SA needs an orderly energy transition, says Old Mutual’s investment unit
The move away from coal-based energy is inevitable, but has to take into consideration the socio-economic realities of such a move
Old Mutual’s investment arm, which is one of the country’s biggest investors in renewable energy, has warned that while SA needs to increase its pace of transitioning to a low-carbon economy, this must be done in an orderly manner that will not worsen an already agitated social fabric or disrupt the economy.
Old Mutual Investment Group, which has more than R650bn in assets under management, released its 2019 impact investment report called “Tomorrow” on Thursday, which showed that it has placed R34.5bn of its clients’ monies in clean-energy initiatives.
The investment manager has financed numerous renewable energy projects and its head of responsible investments, Jon Duncan, said SA cannot afford to continue with its over-dependence on coal-based energy, given it is one of the 20 largest greenhouse emitters in the world. However, it cannot rush the transition to clean energy before thinking through how job losses in the coal industry would be handled.
He said recent research on how to “justly” transition to a low-carbon economy in SA shows that economists are “acutely aware” of the risks an abrupt retreat from coal-based energy would pose.
“You’ve got some 80,000 people employed in the coal industry. In addition to that you have people involved in coal terminals, Sasol, so we are talking about a substantial part of our economy at risk,” said Duncan.
Tracey Davies, executive director of Just Share, a non-profit shareholder activism firm, said it is not surprising that people in SA would question the emphasis on climate change and drive towards green energies given that the biggest challenges the country is grappling with are social in nature. However, said Davies, in conversations about the need to transition to a low-carbon economy, SA needs to factor in how climate-related disasters, such as droughts in the Western Cape where farm workers lost jobs, are already affecting the economy and how this is likely to escalate.
“And our current coal-based economic policies haven’t exactly developed the development pathways we wanted them to,” said Davies, adding that cultivating a renewable-energy industry in the country could present opportunities for a “new kind of economy”.
Davies said the problem is that some stakeholders, including labour unions and businesses that benefit from SA’s dependence on coal, are in denial about its future and it is up to the financial sector, particularly institutional investors to use their buying power to drive the transition.
Chris Malikane, activist and associate professor at Wits, said tht even if they have buying power, financial institutions need to be realistic about the ability of renewable energies to sustain all the country’s energy needs before making decisions about funding new coal-powered stations.
He added that the cost of energy also needs to be considered in the transition debate. “You need to have everyone on board. You can’t have a transition where you’ll leave a lot of people behind. If you look around, you see that people are not working.”
Malikane said for the envisaged energy transition to be fair, emerging industries must benefit local people. “A just transition must mean that these new industries are set up on the continent. If that doesn’t happen, it will be difficult to move countries out of a coal-based system.”