'A lot of work to be done' to finalise COP26 billions - Mminele

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Daniel Mminele.
Daniel Mminele.
  • Financial packages to transition the SA economy should not negatively impact the fiscus and borrowing requirements, says Daniel Mminele.
  • The Presidential Climate Finance Task Team hopes to make progress in finalising the $8.5bn offer ahead of the next COP in Egypt this year.
  • The task team is also working on an investment plan to support the just transition.

Funding for South Africa's just energy transition should not negatively impact the country's fiscal position and borrowing programmes, says Daniel Mminele, head of the Presidential Climate Finance Task Team.

Mminele on Tuesday addressed the Financial Sector Consultive Forum on the Just Transition Framework, hosted by the Presidential Climate Commission and the JSE.

Mminele, a former deputy governor of the SA Reserve Bank and CEO of Absa, was appointed as the head of the Presidential Climate Finance Task Team in February. His first task involves finalising the $8.5 billion offer from developed nations - France, Germany, UK, US and EU - to support South Africa's transition to a low carbon economy. The finance facilities that will emanate from this offer need to be aligned to the country's socio-economic priorities and development imperatives, he said.

"It is essential that any finance package we develop and negotiate should reflect South Africa's unique fiscal challenges and incorporate equitable risk-sharing arrangements to be achieved," said Mminele. The funding must be made available through a combination of grants, concessionary finance, risk mitigation instruments and other tools. Essentially these funds should cover the cost of the transition without negatively impacting the national borrowing programmes or budgets, he added.

Mminele said that loan finance should be provided at "highly favourable" terms and at "significantly lower" interest rates.

Over the next few months, ahead of COP27 to be held in Egypt in November, the task team will be assessing the financial packages being offered against the country's needs and priorities.

"Intensive discussions are under way that are focused on obtaining the necessary detail of the funding elements being provided through this partnership," said Mminele.

Secondly, the task team is also determining the finance needs for the transition and requirements of the investment portfolio to meet those financial needs. Mminele explained that the $8.5 billion should be leveraged to crowd in further investment by the private sector.

"Constructing a precise investment pathway for South Africa's just transition will go a long way in promoting investment," he said.

READ | Private sector can't just 'sit back', says Mminele on funding SA's energy transition

Asked about when the $8.5 billion will be finalised, Mminele said that timelines are "tenuous" but there should be significant progress ahead of the next COP. There should be a "better sense" of the details of what is being offered, and South Africa should be making progress in terms of its investment plans - and possibly announce projects.

"But there is a lot of work to be done between now and then," said Mminele.

"We need to ensure that whatever we put on the table at the end of the day for Cabinet to approve as the appropriate deal South Africa enters into has taken due account of the various risk profiles that may come with might be on offer."
- Daniel Mminele

The funds are targeted at transitioning the energy sector - mainly through supporting the decommissioning and repurposing of coal-fired power stations, developing the hydrogen and electric vehicle sectors and ensuring a just transition for affected workers and communities.

This initial amount of $8.5 billion will be mobilised over three to five years, but there is hope that further funding will be raised.

Mminele and his team have, over the past few months, been engaging with partner countries and have undertaken diplomatic missions with those that have shown interest in South Africa's decarbonisation efforts. Meetings have also been held with local and international development finance institutions, philanthropic organisations, research and advisory institutions and private sector institutions.

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