Route Quest

Billions have been pledged, but can SA achieve a Just Transition to clean energy?

‘There’s a long way to go and a lot of engagement and alignment that needs to take place’: Andrew Lane – energy, resources and industrials leader, Deloitte.

By  SAFM MARKET UPDATE 3 Nov 2021  21:44

image of wind turbine

FIFI PETERS: This month you are going to hear quite a lot about climate change and the Just Energy Transition. In fact, I think we’ve mentioned it twice so far on the show today, but it’s because the COP26 summit is still going on and it’s going to continue going on until around November 12. Just yesterday our President Cyril Ramaphosa announced a deal that has been described as a landmark deal for the country in the form of South Africa securing a [R131 billion] commitment from international partners to help it move away from coal and towards cleaner forms of energy.o discuss the impact of this deal I am joined by Andrew Lane, who is the leader of energy resources and industrials at Deloitte. Andrew, thanks so much for your time. A ‘landmark deal’ is how this is being described in many corners. Would you agree?

ANDREW LANE: Hi, good evening Fifi. Thanks for having me on your show. I think this is a very positive development, it’s a start. Clearly it’s a fair amount of money but it’s not all the money that’s required. I think it’s good news for the decarbonisation agenda, and what would seem to be a political victory for the president – and I think for the leadership of Eskom as well. So I think it is positive, a step in the right direction.

FIFI PETERS: How far will it go and what will the gap be?

ANDREW LANE: Look, the numbers that have been thrown around are significantly bigger than that R130 billion, but R130 billion is a good start. I think the challenge is going to be whether we can actually achieve a Just Transition. There’s a long way to go and a lot of engagement and alignment that needs to take place to get to a real and effective Just Transition.

FIFI PETERS: And then how do you look at world leaders having committed around $100 billion in climate finance to developing countries over five years; many reports that I’ve read are on the fact that many of those commitments have not been realised. Can you just talk to us about the dynamics with that and what that does mean for our Just Transition?

ANDREW LANE: Well, absolutely. It’s not real until the money flows. I think one doesn’t yet know how quickly or easily that money’s going to flow and how easily it’s going to be disbursed. I understand it’s going into some form of Just Transition trust, so one doesn’t know how effectively that’s going to be disbursed and whether it’s going to actually deliver the outcomes which we hope for. So there are open questions there.

FIFI PETERS: You mentioned Eskom and how this is a bit of a win for Eskom. I was reading a story regarding the Eskom CEO’s response to the deal. He described it in similar fashion to you, in the form of ‘It’s a welcome first step in the right direction’. But how far will it go, in your view, towards solving Eskom’s problem?

ANDREW LANE: Look, Eskom has a massive debt problem, as we know. So adding to that is going to be difficult.There is still stress on Eskom’s balance sheet and potentially on the sovereign balance sheet. There’s a limit to how much money we can borrow, even free money, without getting ourselves into difficulties.

FIFI PETERS: Exactly. On that issue that this money will need to be paid back, despite the fact that it does come cheap, what conditions will allow us to be in a position as a country to start making those repayments, in your view?

ANDREW LANE: I think we’ve got to get the economy firing. It’s great to see these intentions around starting new industries and sectors, green hydrogen and greenfields, and all these very noble intentions. But we’re not a country that has a history of being successful at manufacturing, and those are essentially industrial pursuits

So I think we’ve got to get ourselves into a space where we can actually make a success of industrial pursuits such as these new sectors in green energy, so we can actually get some economic growth going and some money flowing back into the fiscus so that we can actually start to retire from this debt and move ahead.

FIFI PETERS: A question around what this deal could mean for the rest of the continent – given that I think South Africa is the biggest emitter in Africa – is what this deal could signify for what other countries on the continent may be able to get in the form of help from developed nations who are also seen as the largest emitters of some of the harmful fuels into the environment?

ANDREW LANE: I think it’s good for the continent. Clearly we were the prize, being the biggest emitter on the continent and something like the 14th biggest emitter on the planet. Certainly we were the focus. But to see the rest of the world, the developing or the developed world, paying attention to Africa I think is a good thing.

We are a power-starved continent, so development that would deliver power to those that don’t have it, and deliver that in a green and sustainable fashion, I think is positive for the continent.

FIFI PETERS: Well, Andrew, we’ll leave it there. Thanks so much for your time, sir. Andrew Lane is the leader of energy, resources and industrials at Deloitte.