CAROL PATON: Ramaphosa makes move for pro-green funding
President surprises by announcing decommissioning of coal power stations
It was a surprise to hear President Cyril Ramaphosa tell the world in his written remarks to the UN climate change conference that his government was finalising a transaction that would accelerate the decommissioning of coal power stations in return for concessional funding for Eskom from pro-green funders.
The “green fund” is one of the proposals of the expert task team Ramaphosa put together in December to advise him on how to proceed on the Eskom problem. The team, comprising among others University of Cape Town professor Anton Eberhard and economist Grove Steyn, made its first report to the president in February and its final report in May.
The idea is to shift a large portion of Eskom’s R460bn of debt — about R160bn — into a special-purpose vehicle or Eskom loan company, fully owned by the National Treasury. The loan company would be able to access debt more cheaply than Eskom has over the past 5-10 years.
In particular, it would be able to access global funding available to assist countries to reduce carbon emissions at concessional rates. This would be blended together with funding from global and domestic development finance institutions — such as the World Bank or New Development Bank — and long-terms bonds held by pension fund investors such as the Public Investment Corporation.
The quid pro quo is that SA — one of the world’s worst greenhouse gas emitters — would commit to decommissioning its coal-fired power stations at an accelerated rate and would bring on much more renewable energy to compensate. All in all, a win-win situation for SA and a world hungry for quick gains in the fight against climate change.
But, perhaps it is not such an obvious win for SA coal miners and power-station workers. And that is why it was a surprise to hear Ramaphosa speak of the fund in such definite terms. While the plan depends on winning the co-operation of labour to proceed, the fact is that the idea has not so much been floated past the ears of a single trade unionist active in the energy sector.
The government and Eskom have been alarmingly remiss in bringing workers along. Only one high-level meeting involving Ramaphosa and the Cosatu leadership has been held and that was before the May general election. Since then, apart from a decision at the National Economic Development and Labour Council (Nedlac) to set up a committee on Eskom that has not met, Cosatu and its affiliate the National Union of Mineworkers, as well as the less government-friendly National Union of Metalworkers of SA, all report radio silence.
Employees at Eskom were called into a presentation by Eskom chair and acting CEO Jabu Mabuza in August, at which Eskom’s turnaround plan was presented. But this was considered by unions to be a meeting without any standing as it met none of the requirements of the formal processes outlined in recognition agreements.
While the labour hurdle is the most daunting, it is not insurmountable. Linked to the green fund is the concept of creating “a just transition fund”, which would focus on creating job opportunities for those workers and communities who will lose out in the accelerated transition away from coal. Because of the urgency of solving the Eskom crisis and the urgency to reduce climate change effects, workers are in a more powerful position than usual to negotiate a deal for their members.
But for the green plan to fly, co-operation must also be secured from other quarters. Mineral resources minister Gwede Mantashe looks reluctant to commit to a separation of Eskom into stand-alone companies responsible for its three main functions of power generation, transmission and management of the national grid, and distribution at a local level.
Speaking at an investor event in London recently, Mantashe described the Eskom split as a “functional” split in which the three entities all remain wholly owned and controlled by Eskom.
But freeing the transmission company — which would own and manage the national grid — from Eskom ownership is critical to the energy transition. If the transmission company remains within Eskom it will not have the incentives in place to seek out and buy the cheapest forms of energy available. Without this crucial leg in which the market is liberalised, the energy transition will not proceed.
For most of the past six months the Treasury has also been sceptical about the fund. The stock response has been to say “debt is debt”, whether it sits in Eskom, on the national government balance sheet or in a green SPV. That stance seems to be softening now with the realisation that savings could be made, which right now — given the fiscal pressure the country is facing — is a pressing need.
It is a big and bold idea. It is the sort of of idea that SA really needs. But accepting it is going to take courage all round.
• Paton is writer-at-large