Occasional Paper 2/2025
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J A N U A R Y 2 0 2 5
This paper has been prepared for presentation at the International Conference on “Resource and Environmental Technology Innovation Boosts China-Africa Green and Low-Carbon Development” in Shanghai and Jinhua from 1 – 5 November 2024
Daryl Swanepoel
MPA, BPAHons, ND: Co. Admin
Research Fellow, School of Public Leadership, Stellenbosch University
Abstract
Green energy, low-carbon development and green technology offer economic opportunities for South Africa and African countries, which have abundant potential for renewable energy generation. However, the scale and pace of investment in green energy in Africa is sorely inadequate. Inconsistent policies, inefficient public services, corruption and lack of rule of law all undermine domestic private and international development finance involvement in green projects. Limited access to finance, inadequate infrastructure, and insufficient government incentives for the private sector, households and foreign investors, also deter new investors. Thirty of the world’s 40 most climate vulnerable countries are in Africa, yet Africa emits only 4% of global greenhouse gas emissions. Unless Africa responds effectively to climate change, up to 118 million people will live in abject poverty by 2030.
South Africa and Africa should look to China for lessons on the way forward. China is the world’s biggest emitter of greenhouse gas emissions by volume but now produces most of the world’s renewable energy. China expanded its renewable energy capacity with astonishing speed and scale. The country’s industrial policy – based on a pillar of world-class infrastructure suitable for shipping goods anywhere in the world – turned China into a global giant manufacturer of electric vehicles. Partnering with China would open up many opportunities for both parties to boost their green economies and technologies, and low-carbon development – together preparing for what will surely be more stormy weather ahead.
Introduction
Green energy, low-carbon development and green technology offer economic opportunities for South Africa and African countries.
They can drive economic growth, create jobs and reduce poverty through the creation of new manufacturing industries, the development of new technologies, the development of a green economy, and the expansion of infrastructure, agriculture and ecotourism (Biswas & Yila, 2022).
South Africa and Africa have abundant potential for renewable energy generation, and not only for their own consumption.
However, the scale and pace of investment in green energy in Africa is inadequate. South Africa and Africa’s transition to a green economy must be secured in such a way that it lifts inclusive economic growth, increases development and expands industrialisation.
Developed countries such as Denmark – which generates 57% of its power from wind energy – have energy mixes that are dominated by renewable energy, but still rely on fossil fuels, either for baseload power, the transport industry or for heavy export industries.
African countries are also struggling to source funding to address losses and damages linked to climate change. It is estimated that developing countries, including those in Africa, need at least US$100 billion a year to adequately finance a Loss and Damage Fund aimed at compensating them for such losses and damages (Kabukuru, 2023).
Regional power pools, whether through renewable energy or gas, are critical to boost individual country power grids. This will require power to be traded between countries, and so avoid energy shortages or surpluses sitting idle.
But there are many obstacles getting in the way of progress. Inconsistent policies and regulations in South Africa and other African countries, inefficient public services, high levels of corruption and lack of rule of law undermine domestic private and international development finance involvement in green projects.
Limited access to finance and insufficient government incentives for the private sector, households and foreign investors, deter green investments. South Africa and African countries also have inadequate infrastructure for green projects, which hinders delivery and puts off new investors. South Africa and almost all African countries need to upgrade and expand their existing grid infrastructure, while building new renewable energy generation capacity.
Foreign businesses in Africa often do not implement green practices, as there is largely a lack of enforcement in these countries. Whereas local African businesses are often simply not aware of the benefits of green practices, nor do they have the capacity to implement them, nor are there, in many instances, government incentives to do so (UNDP, 2024).
South Africa and Africa could become world leaders in motoring the green economy, if they set appropriate policies and regulations, muster up the political will to push for green energy and secure the requisite investments.
However, South Africa and African countries lack public funds to finance the green economy and low-carbon development. There is also a lack of funding for countries to mitigate against and adapt to climate change. Grant funding is critical for this. Development finance, private finance, and public-private finance is critical to achieve the green economy goals.
James Murombedzi, head of the Addis Ababa-based African Climate Policy Centre (ACPC), says that Africa will have to explore innovative private sector financing structures such as debt-for-nature and debt-for-climate swaps to overcome the climate financial gap. At the African Climate Summit, African leaders expressed their frustrations with the industrialised countries’ inability to honour their commitments to provide adequate climate finance.
The route to climate change mitigation is clear. The International Energy Authority’s (IEA) Roadmap to Net Zero by 2050, first published in May 2021, outlined how the world can reduce global warming to 1.5°C. It says the world must reduce use of fossil fuels, double energy efficiency, and increase and expand the range of clean energy technologies. The IEA says tripling global installed renewable power capacity, such as solar and wind, by the end of the current decade is the most important lever to reduce carbon dioxide emissions.
Africa disproportionately impacted by climate change
The Paris Agreement’s goal is to curb global warming to 1.5˚C. However, these targets are far off. Africa emits only 4% of global greenhouse gas emissions, and yet, the continent is disproportionately vulnerable to the impacts of climate change – with temperature rises higher than the global average (Climate Adaptation Platform, 2024).
A 2024 report by the World Meteorological Organization (WMO) shows that 2023 was the warmest year globally on record. The report shows that the three major greenhouse gases – carbon dioxide, methane and nitrous oxide – reached a new record in 2022. It says ocean warming continues to increase, with the ocean heat content at a historic high in 2023.
The report notes that as the ocean absorbs a quarter of annual human-caused emissions, increasing emissions also decreases pH, a process known as “ocean acidification”. This affects organisms and ecosystem services, including food security, by reducing biodiversity, degrading habitats, and endangering fisheries and aquaculture.
As a result, the WMO report reveals that African countries are losing 2-5% of their Gross Domestic Product (GDP) to climate change. Many of these countries set aside 9% of their budget to respond to climate extremes. The cost of climate adaptation in sub-Saharan Africa is very high, estimated to be between US$30-50 billion annually over the next decade, representing 2-3% of their GDP.
Unless Africa responds effectively to climate change, up to 118 million people will live in abject poverty – living on less than US$1.90 per day by 2030 – and will be exposed to drought, floods, and other extreme weather conditions, the report says. In fact, “between 1970 and 2021, Africa accounted for 35% of weather, climate, and water-related fatalities” (WMO, 2024).
In 2023, droughts cut North Africa’s cereal production to 10% below a five-year average. In Sudan, sorghum and millet production in 2023 decreased by about 25% and 50%, respectively, compared to 2022 (WMO, 2024).
Thirty of the world’s 40 most climate vulnerable countries are in Africa. A 2022 Mo Ibrahim Foundation report, The Road to COP27: Making Africa’s Case in the Global Climate Debate, emphasised that Africa’s small contribution to CO2 emissions, and the continent’s disproportionate vulnerability to the negative impact of climate change, should necessitate the continent getting climate financing from industrial countries responsible for emissions.
Crucial to consider is that Africa holds 65% of the uncultivated arable land left in the world, and therefore holds the key for the future of food globally. The rising global population makes optimising the productivity of available land even more urgent, since climate change reduces water availability and reduces crop productivity.
“Extreme weather – including droughts, cyclones and heatwaves – is increasing in frequency and intensity, alongside trends of urbanisation, population growth and weak conservation enforcement. Ecosystem damage and biodiversity loss is now having major negative impacts on livelihoods, causing US$7-15 billion in yearly losses (projected to reach US$40 billion by 2030)” (UNDP, 2023: 19).
Research by the ACPC showed “the increasing frequency and severity of climate change impacts resulting in disproportionate effects on African economies and societies, with countries estimated to be losing on average 2-5% of GDP and many countries diverting up to 9% of their budgets into unplanned expenditures on responses to extreme weather events.”
At the same time, over 600 million people in Africa lack electricity. Affordable clean energy sources is therefore critical to plug the power gap.
Africa’s collective approach to combat climate change
African countries, at an Africa Climate Summit in September 2023, adopted the “Nairobi Declaration” as a broad approach to combat climate change and facilitate a green transition in the region (African Union, 2023). The Nairobi Declaration called for climate-positive growth, renewable energy expansion, the protection and enhancement of biodiversity and nature; green industrialisation; sustainable agriculture; standards, metrics and market mechanisms to value nature, biodiversity and co-benefits; and African countries to adopt policy and enabling environments to support the development of the green economy.
The Nairobi Declaration outlined some of the opportunities for the African region, including the opportunity emerging from its youthful demographics. They could become new markets for innovative solutions and business models. But there are also formidable challenges such as rapidly urbanising populations; lack of skills, resources, capital and political will; and old economy thinking among African governments, political and business elites.
African countries as a group demand that developed countries provide between US$200-400 billion a year by 2030 for loss and damage because of climate change; and US$400 billion a year for adapting to climate change. This is, on top of funding required to reduce emissions.
In December 2023, the Conference of the Parties 28 (COP28) pledged record funding to climate change transition, including to Africa. However, the pledges to Africa at COP28 deferred major financial decisions to COP29, only contributing US$134 million and US$792 million to the Adaptation Fund and the Loss and Damage Fund respectively (Mbungu, Ogallo & Rudic, 2024).
Also in 2023, an Arab-African initiative was launched to improve agriculture and food systems in both regions. The “Africa and Middle East SAFE Initiative”, a public-private partnership, aims to mobilise US$10 billion in funding to support green agriculture. The idea is that Africa can provide food solutions to the Middle East, “where water stress poses immense challenges for food production, and where the cost of water desalinisation is prohibitive for competitive food production to assure food security” (Adesina, 2023).
The project aims to unlock green investments and promote climate-smart agriculture. The focus will be on irrigating two million hectares of African farmland, enhancing climate resilience for 10 million smallholder farmers, with a focus on women and young people, creating two million green jobs, and exporting two million metric tons of food crops from Africa to the Middle East.
In January 2023, African countries organised the Feed Africa Summit in Dakar – convened by the African Development Bank and the Government of Senegal, under the chairmanship of President Macky Sall – where 34 African Heads of State and Government signed the Dakar Declaration.
They agreed to establish food and agriculture delivery compacts, which are clear roadmaps for fully unlocking the potentials of their food and agriculture sector. The African Development Bank mobilised US$72 billion to implement these food and agriculture delivery compacts. This will allow Africa to take proper advantage of the size of its food and agriculture market, which, if cultivated effectively, could reach US$1 trillion by 2030 (Adesina, 2023).
Back in 2016, the African Development Bank launched its Technologies for African Agricultural Transformation (TAAT) – a continent-wide initiative designed to boost agricultural productivity by using new technologies. TAAT brings productivity-increasing technologies to crop, livestock and fish smallholder farmers. The TAAT programme transfers resilient agricultural technologies to smallholder farmers.
Africa’s green energy, low-carbon funding needs
Investing in green growth alternatives is expensive. The United Nations Economic Commission for Africa calculates that US$2 trillion is needed in the power sector alone by 2050 to drive green economic growth in Africa. And yet, the IEA says less than 2% of global investments in clean energy flows into Africa, with the current annual flow of climate finance to Africa standing at US$29.5 billion.
Africa requires an annual capital commitment of US$277 billion to implement Nationally Determined Contributions (NDCs) and achieve agreed-on climate objectives by 2030. The private sector’s involvement in Africa’s climate finance stands at 14%, equivalent to US$4.2 billion in 2021.
Central and East African countries have the largest climate investment shortage as a percentage of GDP, averaging 26% and 23%, respectively. North African countries have lower climate investment gaps, averaging 3% of GDP – they still require up to six times more green capital than current levels. Southern Africa has the largest financial gap in absolute terms, because of South Africa’s massive green capital requirements, around US$107 billion annually, according to the United Nations Development Plan (UNDP).
The UN Economic Commission for Africa’s Deputy Executive Secretary, Antonio Pedro, said African countries could marshal US$82 billion annually through accessing carbon markets. The United Nations (UN) estimated that combined developing and emerging countries, including Africa, need US$2 trillion annually by 2030 to deal with climate change.
Industrial countries have not delivered on their climate finance promises. African countries have called on industrialised countries to “scale up climate finance to make up for the shortfall caused by [their] failure to deliver US$100 billion per year by 2020 and through 2025” (Kabukuru, 2023). African countries are also asking for between US$200-400 billion a year by 2030 for climate losses and damage; and US$400 billion a year for climate change adaptation.
Industrial countries and emerging powers collectively paid out US$7 trillion in 2022, for producing coal, oil and natural gas, in the form of subsidies such as tax breaks or price caps (Parry, Black & Vernon-Li, 2021). China is the biggest subsidiser of fossil fuels, followed by the US, Russia, India and the European Union (EU) (Parry, Black & Vernon-Li, 2021).
Fossil-fuel subsidies rose during the global increase in energy prices caused by Russia’s invasion of Ukraine and the country’s economic reboots following the Covid-19 pandemic. The subsidies were the equivalent of 7.1% of global gross domestic product. The subsidies have risen by US$2 trillion over the past two years.
Following energy shortages because of the Russia-Ukraine war, many industrial countries have returned to the use of coal for power. In October 2023, Germany’s Cabinet approved putting on-reserve lignite-fired power plants back online until the end of March 2024, as a step to replace scarce natural gas this winter and avoid shortages. This happened in the wake of Russia’s invasion of Ukraine and a sudden drop in Russian gas imports to Germany – Berlin reactivated coal-fired power plants and extended their lifespans (Pole, 2022).
Austria, the Netherlands and Italy also, in 2023, started up their coal power stations (Pole, 2022). Previously the Netherlands had limited coal power to just over a third of the country’s power output.
In 2022, in its bid to cut planet-warming emissions by 55% by 2030 from 1990 levels, the European Commission (EU) proposed a 100% reduction in CO2 emissions from new cars by 2035 (Pole, 2022). That means it would not be possible to sell combustion engine cars from then on. However, the German government refused to accept this ban.
Harnessing Africa’s own resources
African countries could also generate income from the value chains of non-renewable resources – for example, critical minerals – mainly found in Africa and essential for battery production.
African governments have made commitments to contribute US$26.4 billion from domestic public resources for green energy annually. However, given rising government debt, mismanagement and corruption, combined with competing developmental priorities, it is highly unlikely that they will reach these targets. Public-private partnerships to finance climate change and drive green business will be crucial.
The continent has abundant renewable energy resources. It accounts for 40% of global solar irradiation. It has a 20,000MW geothermal power potential; a 30,000MW hydropower potential and a 110,000MW wind power potential. The challenge is to secure a smart transition, growing renewable energy, increase decarbonisation by using gas and gradually easing out coal – or finding clean coal technology.
As for “green recovery”, pledges by industrial countries and multilateral organisations have not only been insufficient, but also not forthcoming. According to the UNDP, for every US dollar spent addressing the climate crisis, four dollars fund fossil-fuel subsidies, perpetuating the crisis (UNDP, 2024: 17).
The UNDP argues an urgent transition into green business is a necessity for Africa to overcome the “dual challenges posed by the increasingly extreme impacts of climate change and the imperatives of continued economic growth”. It argues a green business transition “represents the opportunity to pursue alternative growth models, leapfrog generations of technology and build a more sustainable future” (UNDP, 2024:17).
Many industrial companies have become guilty of “greenwashing” in Africa. They mislead the public by claiming their products, policies and Environment, Sustainability and Governance (ESG) are environmentally friendly. Banks, mining and fossil fuel companies are among the key culprits in greenwashing. United Nations Secretary General António Guterres at COP27 in November 2022, criticised the practice as dishonest and undermining the fight against climate change.
In August 2024, TotalEnergies, the world’s 19th-biggest greenhouse gas emitter, was found guilty of misleading sustainability advertising in South Africa. TotalEnergies was found guilty of greenwashing by the South African Advertising Regulatory Board (ARB). The complaint was filed by campaign group Fossil Free South Africa.
The lawsuit centred on a partnership between TotalEnergies and South Africa National Parks (SANParks), in which the two organisations partnered in a #FuelYourExperience competition, encouraging people to visit South Africa’s parks. In an advertisement, TotalEnergies said: “We’re committed to sustainable development and environmental protection”, which Fossil Ad Ban highlighted as being “false and misleading” and was “greenwashing”.
Fossil Ad Ban cited the energy company’s “response to the 2015 Paris Climate Treaty has been not to cut, but to continue to expand its emissions, by another 14 million tonnes, to 400 million tonnes of carbon dioxide by 2022” (Doris, 2024). The ARB also ruled that there was “no doubt that the core business of the Advertiser is directly opposed to the issue of sustainable development, as the ongoing exploitation of fossil fuels is contra-indicated in this context” (Doris, 2024).
But developed countries also often misrepresent their policies, initiatives and projects in Africa as “green”, while it is totally the opposite. Unfortunately, African countries do not have laws against greenwashing. Some EU and Southeast Asian nations have introduced guidelines of financial practices to prevent greenwashing.
The UNDP has proposed several key recommendations for how Africa could leverage the green economy. The organisation has proposed the establishment of dedicated green investment banks, facilities and funds, with a specific mandate to support the development of green business in the region via green financing products.
The international organisation proposed that Africa create an urban green business and finance platform to help support Africa’s rapidly growing cities to meet the dual challenges of rapid urbanisation and climate change. The UNDP calls on multi-lateral development banks to do more to reduce investment risk in Africa through the creation of new and innovative instruments, funds and facilities.
The UNDP also called for African countries to establish nature as an asset class, leveraging the lessons from carbon markets elsewhere as well as Africa’s nature-rich status, to build robust carbon and biodiversity markets. The UNDP proposes that African countries enhance green value chains and capacity, leveraging Africa’s natural abundance of minerals needed in the green transition, along with the region’s sustainable energy, to ensure greater value addition remains within the communities and areas involved in mineral extraction.
South Africa: energy mix
South Africa’s energy mix in 2023/2024 consists of 82.8% coal, with renewable energy providing 8.8%, amounting to 42 000 MW. Nuclear power makes up 6% of electricity output and gas only contributes 3% of South Africa’s power generation. Upgrades to South Africa’s only nuclear plant, at Koeberg, have seen its two reactors having lifetimes extended to 2045 and 2047.
Coal will remain the main source of energy for the immediate future (ITA, 2024). However, around 8.7GW of non-hydro renewable energy capacity is planned to be installed between 2023 and 2032. Solar energy will be the primary source of expansion.
South Africa’s Just Energy Transition Partnerships plans to repurpose and decommission coal-fired power plants to decrease emissions – the government is planning to close down seven coal-fired power stations by 2032.
The government has eased restrictions for local content in solar. Renewable energy expansion is slowed by opposition to it by interest groups in the ANC-SACP-Cosatu tripartite alliance, and opposition from populist groups and coal-based trade unions to renewable energy.
It is expected that South Africa’s total power capacity will expand by 4GW (ITA, 2024). The expansion will come from non-hydro renewable energy – increasing from 9.3% to 17% in 2032. The South African government’s revised Integrated Resource Plan makes provision for gas to provide 8% of energy capacity.
South Africa’s Renewable Independent Power Producer Programme is expected to increase the non-hydro renewal, because of the lessening of licence restrictions, allowing more private sector involvement in the sector. The developers of renewable energy are mostly foreign companies that have signed power purchase agreements with Eskom for the electricity they produce.
However, South Africa’s aging, poorly maintained and vandalised network infrastructure undermines the energy distribution network. According to Eskom, the utility needs 8 000km of transmission infrastructure by 2030 to absorb new renewable energy capacity (ITA, 2024). But Eskom’s long-term financial viability is in question, considering its R400 billion debt. Renewable energy companies have already signed purchase agreements with Eskom, agreements which would be compromised should Eskom collapse.
South Africa’s automotive industry contributes 5.3% to South Africa’s GDP and is its biggest manufacturing sector, and supported R270 billion worth of exports in 2023. South Africa’s auto industry was facing headwinds because of the rise in the sales of electric powered vehicles globally, the increased use of fuels with cleaner emissions, and use of new technologies such as autonomous driving vehicles.
In response, South Africa has created the South African Automotive Masterplan, SAAM 2035. It aims to increase the country’s motor vehicle production to 1% of global output. And to increase the yearly exports value of the industry from R200 billion in 2019 to R400 billion in 2035 (IOL, 2024).
Domestically, the country’s declining economy, high fuel prices and high interest rates have compounded the declines in vehicle sales. In 2023 vehicle sales were down 5.8%, exports were down 16.9%, and vehicle production dropped 20%. South Africa’s automotive industry is lagging, and will continue to lag, behind turning its production to new electric vehicles (NEVs), its global competitors.
In fact, Trade and Industry Minister Parks Tau said that South Africa may take 15 to 20 years longer to transition to mass NEVs. To mitigate this, the government is preparing a White Paper on NEVs, which is being put together by the Department of Trade, Industry and Competition, the National Treasury, and the Department of Mineral Resources and Energy.
In October 2024, President Cyril Ramaphosa announced that the government will introduce tax incentives to make new energy vehicles cheaper for South Africans. The incentives will also cover hybrid vehicles – which use traditional fuels and electricity batteries, and other renewable energy, including hydrogen.
The Government announced NEVs incentives in the Budget in February 2024, providing for a 150% investment allowance for expenses in the initial year of investment, effective from 1 March 2026. Depreciation allowances for new and used machinery and inputs to make NEVs was increased to 40% in the first year and 20% in each of the following three years. “Consideration must be given to incentives for manufacturers as well as tax rebates or subsidies for consumers to accelerate the uptake of electric vehicles,” said Ramaphosa (National Treasury, 2024).
South Africa: green energy and low-carbon development funding
South Africa’s Just Transition Framework focuses on public-private partnerships, foreign investment, and blended finance (PCC, 2022). On 4 November 2021, South Africa announced the Just Energy Transition Partnership (JETP) at COP26.
The JETP is a US$8.5 billion funding package from the European Union, Germany, France, the US, the UK, the Netherlands and Denmark, to support South Africa securing a just energy transition. The final amount, following additional pledges, is now more than US$11 billion. Only 4% of the amount was grant financing; the rest is concessional loans.
South Africa introduced the Just Energy Transition Implementation Plan at COP28, the annual climate change conference, held in Dubai in 2023. This is a roadmap for achieving decarbonisation of the economy in a just manner. The Implementation Plan was aimed at outlining how the funding would be structured, the priorities, projects and implementation partners. It covers six portfolios: Electricity; Mpumalanga Just Transition; New Energy Vehicles (NEVs); Green Hydrogen; Skills; and Municipalities.
Reports showed that before the JET Implementation Plan was released in 2023, more than R10 billion of the funds had already been allocated or assigned to projects or spent on projects (Davies, 2024). The pre-plan released spending allocations were outlined in the JET Implementation Plan Grant Mapping Register. The register outlines the priority areas for spending.
“By the time the JET Investment Plan was unveiled by President Cyril Ramaphosa on 4 November 2022, 89 of the 145 projects, worth more than R5.3 billion, had already commenced (before November 2022 when the JET IP was publicly announced). The end dates for 26 of them were before Cabinet formally approved the JET IP in November 2023” (Davies, 2024). Furthermore, more than R8.5 billion had been used for projects that had already finished at the time of funding.
Only two projects, out of 145, had not started by the time the funding became available. This means no public discussion on the kinds of projects that needed funding, the organisations to whom the projects should go, and who the beneficiaries should be that receive help.
It is unclear what the criteria for funding are or whether the projects were growth catalytic ones – for example, whether it is for projects developing new manufacturing or fit within a wider industrialisation plan. The application process, funding oversight and selection governance structures appear unclear. The JET IP framework said a JET Funding Platform would be established in 2024 as a “matchmaking mechanism” between implementing entities and beneficiaries.
On the JET IP register of projects only 24% of the funds went to South African implementing organisations. Most of the funding went to donor country companies. Donor agencies take large proportions of the funding to cover their costs. More than R222 million went to consulting and financial advisory firms. A third of the distributed funding went to German entities: among these, R1.7 billion went to GIZ, the German development agency, R2 billion went to KfW, the German development bank. Essentially, all the financing given by Germany has gone to German entities.
Of the funding from the United States (US) government, R145 million went to consultancy firm Deloitte and R58 million went to the US Department of Energy’s National Labs. The Dutch government funding, among others, went to the Dutch Water Authorities, and the Danish government’s funding, among others, went to the Danish Energy Agency.
Researchers Katrina Lehmann-Grube, Imraan Valodia, Julia Taylor and Sonia Phalatse analysed how the JET IP money was spent. The bulk of the money was directed to green hydrogen, Mpumalanga Just Transition, electricity infrastructure, municipalities, skills development, electricity just transition, and new energy vehicles. However, Lehmann-Grube and her colleagues revealed that most of the funding did not go directly to the assigned priorities.
They report that for funds allocated to electricity infrastructure, none was allocated for building electricity infrastructure, whether to expand the grid or for renewable energy generation. The funds for electricity infrastructure has been spent on technical assistance, project feasibility studies and scenario planning. Around R1.2 billion was spent on technical assistance. Lehmann-Grube et al described the technical assistance as “long been criticised as a form of aid for being ineffective, extremely expensive since much of these funds go to foreign ‘experts’, and an outdated form of development”.
Another portion of the funds, around R1.5 billion was spent on green finance, which included refinancing community trust projects, green bods, blended finance to attract the private sector, which is “arguably not where the grants portion of the finance should be focused”. Funds are allocated for stakeholder engagement and capacity building. However, civil society and community organisations are rarely involved. Only 0.4% of the funding was allocated to civil society – around R41 million.
Approximately R1.1 billion was allocated to skills training. However, the researchers show only R453 million went to actual skills training. Astonishingly, none of the allocation went to employees that will lose their jobs, livelihoods and income in the transition from fossil fuels to renewable energy.
There are other significant South African public funds established for climate change. The state-owned Development Bank of Southern Africa established the Green Fund in 2011. The fund is a complementary fund, aimed to augment existing fiscal allocations. It particularly focuses on existing projects that require bridging financial gaps. The Green Fund says it has collective investments of R679.8 million.
There are also private funds in South Africa dedicated to climate change. In 2018, Growthpoint Properties, a real estate investment trust, issued a (10-year) corporate green bond. The proceeds from this bond are earmarked for the financing of new and existing environmentally friendly properties.
China: world leader in renewable energy economy manufacturing
China is the world’s biggest emitter of greenhouse gas emissions by volume, burning as much coal as all of the world combined. At the same time, the country now produces most of the world’s renewable energy.
In the 2000s, China changed its development model, based on coal dependence, as it was causing environmental crises and had begun to undermine economic growth. With GDP growth slowing in the mid-2000s, labour costs rising and a housing crisis, China, as part of changing its developmental model, also moved towards renewable energy. The country invested heavily in green energy technology, prioritising becoming the world’s largest supplier of renewable energy technologies, manufacturing products and infrastructure to tap into the world’s need for clean energy.
China now dominates the manufacturing of renewable technologies. “China had largely achieved its goal of dominating not only the production of solar and wind technologies, but it had developed a near monopoly on every aspect of the supply chains, including the mining and processing of the rare-earths and strategic minerals essential for the clean energy revolution” (Hilton, 2024).
China controls 80% of the globe’s solar manufacturing. It dominates wind and battery technology and manufacturing. Its manufacturing of electric vehicles is rising. Its domination of renewable energy technologies, manufacturing and supply chains has brought global prices down.
China expanded its renewable energy capacity with astonishing speed and scale. Fossil fuels now make up under 50% of the country’s power generation capacity, whereas a decade ago, fossil fuels made up two-thirds of its power generation. The International Energy Authority said that the 50% increase in the installation of renewable energy capacity in 2023 was largely attributed to China.
In 2023 China doubled its new solar installations, increased new wind capacity installations by 66%, and quadrupled energy storage capacity. In 2022, its solar photovoltaic capacity installation for that year, was as large as the rest of the world combined.
China has transformed its economic growth model to make high-tech export products to spur growth. The country’s changed industrial policies are outlined in its “Made in China 2025” (MIC 2025) industrial strategy, a multidecade national strategy for the manufacturing sector, which was published in 2015. The strategy sets out its goal to dominate global market share of high-tech manufacturing, prioritising higher valued goods.
China is now also a dominant global manufacturer of plug-in electric vehicles and its associated supply chains. Electric vehicles is a disruptive technology, because it replaces internal combustion engine vehicles, which have dominated vehicle manufacturing (Graham, Belton & Xia, 2021).
China’s industrial policy followed the example of Japan’s Toyota, Germany’s Volkswagen and the US’ General Motors, who dominated global combustion engine vehicles supply chains. China’s industrial policy to turn it into a global giant manufacturer of electric vehicles – and their supply chains – is a lesson for developing countries in cobbling together successful industrial policies.
The country’s electric vehicle global rise has unleashed a trade conflict between China, the EU and the US over electric vehicles. The EU is the largest overseas market for China’s electric car industry.
The EU is planning to impose huge taxes on imports of electric vehicles from China to Europe. It says introducing tariffs on Chinese electric vehicles imports aims to protect the European car industry from being undermined by what EU governments say are unfair Chinese-state subsidies on its own cars. Tariffs on electric cars made in China are set to rise from 10% to up to 45% over the next five years (Race, 2024).
The European Commission set individual duties on three large Chinese electric vehicle brands: SAIC, BYD and Geely. The EU fears that European car manufacturers will not be able to compete with Chinese cars. It calculated the charges based on estimates of how much Chinese state aid each manufacturer has received following an EU investigation. Chinese-made electric vehicles account for 19% of Europe’s market, estimated to rise to 25% by the end of 2024.
The US in May 2024 announced that it was quadrupling customs duties on imported Chinese electric vehicles. China has not penetrated the US market as it has the European market. In response, China has lodged a complaint against the US over the tariff penalties at the World Trade Organisation in March 2024, charging that the US Inflation Reduction Act (IRA) “formulates discriminatory subsidy policies for new energy vehicles”, referencing a classification that includes electric cars and hybrids.
China says the US IRA “distorts fair competition, seriously disrupts global new energy vehicle industrial and supply chains and violates WTO rules”. China has denied that its own industrial policies are unfair and has repeatedly threatened retaliation to safeguard its companies. The US has rejected China’s WTO challenge, saying “China's challenge is particularly hypocritical in light of China's targeting of clean energy sectors for global dominance” (AFP, 2024).
In 2022, the United States announced a giant aid and subsidy programme to support US-based companies operating in the energy transition sector and electric cars manufactured in the US. The US government said the subsidies were to address the climate crisis and “invest in US economic competitiveness”. The US also said its electric vehicle subsidy programme was meant to counter China’s subsidies for electric vehicles and China’s green industry, which has seen China investing vast state funds into domestic firms as well as research and development.
How China can help boost a South African manufacturing boom based on the green economy and technology
South Africa needs a dynamic manufacturing sector that can soak up low skills. A manufacturing sector in the energy sector based on renewable energy and gas, can soak up an army of low and unskilled. It can also reverse the decline of manufacturing in other sectors – which could create desperately needed new jobs, especially for those with low skills.
The inputs, technology and production processes underpinning renewable energy and gas production must be manufactured within South Africa as far as possible. Local communities can set up local cooperatives to generate and sell their own energy. If local renewable energy initiatives are established by local communities in every town; and gas is piped to every household, it would not only stabilise energy supply, but it will also create a much-needed manufacturing explosion.
China is in a tariff dispute with the European Union and the US over electric vehicle imports. The Chinese government has asked its manufacturers to halt expansion plans in Europe over this trade conflict, including stopping active searches for production sites in the region and signing of new deals (Zhang, Lepido & Torsoli, 2024).
This creates an opportunity for South Africa to become a hub for Chinese electric vehicle manufacturers – and serve as a springboard to the rest of Africa, the developing world, and even Europe. China could set up manufacturing plants in South Africa; and co-manufacture with South African companies. However, in such co-manufacturing, there must be an awareness of “political capitalists” – politically connected individuals with no industry experience, but who set up “black economic empowerment” companies to partner with established firms.
Chinese research, technology and development organisations could partner with South African ones to exchange green economy technologies for development purposes. Industrial policy-learning between China and South Africa is critical to help South Africa boost its industrial policy capacity.
China should match Western countries’ financial commitments for climate change to South Africa. However, China’s financial commitments should be different: rather than loans, it should be grant funding, manufacturing, technology, supply chain, and research and innovation exchange partnerships.
How China can partner with Africa to boost green economies and low-carbon development on the continent
African countries lack public funds to finance the green economy and low-carbon development. Grant funding is critical for this. Development finance, private finance, and public-private finance is critical to achieve the green economy goals.
African leaders expressed their frustrations with the industrialised countries’ inability to honour their commitments to providing adequate climate finance. China can partner with Africa in international climate change negotiations to secure better climate change funds for Africa – and to ensure that industrial countries honour their climate change financial commitments. But China could also be a source of grant funding for African countries’ green economy and low-carbon development initiatives.
African countries have inadequate infrastructure for green projects, which undermines delivery and deters new investors. Almost all African countries need to upgrade and expand their existing grid infrastructure, while building new renewable energy generation capacity.
Over 600 million people in Africa lack electricity. Affordable clean energy sources is critical to plug the power gap. China could partner in expanding Africa’s infrastructure, which underpins any green economy and low-carbon development strategy.
Foreign businesses in Africa often do not implement green practices – as there is largely a lack of enforcement in these countries. It is critical that the Chinese government compel Chinese state and private companies to implement genuine green practices in their operations in African countries.
Africa and China can also collaborate on food solutions for China – for example, by helping Africa to boost climate-smart agriculture. In 2016, the African Development Bank in 2016 launched its Technologies for African Agricultural Transformation (TAAT) – a continent-wide initiative designed to boost agricultural productivity by using new technologies. TAAT brings productivity-increasing technologies to crop, livestock and fish smallholder farmers. China could partner with African countries to boost new agricultural technologies to increase African agricultural productivity.
Moreover, China could establish manufacturing hubs for electric vehicles in African countries, and link African economies into their global manufacturing value chains.
South Africa: policy and regulator reforms needed
South Africa does not have a coherent industrial policy that places the green economy as one of the pillars of economic transformation, industrialisation and economic development. Truth be told, the county’s green economy and low-carbon development initiatives appear to be ad hoc – not part of an overall industrial strategy. South Africa can learn from China’s green economy industrial policy, both in its scope and execution.
For 20 years, China’s government has pursued clear, well-thought-out industrial policies to make it the world’s biggest producer of electric vehicles. China also pursued a focused industrial policy to build renewable energy manufacturing capacity.
In South Africa, whereas the apartheid government had industrial policies that produced disruptive technology, the post-1994 government has lost the ability to pursue industrial policies that can foster disruptive technology. The current South African government can learn from how the Chinese have pursued industrial policies that usher in disruptive technologies.
South Africa can learn from China how to quickly push through renewable energy, which is currently being slowed down by pro-coal proponents and opponents of renewable energy within and outside the ANC tripartite alliance. The Chinese government pushed through renewable energy with steely determination; similar determination is lacking in the South African government.
South Africa should introduce tax incentives to large corporates, SMMEs and households for renewable power generation. Tax systems must offer incentives to low-income households and businesses for deploying renewable energy.
Banks should be compelled to provide affordable finance to households and SMMEs to secure renewable energy generation. Customers should also be allowed to sell excess power back to the grid.
South Africa needs regulations to prevent “greenwashing” by countries and businesses who claim their policies, initiatives and investments are green – when they are not. There are currently no laws in South Africa combating green and sustainability claims. There are only voluntary standards. These standards need to be incorporated into legislation. There are increasing civil society efforts to litigate against companies using greenwashing tactics (Parker, 2023).
South Africa’s collapsing infrastructure undermines any industrial policies – it is critical to reboot these systems. This is made clear by China’s industrial policy, based on a pillar of “world-class infrastructure suitable for shipping goods anywhere in the world” (Graham, Belton & Xia, 2021).
The African continent has not established effective regional power pools to share power, renewable energy or gas, which are critical to boost individual country power grids. South Africa will have to take a leadership role in helping African countries to build regional power pools, to exchange power, and trade power between countries, and so avoid energy shortages or surpluses sitting idle.
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This report has been published by the Inclusive Society Institute
The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals.
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