Vallis Report | May 2022

Written by
Zeb Baker-Smith
for Vallis Group Limited

Introduction

Three-quarters of South Africa’s coal continues to be used domestically and remains a crucial component of everyday life in the country. From the first discovery of the Witwatersrand’s copious mineral wealth to the industrial boom of the 1950s and the present day, it cannot be stated enough how vital a part coal has played as the primary source of energy in the country. Currently, around 80% of the country’s energy sector runs on coal, but many live in hope that the 2020s will mark the twilight years of South Africa’s dependency on the fossil fuel. President Cyril Ramaphosa’s recent addresses have envisioned a fall in its influence, declaring his expectation that coal-based power will contribute to approximately 60% of all power generated in South Africa by 2030. It is planned that wind and solar power will supply around a quarter of the country’s capacity by that same year. Predictably, this announcement was met with frustration from either side of the debate, those who assess such targets as too extreme and those who argue that the plans do not go far enough.

Meanwhile, despite small surges of case numbers in recent weeks, South Africa has begun to emerge from the pandemic. Lockdown is now officially over in South Africa. But, over the last two years, when the country’s first shutdown was enforced, Africa’s third-biggest economy, like many others, has been bludgeoned repeatedly. South Africa suffered the highest number of COVID-19 instances on the continent at 3.7 million cases. Huge numbers of people also lost their livelihoods during the bleak periods of strict lockdown. The unemployment rate currently stands at around 35%.

Now restrictions are relaxed, the financial situation is predicted to settle. However, extreme weather is taking a similarly heavy toll on eastern parts of the country. In the recent Kwa-Zulu Natal floods, hundreds died, and thousands were displaced from their homes because of torrential rain, mudslides, and flooding. Infrastructure in cities like Durban was destroyed. Disruptions to the water supply, phone networks and the freight industry are symptomatic of a recurrent trope – that the global south is continually feeling the effects, both human and economic, of changing climates. Weather patterns have, up until last week, continued to exact similar numbers of casualties and levels of damage. Many South African environmentalists are pointing the finger at fossil fuels and the lack of meaningful action being taken by the government.

The first half of this report focused on South Africa’s historic relationship with coal, the mining industry and its export market. An outline of domestic consumption of coal and an explanation of its current generational deficit follows in this report, the second of two instalments. It will track the historic and current troubles of ESKOM as well as the difficulties of its load-shedding policies. The practicalities of the nation’s COP26 deal and the possibility of a South Africa without coal will be examined, alongside the potential for renewable energy and the obstacles standing in the way of a greener future for country and continent.

Domestic Consumption and Power Generation

ESKOM, the country’s public electricity utility, functions as a monopoly and controls almost all electricity generation in South Africa, the transmission of power around the country and a good part of the distribution into homes, businesses and industry. Even when one considers South Africa’s position as the continent’s energy leader, ESKOM’s annual generation of 46 GW represents approximately 40% of the electricity produced on the Africa in 2017. To understand the current topography of this situation, it is useful to trace the company’s path from its founding to it becoming the dominant landmark in the chaotic and challenging landscape of power generation in South Africa.

The Electrical Supply Commission (ESCOM), or to use its Afrikaans name Elektrisiteitsvoorsieningskommissie (EVKOM), was founded in 1923 in response to a parliamentary act the year before. The legislation stated that, although the firm would be exempt from tax, the electricity it provided would be sold at cost. These terms favoured many industries across South Africa, namely the extraction of minerals, their subsequent transport and various metallurgical processes that they require, which, together, had flourished since the turn of the 20th century. This was the bedrock of the new republic’s economy, and a centralized power supply would provide it with a reliable wealth of affordable electricity.

Over its first forty years, the utility would establish power stations across South Africa, raising capital by issuing debentures and benefitting from state-guaranteed loans. ESCOM focused its generating efforts in urban areas, establishing major power plants in cities such as Durban, Cape Town and Johannesburg. This coincided with a previously rural-dwelling demographic, the ‘Poor Whites’, flocking to the cities for employment opportunities during the 1920s and 1930s. As the demand for power generation grew in cities across the country, it became necessary to extract larger quantities of coal and therefore supply the mines with dependable access to power. So began the process of constructing power stations nearby or on top of coal mines, such as the Witbank power station east of Johannesburg in modern day Emalahleni in the province of Mpumalanga. The largest station of its kind at the time, with generating capacity of over 100 megawatts, its construction and operations were jointly funded by ESCOM and the privately-owned Victoria Falls and Transvaal Power Company (VFTP), one of the many private companies which had played a major part in power generation across the region prior to the parliamentary act. With government support, the public utility was able to buy out VFTP and other private would-be competitors in the aftermath of WW2 and thereby gain a monopoly over power generation in South Africa. This blueprint for expansion would be repeated across the country’s northwestern coalfields. Aside from powering a market of predominantly urban-dwelling white consumers and the mines, the utility also began to generate electricity for national industries such as steelmaking and other metallurgical operations like aluminium smelting in Richards Bay, each of which entail extreme heat and thus city-sized demands for power.

After the National Party’s general election victory in 1948, ESKOM (as it would later become in 1987) emerged as a focal point of the apartheid economy, itself built on the fiscal principles of extracting South Africa’s vast mineral resources at the cheapest rates of exploitative labour and power. During the 1960s and 1970s, the surplus quantity of coal being extracted not only allowed South Africa to build an export market for the fossil fuel, but also resulted in foreign capital flooding into the country’s mining industry. The combination of huge seams of coal being mined and the establishment of nearby ‘six-pack’ power stations, so-called because of their standardised use of multiple coal-fired generators units, was a winning one. By virtue of the scale of operations at these power stations, vast amounts of power could be produced at low cost. ESKOM prospered, growing the nations’ generating capacity tenfold between 1960 and 1990 and building a surplus on what the country and its grid required, providing the utility with opportunity to continue modernising its equipment at impressive rates. One of its triumphs was connecting the coal-rich, industrial centres of the Witwatersrand such as Johannesburg with their natural potential for generating electricity to the coastal cities such as Cape Town and Port Elizabeth through a national 400 kV power network. Added voltage boosted South Africa’s grid as urban population figures continued to increase.

As the fiscal growth of the 1960s slowed, international backlash towards the apartheid regime began to adversely affect South Africa’s economy. Trade sanctions were imposed by major Western powers throughout the 1970s. According to government sources, the outlook for ESKOM, however, remained largely positive, and the surplus that had been fostered over these twilight years of apartheid was presented as evidence of this. However, a series of failures, including collapses of the grid and, allegedly, the first instance of embezzlement in the company’s history occurred as R8 million was reportedly siphoned off by its Assistant Chief Accountant 1981. Likewise, as financial restrictions were enforced and capital flowing into the country fell away, ESKOM’s inability to access US Dollar-denominated bonds and the rising costs forced the utility’s hand. A commissioned inquiry was set up that would advocate for wholesale change to ESKOM’s financial management, not least the need for the utility to free itself from the shackles of pricing electricity as per its production cost. The perceived overcapacity of power, a necessary element for the success of many national electricity networks across the world, would prove fatal to the ESKOM’s brave new age of independent pricing, as tariffs continued to fall steadily, dropping by around a third between 1978 to 2004.

The most significant setback to South Africa was the oil embargo of 1984. Against such a backdrop, the importance of coal supply to the nation could only grow. SASOL Limited, a firm founded in the wave of industrial development following WW2, were major proponents in the production of coal-based synthetic fuels and advances in the sphere of organic chemistry during the 1980s. Though the effects of an embargo could be warded off in this way, the social conscience of global financiers prevented the influx of foreign capital to which South Africa had grown accustomed in earlier years. It was partly this fiscal instability affecting events on the country’s political stage that would lead to President F.W. de Klerk’s release of Nelson Mandela before the first free and fair, non-racial elections of 1994 won by the African National Congress (ANC).

With the advent of South Africa’s first democratic government, under Mandela’s leadership, came the chance to level up the areas neglected and left behind by apartheid rule. Previously, the black population, a large part confined to rural ‘bantustans’, had been disproportionately affected by a lack of electricity across large swathes of South Africa. From the late 1990s, the ANC prioritised the electrification of the townships. With its capacity, ESKOM was able to provide absurdly cheap power to homes, schools and clinics, pricing electricity at levels far below what it ought to have cost. However, as the number of consumers increased rapidly, the capacity that had been built up during the apartheid period was lost just as quickly, meaning any ability to fund the replacement equipment had been lost as the millennium dawned.

It was during the early years of 2000s that Thabo Mbeki’s government began to realise that ESKOM needed to build capacity as the population grew exponentially, the economy diversified, urbanisation soared and, with it, demand for improved quality of life. More and more households required power, which could not be delivered by the current generating infrastructure. Many of the power stations that had been built nearly forty years before were no longer fit for purpose. One option that lay before the government and Alec Erwin, the Minister of Public Enterprises, was privatisation of ESKOM and its network, an idea that was eventually shelved in favour of private entities financing and investing in component parts of the infrastructure.

Efforts were made for private investment, but the below-cost sale of power would have made any investment unprofitable. As the global community began to jolt awake to cries of climate destruction, the South African government pondered over whether to stick or twist. The decision to forge on with this coal-powered future was made. ESKOM was given the responsibility to build two of the biggest coal-fired plants ever constructed, Medupi and Kusile, two names which have since taken their place in the everyday parlance of South Africans due to their well-publicised failings. The construction of both power stations have gone way over budget since their commission in 2007. Designs for their respective capacities were doubled shortly afterwards to reach 4,800 MW and, alongside these figures, costs have nearly tripled. According to several sources, the total cost may have reached in the region of between $9 billion and $14 billion. Medupi was reported to have achieved commercial operational status on 31st July 2021, before its fourth unit malfunctioned and suffered significant damage less than two weeks later. Meanwhile, Kusile’s fourth unit of six was connected to the grid days before the close of 2021. The total duration of each site’s construction stage was originally anticipated to be four years. Now, nearly the best part of a decade later, contracts for coal sourced to operate the semi-functional stations have since become active, obliterating the utility with soaring costs and sparse income. ESKOM’s debt is said to have reached R430 billion (or $27 billion) and it announced a loss of R19 billion (or $1.17 billion) in the financial year of 2021.

While the company’s debts continued to mount due to poor business decisions, the 2010s saw scandal plague ESKOM at every turn. During the presidential stint of Jacob Zuma, several high-level officials appointed in 2015 appeared to enjoy close ties with the influential Gupta family, the extent of whose relationship with the former South African president continues to come to light through inquiries and reports. Accusations of ‘state capture’ by the infamous family stretches well beyond the appointments of ESKOM management and is even said to have influenced Zuma’s choices for the country’s cabinet. Many of the allegations of corruption focus on coal-sourcing deals with Gupta-owned suppliers, Tegeta, who were awarded a huge contract, and Trillian Capital Partners Ltd., who, despite being uncontracted, were paid a total of R495 million for ‘financial services’. In 2019, two senior ESKOM managers were charged with fraud and corruption related to the construction of Medupi and Kusile Power Station, after an investigation concluded that R139 billion had been stolen from the projects by 11 contractors. It is these recurring instances of overrunning budgets and financial misconduct that are directly to blame for the soaring tariff costs for ESKOM’s customers.

Load Shedding

From 2006 onwards, the utility had spiraled into a tailspin, simultaneously incurring significant costs as tariffs remained low and raising vast amounts of debt to fund the electrical infrastructure projects which South Africa need to cope. The most visible symptom of the zombie-like condition in which the utility found itself by late 2007 was the phenomenon of ‘load shedding’ or ‘rolling blackouts’. ESKOM feared that the inability to meet demand would initiate a catastrophic breakdown of the whole grid. Thousands of South Africans were left without power as ESKOM first cited “unplanned outages” and “equipment repairs” at its power stations. Prior to his departure as leader, Mbeki apologised formally and owned up to the neglectful treatment of ESKOM for which the ANC government had been responsible. Clearly, by this time, the surplus was gone. The impressive technology of the ‘six-pack’ power stations and national grid constructed in the 60s and 70s, had aged and, due to declining reserve margins, many of these sites had been mothballed. Not only did South Africa’s grid now lack sufficient generating capacity, but the national demand for electricity which it needed to meet had risen rapidly from 51% of households in 1994 to 92.7% in 2016.

Nearly fifteen years later, South Africa’s ability to power the national network remains uncertain. Though the severity of the load shedding has varied over the years, outages continue to plague large parts of the country’s population for multiple hours in a day. Notionally, the outages are determined according to area and a schedule, frequently between 2-4 hours at a time, However, the reality for many South Africans is that an hour is the usual notice period for a load shedding update. Zones within cities and large swathes of the state are load shedded for allocated periods based on the amount of generational capacity that is offline. Each level is based on how many thousand megawatts are required to be removed from the grid. ESKOM’s official levels of load shedding currently ranges from Stage 1, approximately six hours of blackout every three days, to the presently theoretical Stage 8, where 12 hours of a day would be spent powerless. In December 2019, Stage 6 was initiated for the first time, a total of 24 hours with no electricity across three days, despite ESKOM declaring the country to be at Stage 2.

The present condition of South Africa’s power network not only makes basic day-to-day life extremely difficult for millions across the country, but it is highly detrimental to local business. While the economy faltered during the pandemic, unemployment figures have soared and many South Africans have had to seek income from within the confines of their own homes. Small businesses cannot operate, let alone prosper, without the support of the grid. Typically, business owners and households are being forced to rely on private generators and cover the increasingly prohibitive cost of running them. There is frustration among citizens that there is alternative being put forward by those in power and many fear the financial consequences of load-shedding going forward with the cost of living rising globally. By no means is load-shedding limited to South Africa. It is a pan-African issue, one that has been happening across the continent for decades. Ghanaians, for example, led country-wide protests against load shedding. According to the World Bank, the national grid’s lack of reliability is said to cost the Nigerian economy $28 billion annually. In Ramaphosa’s State of the Nation address in February 2021, it was announced that ESKOM would face a shortfall in electrical generation for the next five years at least, amounting to somewhere between 4,000 and 6,000 MW. Load shedding and its debilitating effects are here to stay and will continue to dog South Africans into the foreseeable future.

Sustainability and environmental impact

Africa’s total installed energy capacity of around 150 GW which serves over 1.3 billion people remains less than that of Germany and its population of 83 million. In 2019, 570 million people in sub-Saharan Africa still did not have access to electricity. To put that figure into context, this is 43% of the continent’s population. Huge sums of money are being invested to solve this issue. However, the financial burden of the pandemic has hindered any solutions and potentially worsened the situation. It is said that off-grid solutions could be the solution to the dearth of power on the continent as well as the impending climate crisis.

Surely the most sun-rich continent could utilise the seemingly endless potential of solar power? Government regulation and licensing laws across several countries provide complicated bureaucratic and box-ticking hurdles to schemes. Schemes of this sort require mobilising local interest and convincing the communities where such infrastructure will be implemented. Distributing electricity to previously unpowered rural areas entails cumbersome processes which often last over 2 years. Profits can take longer to materialise, hence the hesitancy of some governments to involve themselves in private sector schemes. Bottom-line incentives still reign over the more altruistic outcomes. Much of Africa’s solar infrastructure focuses upon concentrated areas, often small, rural villages. Households receive power via prepaid meters which can be credited using mobile money. There is no blueprint for powering larger settlements by solely solar means.

The renewable potential of the continent is significant. It has been shown by several pilot projects that Africa could undoubtedly power itself and even generate a surplus of capacity. One study has even claimed that the entire planet’s annual energy usage could be generated by covering 43,000 square miles of the Sahara Desert in solar panels, an area roughly the size of Cuba. The eventual goals of these green energy projects are getting closer to fruition and appear to be further within grasp than the capabilities of fossil fuels, both in terms of timeframes and required infrastructure.

Gwede Mantashe (left), Minister of Mineral Resources and Energy, and Cyril Ramaphosa (right), President of the Republic of South Africa.

South Africa itself sits as an anomaly within the energy landscape of the continent, contributing over a third of Africa’s total installed capacity. According to statistics provided by the EDGAR database, the country sat between Canada and Mexico as 12th biggest emitter of carbon dioxide in 2019 despite being the 33rd biggest global economy. In 2020, the country produced more than double the CO2 emitted by Egypt, the next largest emitter in Africa. Approximately 80% of its 450 million metric tonnes of carbon emissions derive from its coal-reliant energy supply according to the National Planning Commission. Due to the nation’s focus on industry and the vast generating requirements involved, South Africa’s per capita rates of emission resemble that of a western European country, such as the UK, France or Italy.

Taking the effects of coal on the environment as read, South Africa’s statistical reliance on fossil fuel is as unhealthy as it is clear. However, the existence for South Africans who live within a throw of the coal mines, or beneath the power station chimneys in the townships of Mpumalanga makes for grim reading. The remnant gases that are released into the atmosphere during the combustion of coal leave significant quantities of deadly and noxious particles of carbon dioxide, as well as sulphur dioxide and nitrous oxide. The effects of sick dust and debris damage are commonplace in these communities, where asthma, acute breathing issues and lower life expectancy beleaguer the inhabitants.

COP26 Summit

In early November 2021, the COP26 Summit held in Glasgow was billed as humanity’s last chance to fend off the impending climate disaster. Delegations of political leaders and environmentalists from nearly all nations across the world attended. Funding from the world’s biggest economies was the aim for many African delegates, seeking investment to foot the bill for adaptation to climate change, reduction of their emissions and cope with unavoidable shifts within their natural environment. Many experts argue that western countries appear to have developed by virtue of fossil fuels for decades. However, in a bid to reduce global warming to a maximum of 1.5˚C, the same countries who have prospered are pressuring developing nations to manage without them and commit large sums to the cause of cleaner energy. The funding targets promised at previous conferences like Copenhagen in 2009 and Paris in 2016 have still failed to materialize, and it will be 2023 at least before these pledged sums are met.

Overall, the decision to phase down the clauses about the use of coal, advanced by China and India, was a disappointment to many representatives in Glasgow. Predictably, the hundreds of billion dollars needed to tackle climate change transition to renewables was not forthcoming. Disappointingly too, funds put aside for loss and damage, such as sea-level rises, drought and other environmental disasters, though acknowledged to be necessary, were never agreed. The prognosis has gone on too long and the treatment stage must be entered. The onus then is in those who have pledged finance to provide before action can be taken by these developing nations.

One deal that was struck early in the conference was the $8.5 billion investment pledged by a partnership between the USA, the EU, Germany, France and the UK with the aim to reduce South Africa’s dependency on coal and transition to renewable sources of energy. $500 million in grant money has been set aside to mitigate job losses in coal-rich areas across the country, to promote opportunities for miners to retrain and mining companies to realign themselves, as well as give a hand-up to renewable enterprises. It could be a possible blueprint for de-carbonisation for developing middle-income countries around the world and has been described by Cyril Ramaphosa as a ‘watershed moment’. The rest of the package would take the form of concessional debt, though it is still unclear how favourable the terms would be.

South Africa’s Renewable Landscape

To understand the context behind South Africa’s package better, the country’s renewable landscape must be examined. South Africa has enormous resources for generating green energy, particularly its potential solar and wind-based power. Generational capacity derived from privately-funded renewable sources is growing at a healthy rate. Investment levels are on the rise and a formalized and competitive tendering process, the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP), has been established by the government to facilitate funding for grid-connected schemes. The cost of renewable energy has dropped steeply in five years, resulting in many of these wind or solar-based schemes being almost half as cheap than the coal-fired plants being proposed. At the close of 2021, REIPPPP announced the award of 25 project contracts, worth around R50 billion, or $2.8 billion, to private sector entities. It is expected that these projects will amount to an increase of 2,583 MW, or 4.5%, to current capacity of the grid, still just half of the President’s stated generating deficit. Projects that are already operational like the Northern Cape’s Kathu Solar, one of the largest photovoltaic power plants in Africa, provides the 75MW, enough for approximately 73,000 households. The solar plant is one of a number of privately-funded renewable schemes designed, constructed and operated by Red Rocket Energy. The same have also established a hydroelectric project in the Free State and has a continent-wide pipeline of schemes in excess of 2 GW.

Looking Forward

Financial Hurdles

That headway is being made is plain to see, but one can only describe it as progress on a boutique scale. Recent policy signaling the shift to renewables has been hindered by several issues. Clearly, there is worldwide interest and appetite from foreign governments and the private sector to transition the South African economy away from coal. However, it is estimated that ESKOM’s transition to green energy alone would cost somewhere in the region of 30 billion USD, a total that dwarfs the package agreed in Glasgow, and that is before its accumulated debt is mentioned. Finance is undoubtedly the sticking point for many of the government’s intended targets. Still, nowhere near enough has been pledged, perhaps a mere 25% of the projected cost of a full transition.

Not only is it a question of how much. The means by which the money from the COP26 deal will be procured remains unclear. ESKOM’s infamous recent history stands as a cautionary tale to the foreign governments involved, as does the lack of a coherent solution to its financial troubles. The failure to come to grips with fixing the South African electricity sector can be directly attributed to ESKOM’s struggles not being addressed. In 2011, a successful intervention and the introduction of renewable power generation put ESKOM into a potentially worse commercial situation and resulted in a suspension of several early renewable projects. The US, EU, Germany, France and the UK might decide, rather than bestowing money directly to South Africa, to install equipment in countries so that the benefit of donation is secure and the risk of funds being misappropriated is averted.

According to an interview in November 2021 with Barbara Creecy, the incumbent Minister of Environment, Forestry and Fisheries, declared that South Africa had compiled ‘an investment plan’ and appointed a ‘high-level team of financial advisors’ to assist the government in understanding the nature of the financial support that is currently available, the possible implications of debt repayments and the requirements behind foreign government guarantees. Now that some of the major economies have committed investment, how much say South Africa will have on where the COP26 funding will be directed is unclear. In all likelihood, the agendas of those funding the transition will overrule any of the South African administration’s preferences.

Green Colonialism

Here then, another significant obstacle to the transition is met. The notion of a foreign power, such as the US, EU or UK, or any private company in possession of a sovereign state’s key infrastructure has proven divisive and problematic for many across South Africa and the continent. As the clamor of climate disaster raises, green colonialism is an accusation that has been bandied about. The most extreme implications of this term suggest that Western influence is supposedly once again fuelling dispossession, exploitation and socio-economic exclusion, this time under the guise of renewable projects and no longer the ‘civilising’ of the 19th and 20th centuries.

An abundant but untapped quarry of raw materials is how Africa has been frequently regarded in the eyes of foreign powers. Views like these have been demonstrated through the global community’s historical interest in its reserves of oil, gas and minerals. In comparison to other continents, vast areas of Africa are still unexplored from the perspective of below-ground resources, and, in recent years, there have been significant oil and gas findings across several countries including South Africa. However, as emission-cutting requirements begin to have an effect at governmental level, these exploratory surveys of the land are becoming less affordable. Africa’s renewable potential is now beginning to capture the foreign imagination. With the climate crisis coming to bear and costs of fuel leaping globally, one of many tangible realities of Russia’s attack on Ukraine, that interest can only increase.

Sources of electricity production in South Africa, 1985-2017. Source: BP Statistical Review of World Energy 2018. Chart by Carbon Brief using Highcharts.

Analysts of South Africa’s energy sector maintain that most of the investors putting money into renewables in the country represent large multi-national corporations and firms based abroad. Given the country’s history with coal and minerals, and the international capital that these commodities attracted, this global interest in the country’s green sector should not come as a surprise. Originally, at the turn of the millennium, many renewable schemes were initiated by the public sector before private sector money flooded these markets. Several investments have seemed to lack transparency and their motives are said to be dubious. Many of the long-term projects across Africa, some expected to last over 30 years, have been criticized for being inflexible to changing circumstances in countries and regions. Much of the developing world is said to be at risk of nepotism, tender rigging, bribery and tax evasion, when it comes to the establishment of green energy.

A ‘Just’ Transition

Cyril Ramaphosa’s ministers have repeatedly recognised that the energy sector is the major pillar within the South African economy that would need to transition if the stated mid-century aspiration to have a low-emissions economy and climate-resilient society is to be successful. The final destination for South Africa’s energy sector is not in doubt. However, the route by which the country arrives there is a source of contention and concern for many.

Alongside the obvious financial hurdles and question marks surrounding the ethics of foreign influence in the renewables sector, there are knotty political snags obstructing such a drastic transition. Unsurprisingly, the outspoken Gwede Mantashe, Minister of Mineral Resources and Energy and a former coal miner himself, says the country should not rush to abandon coal and embrace green energy. Instead, he argues for a scaling down of carbon emissions and is set on developing technology to capture a portion of the carbon released during combustion. The ‘fossil fuel fundamentalist’, as Mantashe has jokingly called himself, shares the concerns of many working South Africans that the country’s traditional mining-based professions and livelihoods earnt through coal need to be protected. A ‘just’ transition must be implemented.

In reaction to the COP26 deal, the National Union of Metal Workers declared that 100,000 jobs in the mining industry could be lost in the transition. Anxiety surrounding jobs looms especially large in the public consciousness of a nation where unemployment rates have recently reached 35%. Decline in demand for coal abroad has been fatal for smaller mining enterprises and is even proving a cause for concern for major firms like BHP Group, Anglo American Plc and Glencore, who have initiated divestment schemes and are weighing up plans to exit the market. One question that has not been fully answered is whether the renewable transformation of the next 25 years will create enough jobs for those who are to lose their positions within the coal industry. Though employment opportunities are expected to arise from the establishment of green energy projects, particularly through the manufacture of equipment and construction, one of the criticisms often hurled at renewable schemes is the lack of manpower needed required at an operational stage. Andre De Ruyter, the current CEO of ESKOM, reckons 300,000 jobs could be created during the roll-out of solar infrastructure alone across South Africa and demand for technical courses in solar energy has risen in the last few years. Only when these renewable projects and schemes are able to provide a meaningful contribution to the grid, will the questions surrounding employment be answered.

These sorts of concerns are held by many in South Africa. To transition away from coal, all levels of South African society must be considered and brought on board, from the grassroots level of the coalfields themselves up to the boardrooms of Sandton, the legislating chambers of Cape Town and Pretoria. In assessing a way forward, governments and business leaders will need to be realistic in a financial sense. However, their most significant considerations must be improving conditions for those most vulnerable to the effects of climate change, their opportunities for education and employment and access to food, water and electricity. These need to be the underlying drivers if resilience to climate change is to be fostered in a just manner.

Regional Responsibilities

In terms of electricity generation and capacity, South Africa is significantly advanced in comparison to much of the continent’s southern region. However, ESKOM does supply neighboring countries with small amounts of electricity. Accordingly, the impact of the deficit in South Africa has also taken its toll on those nations. If infrastructure and investment were forthcoming, countries bordering South Africa could potentially unite as a southern African power pool and take on the challenges of renewable energy together.

There is a decision to be made between outward-looking cooperation with neighbouring countries, often the stated intentions of ministers and energy executives, and prioritising South Africa’s urgently-needed transition. In the wake of load shedding’s introduction, there was further backlash of public opinion against ESKOM when it emerged that 3000 MW of electricity, reportedly free of charge, was being supplied to neighbouring Zimbabwe, Botswana and Namibia before an export ban was hastily established. South Africa’s position as Africa’s lead emitter of carbon gas means it should take responsibility for damage that has already taken place on the continent and lead the way to secure climate financing for region.

Unlike South Africa’s urgent need to cut emissions, the mitigation strategy for neighbouring nations should concern itself with building a workable and reliable grid in a climate-resilient manner, rather than adapting any current system. With external funding and expertise, countries across Africa have the chance to skip the stage where coal or oil are required for power and proceed to large-scale renewable schemes to grow their electrical capacity, thereby improving the livelihoods of millions by sustainable means.

Conclusion

This report has followed the story of coal in South Africa, tracing the turbulent history of ESKOM and examining the day-to-day problems of load-shedding. It has detailed the state of carbon emissions in South Africa and preventative measures being implemented as well as the challenges of finance and ethical issues being encountered as the process of phasing down coal advances. This instalment has demonstrated that, despite the many parties and agendas involved in the scheme, South Africa’s leadership will need to seize the initiative if it is to access the financing it needs to hurdle obstacles such as ESKOM’s vast debt. It must show responsibility in addressing the societal and diplomatic challenges as coal-based industries are phased down. Though South Africa provides a unique case when compared to its neighbours, a pan-African approach stands up as a way forward and an opportunity, not only for the continent, but for the planet. Now that COP27 is scheduled to be held in Egypt later this year, will the voices of African environmentalists and their strategies be heard above the clamor? That remains to be seen but given its coal-dependent narrative and as the continent’s energy heavyweight, South Africa needs to be present at the centre of any potential dawn in Africa’s energy transformation, both as an example and an innovator.

Report: South Africa and Coal | Vallis Group