How we can advance SA’s Just Transition in 2022

To unlock the local opportunities for growth in the transition to a green economy starts we need to ask the right questions now.

Executive summary

• To meet its climate commitments as well as changing demand among its trading partners, South Africa is transitioning away from some of its high green-house gas (GHG)-emitting industries
• It is imperative that local stakeholders in the business community and not lose momentum, and that climate change is not to be driven only globally but in country.

The transition to a low or net zero carbon economy is here. The United Nations Climate Change Conference of the Parties (COP26) in Glasgow in November 2021 called for rapid action to meet the goals of the Paris Agreement. This means substantially reducing global greenhouse gas emissions to limit the global temperature increase in this century to 2 degrees Celsius above preindustrial levels.
 

It’s worth highlighting a couple of points. One, this transition to a low-carbon economy will not happen overnight. Two, it must be in the form of a ‘Just Transition’, which secures the future and livelihoods of affected workers and their communities, and includes dialogue between workers and their unions, employers, government and communities.
 

EY’s ‘2022 Geostrategic Outlook’ report highlights “climate change and sustainability” as one of three main themes for the coming year. A key development that business should track is the nexus between climate change and political risk, as governments look to mitigate climate change impacts and speed up the energy transition, while also figuring out how to pay for it.
 

Achieving this transition won’t only have a fundamental and lasting impact on South Africa’s mining and energy sector: it will affect every aspect of our lives, from transport systems to the built environment and beyond. Our economy is largely propped up by mining (8.2% of GDP, and on the rise again) and a coal-based power system (87% of our power comes from coal), and we already have unemployment numbers hovering around 35%. So, we’re going to have to think cleverly about how we are going to do this. 

The transition must start by exponentially increasing our renewable sources of energy, leading as many people as possible out of the old coal economy into the new renewable economy, and supporting the businesses that will close as much as we support those that will be opening or transforming. A major part of the transformation will be the country’s ability to unleash a decentralised energy generation system. Here, the ability for independent power producers and large industries to generate 100MW of their own power will be key.
 

However, there are major challenges. Renewables are the least cost energy generation option that we have right now. But we will have to build this new reality in collaboration with our existing coal-based value chain, which includes unions, communities, mines, coal transporters, and a host of associated formal and informal manufacturing and service sectors.
 

The added pressure is to design South Africa’s energy transition in such a way that it maximises growth and job creation. Here, the very nature of renewable generation assets offers a pointer, as they are often concentrated in sites far from the power grid, such as rural areas. This provides an opportunity to create jobs, skills and opportunities in renewable energy projects in some of the country’s most economically marginalised areas. Similarly, mines can reskill existing workers to support their own power generation initiatives.
 

We have smart people defining the Just Transition, and monitoring its implementation, in the form of the Presidential Climate Commission. I recently spoke to the Commission’s executive director, Crispian Olver, who says the Commission is working rapidly to put in place a framework for the just transition, with policy instruments that ensure the transition is both procedurally and substantively just. It is critical that business works closely with the Commission to drive the transition.
 

The transformation is already under way in the mining and energy sectors, where many of the country’s large high emitters are already signing up to net zero targets. They are actively adapting their operations through better processes, electrification, and a move to renewables, including hydrogen. In most cases, the target date is 2050, but there are a couple of notable exceptions, like Anglo American, which has committed to a zero emissions date of 2040.
 

At the same time, the Commission, together with Eskom, is looking closely at repowering and repurposing decommissioned coal stations and mines, using renewable-energy and storage solutions, or possibly switching their fuel sources to either gas or hydrogen. Repurposing proposals range from training facilities to agricultural activities. The current thinking is that it will be better for the country to take underperforming coal stations off the grid sooner rather than later, and use the money saved to accept a greater level of renewable power from solar and wind farms.
 

What can businesses do? EY’s 2022 Geostrategic Outlook has five recommended actions for Boards and executives. One, examine your company’s footprint and business models, from supply chains to distribution networks, to find opportunities to reduce carbon emissions and increase revenue. Two, take advantage of relevant sustainability incentives like tax allowances and cash grants. Three, assess the impact of carbon taxes on global operations to understand exposure and ensure compliance. Four, measure and report on sustainability metrics while committing to transparency and accountability; and Five, engage with policy makers and standard setters to contribute to the process of developing new policies and standards.
 

The goal is to get every business itself transitioning, and to support local renewables and green businesses, entrepreneurs and communities to offset emissions and to build up the energy sector faster. It seems obvious that the mining sector should be collaborating with these businesses, and looking for ways to bake green energy initiatives and investments into their business strategy.
 

The bottom line is that South Africa’s transition is going to work because it makes economic sense, not by standing on a soapbox and preaching.
 

There’s no doubt that much work and discomfort lie ahead. But there is also tremendous opportunity to build out a new sector with the promise new tech, new skills and much needed jobs.