Can a deeply-flawed model for climate financing, decarbonisation and reparations be reformed?
- What kind of monetary carrot is needed to help high-polluting middle-income countries to rapidly decarbonise? Mainly because of a South African pilot project supposedly worth $8.5 billion, the worlds of high finance and climate justice are colliding, with unfortunate results expected at the United Nations climate summit in Sharm El-Sheikh, Egypt.
When the COP27 opens on November 6, a high-profile climate finance deal will be signed by climate policymakers from Washington, London, Paris, Berlin, Brussels on one side, and from Pretoria and parastatal electricity firm Eskom’s Johannesburg headquarters on the other. On October 19, South Africa’s Cabinet approved – and the Presidential Climate Commission endorsed – the deal, but details are still murky.
In Glasgow a year ago, Western leaders had promised $8.5 billion for a Just Energy Transition Partnership (JETP) that would serve as the world’s decarbonisation model. Since then, the concept has taken root in Indonesia, Senegal and Vietnam – although Indian negotiators are reportedly opposed to the emphasis on cutting coal.
Since then, persistent delays and non-transparent processes mean crucial details have been hidden from the view of both South Africans and Western taxpayer contributors to the JETP.
That leaves us with ten sets of critical questions.
1) First, will the JETP (plus the German government’s additional contribution of an extra $340 million announced on October 5) provide Eskom CEO Andre de Ruyter with new foreign loans that, in part, encourage the parastatal to repay existing “Odious Debt,” i.e. loans from the same countries’ financiers, that it really should not be repaying on sound anti-corruption and also climate grounds?
Specifically, two fragile coal-fired power stations – Medupi and Kusile – cost not the original $9 billion promised, but instead closer to $25 billion, and most of it is debt-financed. Then-Eskom chair Valli Moosa awarded the main boiler procurement contracts to Hitachi in 2007, just after the Tokyo firm gifted 25% of Hitachi Power Africa to the ruling party’s funding arm Chancellor House.
That act was termed “outrageous” by CorruptionWatch because at the time Moosa was also an ANC Finance Committee member, resulting in the Public Protector’s 2009 finding of “improper” conflicts-of-interest management by Moosa, followed by Hitachi’s 2015 bribery prosecution in Washington – and $19 million fine – under the U.S. Foreign Corrupt Practices Act.
There was no subsequent South African prosecution, though it was easily the most expensive case of local state capture by a multinational corporation. Extraordinarily, Moosa now is the main manager of the Presidential Climate Change Commission, which has a major role in the JETP.
Should new JETP loans enable repayment of interest on Odious Debt, instead of challenging these Ponzi-style lenders (i.e. whose new loans mainly cover interest repayment on old loans) to take a haircut, as punishmnet for funding the fraud-filled, ultra-polluting power plants?
2) Second, why specifically give the World Bank a central role in JETP management?
A protest at the World Bank’s Johannesburg office on October 14 drew scores of community and environmental activists insisting not only on the Odious Debt’s cancellation, since a 2010 Medupi credit of $3.75 billion was the lender’s largest ever project loan.
Moreover, two decades ago, the Bank made a venture capital investment in what became a massive coal mine bordering Hluhluwe-iMfolozi nature reserve (Africa’s oldest), displacing hundreds of residents but without having obtained legally-required environmental permission. On October 20, 2020, leading anti-coal activist Fikile Ntshangase was assassinated there, at a crucial point in the struggle against coal mine expansion, resulting in her lawyer Tembeka Ngcukaitobi demanding reparations: the return of mine profits worth millions of dollars to the victimised community.
Anti-Bank protesters also demanded an end to its financing of a Richards Bay Liquefied Natural Gas terminal.
Last month, Al Gore called for firing of the institution’s president, (Trump-appointed) David Malpass, due to his “ridiculous” climate denialism, but the problem is evident when other staff push methane gas projects or demand Medupi debt repayment.
3) Will the JETP allow De Ruyter to use 44% of incoming funding for methane gas-fired power plant construction even though methane is 85 times more potent a greenhouse gas than CO2 over next 20 years?
Given that JETP funding for Eskom is “fungible,” finance needed for De Ruyter’s two preferred methane gas power plants – 3000 MW at Richards Bay and 1000 MW at Komati, together costing R85 billion – will be freed up as it comes from the same pool to be used for solar and wind generation. Won’t JETP inflows allow Eskom’s coal addiction to be replaced by methane gas dependency?
4) Will JETP partners permit Eskom’s meth addiction because they believe – as does the European Union’s “sustainable finance taxonomy” – that gas (and nuclear energy) can be considered “green”?
Politicians in Brussels are obviously panicking about Russian sanctions – but won’t their July determination threaten the credibility of inclement (2026) EU Carbon Border Adjustment Mechanism climate-based trade sanctions against high-carbon South African steel, cement, fertilisers, aluminium, and electricity generation (the tariffs on which are in turn based on an EU Emissions Trading Scheme that does include methane and nitrous oxide emissions)?
5) Does the JETP turn a blind eye to – thus rewarding – De Ruyter’s many extremely unjust, racist Eskom policies?
One is “Load Reduction” energy racism, which disconnects black townships far more frequently than white neighbourhoods.
Another is his requested 32% increase in 2023 tariffs, plus his phase-out of residual pro-poor cross subsidies to black homeowners.
A third is permitting ongoing Eskom power plants’ violations of Air Quality Act regulations (by a factor 3200 times accepted levels), which kill 2200 residents in the vicinity of power plants and coal mines annually, and produce the world’s worst SO2 pollution.
6) Must the JETP financing come in the form of loans, which may be called ‘concessional’ – but aren’t there crucial caveats?
Surely any JETP representing a genuine carrot would take the form of grants, given South Africa’s existing $174 billion foreign debt (up from $25 billion when liberation was won in 1994)?
Unfortunately, as Climate Home News sources report, “less than 3% of the money will be delivered as grants, with the rest split between concessional and commercial loans.”
Moreover, will JETP loans be denominated in the West’s dollar, pound and euro currencies? If so, what with the Rand crashing from R14/$ to R18/$ in recent months, then what effective real interest rate should be assumed for repayment into a future with much further depreciation?
And if the JETP is actually quite expensive as the currency crashes and as exports fall once the commodity boom is over, why not issue local-currency bonds for Eskom decarbonisation instead, given South Africa’s exceptionally liquid financial markets (with one of the world’s highest-ever “Buffett Indicator” ratios of stock market capitalisation to GDP)?
Indeed, what hard-currency spending is truly required for core Just Transition mandates such as re-employment opportunities and climate adaptation – i.e., climate-proofing infrastructure and housing to withstand rain bombs, or irrigation to beat the droughts – where workers are paid in the local Rand currency and most materials are acquired locally, not imported?
And in future, won’t the interest rate on funding through an expanded JETP soar, if as Environment Minister Barbara Creecy said on October 20, “what we’re very sincerely hoping is that [the plan] would create appetite from the private sector and would begin to mobilise the significant quantities of financing that we’re going to need over the next ten years.”
At present, given Pretoria’s (and Eskom’s) junk rating, the interest rate demanded from international financiers for 10-year bonds is more than 10% (fifth highest among countries issuing such bonds), making such private participation exceptionally expensive.
7) Did Western JETP negotiators conduct any genuine consultation with the most vigorous community, labour and environmental critics of Eskom?
Indeed, do South Africa’s main JETP negotiators – especially former central banker Daniel Mminele and National Business Initiative leader Joanne Yawitch – have any track record of promoting climate justice alongside these social forces?
8) Will JETP funding be directed not only to Eskom but also to other multinational for-profit corporations including high-carbon auto and petrochemical companies?
Recent reports suggest the JETP will partly aim to kickstart an elite Electric Vehicle market, especially from South African assembly lines run by German climate-cheaters VW, Mercedes and BMW, hence attracting Berlin’s conflicted-interest state financing. Won’t these subsidised auto exports be sent to very wealthy customers abroad, as is desired by trade minister Ebrahim Patel, on top of $1.7 billion worth of existing irrational annual subsidies for petrol and diesel cars?
And the funding may also subsidise the “green hydrogen” fantasies of one of the world’s worst polluters, Sasol. Privatised in 2000 followed by a New York stock market listing, the apartheid-era firm was originally state-owned, getting its main boost from 1970s-80s oil sanctions.
The world’s single worst point source of CO2 emissions comes when Sasol’s Secunda refinery inefficiently squeezes massive amounts of coal to generate liquid petrol, emitting CO2 at a rate of 60 million tonnes annually (12% of the country’s total). Its racially-biased ecological wreckage is notorious from South Africa to a failed $12 billion investment in Lake Charles, Louisiana that De Ruyter promoted.
Just as German chancellor Olaf Scholz visited South African president Cyril Ramaphosa in May to purchase more coal, his state website acknowledged the “original sin” role of Sasol’s Nazi-era Fischer-Tropsch coal-to-liquid technology. Yet, won’t JETP finance soon amplify Sasol’s profits by directing South Africa’s currently-scarce solar energy into green hydrogen – for export (especially to Germany) – while local residents remain disconnected?
9) In advance of the United Nations COP27, will the long-delayed conclusion of the JETP artificially boost the (generally fake) green credentials of the main Western polluters, as happened in Glasgow in November 2021?
Won’t such applause be terribly inappropriate given the timing, just as Germany is importing several millions tonnes of South African coal for its rebooted power plants due to Russian sanctions, and the UK Conservative Party commits to new methane gas fracking?
10) And speaking of glaring hypocrisy, the West is not alone, for isn’t Pretoria’s sub-imperial fossil ambition increasingly lethal, when deploying 1200 SA National Defence Force troops to northern Mozambique to defend Paris-based TotalEnergies, Houston-based ExxonMobil and other multinationals drilling for 125 trillion cubic feet of gas, in a war zone that has left a million people displaced and thousands dead, just as climate-fueled cyclones on the coast become more intense?
If in coming years, as Eskom injects gas in the form of Mozambique’s “Blood-Methane” LNG – or Total’s Brulpadda/Luiperd methane from offshore South Africa – into the national grid, won’t that infrastructure become a stranded asset, as even the National Business Initiative warns?
Given these contradictions, those committed to climate justice – in the West and everywhere – should consider endorsing a February call by South Africa’s Climate Justice Charter Movement, for sanctions against US, UK and European taxpayers’ financing of the JETP?
Of course, no one should oppose a JETP if these questions are resolved , and especially if the Western super-polluters concede the $8.5 billion is simply its downpayment on long-overdue “climate reparations” to Africa. The polluters should compensate poorer countries for leaving fossil fuels underground, as well as covering growing climate-proofing adaptation costs and extreme-weather Loss & Damage expenses.
Such a policy of recognising the climate debt – and providing compensation for leaving fossil fuels underground – will help all Africans fight their own national leaders (like Ramaphosa) and transnational oil companies.
Notwithstanding ongoing protests at African oil conferences from London to Cape Town and the activist appeal “don’t gas Africa!” – the continent’s elites ever more incessantly claim that oil industry “development” is due Africa and that fossil-fuel profits will trickle down to the continent’s masses, all evidence to the contrary.
So, given the balance of forces, these ten reasonable sets of questions will not even be considered by establishment negotiators, much less answered satisfactorily. Protesters here in South Africa targeting high emitters on November 12 – a global day of action – aim to keep the world aware of how much more reform is needed before South Africa’s Just Energy Transition Partnership is actually worthy of that name.
Yazar: Patrick Bond
is professor at the University of Johannesburg Department of Sociology, and co-editor of BRICS and Resistance in Africa (published by Zed Books, 2019).
