There is a strong case to direct most of the $8.5 billion pledged at COP26 last year to help South Africa decarbonise its economy to Eskom, according to its chief executive, André de Ruyter.
De Ruyter is at the helm of the power utility, which is taking steps to repurpose its retiring coal-fired power stations with green energy solutions. He was speaking at Standard Bank's Climate Summit on Tuesday.
"The money, if we are serious about decarbonisation, should be directed, by and large, to Eskom," De Ruyter said in response to a question about why not all the funding was allocated to the power utility.
Part of the $8.5 billion, or R153 billion – which is a combination of concessional loans and grants – will go toward Eskom's plans to repurpose old coal-fired stations and develop grid capacity for renewables.
The rest will be directed towards developing green hydrogen and electric vehicles, with the details in an investment plan currently under consideration by Cabinet. According to Minister of Forestry, Fisheries and Environment Barbara Creecy, who was also at the summit, the aim is to present the investment plan at COP27 to be held in Egypt's resort town Sharm El-Sheikh next month.
According to De Ruyter, allocating the funds to Eskom is possibly the "cheapest and quickest" decarbonisation route for the country.
Creecy, in her address, said that the energy sector is an input to all goods and services in the country. The carbon content from electricity generation will influence the carbon content of goods and services exported by South Africa – subjecting them to carbon border taxes, which would make them less competitive with other goods from other countries with lower carbon content.
Commenting the financing of green hydrogen, De Ruyter noted that the country had limited resources to enable exports just yet.
On electric vehicles, which South Africa needs to develop for its automotive industry to remain globally competitive given that the sector contributes between 4% and 5% of GDP, De Ruyter said it would be hard to justify concessional loans for the sector.
"I am not quite sure how lenders will think of extending concessional financing to OEMs (Original Equipment Manufacturers) who will pass the benefit of concessional financing to their shareholders," he said.
Private sector funding
De Ruyter echoed views that the $8.5 billion would likely not be enough on its own and that private sector capital would be needed to bolster funding to help South Africa reduce its emissions that contribute to climate change.
Creecy stressed than an estimated R1 trillion would be needed between now and 2030 to give effect to the transition. She noted that some countries had offered support, but said the bulk of finance would have to come from the private sector.
