The US has decided to cut funding for the Just Energy Transition Partnership or JETP. This is an initiative funded by several countries to help South Africa invest in alternatives to highly polluted coal-fired power plants.
The reductions affecting similar programs in Indonesia and Vietnam, taking away about $1 billion in loans from South Africa for its renewable energy programme.
Trump suspended the country's other aid programs shortly after taking office, claiming that measures to allow expropriation of land without compensation under certain limited circumstances “doesn't shock the rights of citizens.” He also invited white South African farmers to resettle the US.
The response to South Africa's JETP cut has been muted so far. In a brief statement, the Bureau of International Relations and Cooperation said the government is “still keeping a close eye on and committed to implementing international agreements, including decisions made at the historic Paris Climate Change Conference.”
“US funds may be surrounded by government figures related to the JETP management unit,” said Victor Perez, a senior consultant at Advisory Firm Africa Africa Practice.
However, he points out that $1 billion in JETP funding will increase beyond the government's plan to increase by 0.5%.
Jetp on the rope
South Africa initially agreed to the JETP programme with a group of supplier countries at the 2021 COP26 Climate Conference. South Africa is considered a model country to test the JETP approach because it has a very carbon-intensive power system and a highly carbon-intensive power system that dominates the energy mix, and needs to invest desperately to replace aging power stations.
The need for a new source of power generation was demonstrated by widespread power losses over the weekend. The updated “load suppression” was spurred by the closure of one of the reactors at the only nuclear power plant in the country, combined with maintenance issues in several coal-fired plans.
Loss of US funds does not necessarily derail the JETP program. The US funding was almost entirely provided through loans rather than grants, less than 10% of the $13.8 billion pledged to JETP in South Africa.
Several other donors can increase their contribution accordingly, Perez suggests.
“Europe, Japan and the UK have managed to close the gap,” he says, noting that institutions such as the European Union and the European Investment Bank continue to support South Africa's energy transition programme.
“On the other hand, innovative financing mechanisms — green bonds, local infrastructure bonds, and climate debt swaps offer even more opportunities.”
However, the JETP was not universally popular even within the South African government. Gwede Mantashe, Minister of Mineral and Petroleum Resources, who oversaw energy policy until last year's election, openly rebelled against President Ramaphosa's efforts to invest in renewable energy at the expense of coal. Many of the country's powerful trade unions are also opposed to measures that lead to unemployment in the coal industry.
Perez suggests that losses in US funds could fall into the hands of Mantache and his allies.
“Undoubtedly, withdrawal could spark skepticism,” he says. “ANC… faces a nearly impossible balancing act. It maintains its job in a struggling industry while moving towards low carbon production.”
