in a country where coal mining employs about 90,000 people.

“The bank is currently working on a financing car to help finance the Just Energy Transition in South Africa, but we are not yet in a position to discuss any of the details at this point,” he said. the AfDB in response to questions.

On May 27, South African Finance Minister Enoch Godongwana said the country was investigating an AfDB proposal to manage the $ 8.5 billion.

Akinwumi Adesina, president of the AfDB, said at a press conference on Friday that the institution is working with Group of Seven peoples and other partners to help South Africa raise more finances.

“The Just Energy Transition Partnership, launched at COP26 in Glasgow, aims to deliver climate benefits, social benefits and investments that accelerate energy transitions,” said a British government spokesman. “They are led by country and designed to enable the delivery of a net zero and sustainable economy in line with the long-term goals of the Paris Agreement.”

The National Treasury of South Africa did not immediately respond to questions, while South Africa’s Presidential Climate Finance Task Team declined to comment.

Direct loans to Eskom from partner countries would require guarantees, said Daniel Mminele, head of the task force, in a interviewer with Fin24 this month.

In addition to financing Eskom’s transition, part of the money could be used to strengthen South Africa’s power grid. The government also wants to use some of the funds to start up its green hydrogen and electric car industry.

UK waits R16bn guarantee for SA coal shift

Source link UK waits R16bn guarantee for SA coal shift

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