Ramaphosa’s moves to set up green fund not an obvious win
WORKERS ARE IN A MORE POWERFUL POSITION TO NEGOTIATE A DEAL. CO-OPERATION MUST ALSO BE SECURED FROM OTHER QUARTERS
It was a surprise to hear President Cyril Ramaphosa telling the UN climate change conference that his government is finalising a transaction to 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, including University of Cape Town professor Anton Eberhard and economist Grove Steyn, made its first report to the president in February and its final 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 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 with funds from global and domestic development finance bodies — 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 — will decommission its coalfired power stations at an accelerated rate and 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 in such definite terms. While the plan depends on winning the cooperation of labour, 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 election. Since then, apart from a National Economic Development and Labour Council (Nedlac) decision to set up a committee on Eskom that has not met, Cosatu and its affiliate, the National Union of Mineworkers, and 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 “a just transition fund”, which would focus on creating job opportunities for those workers and communities who will lose out in the accelerated transition from coal. Because of the urgency of solving the Eskom crisis and 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. At an investor event in London recently, Mantashe described the Eskom split as “functional” in which the three entities all remain wholly owned and controlled by Eskom.
But freeing the transmission company is critical to the energy transition. If the transmission company remains within Eskom it will not have the incentives 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 idea that SA really needs. But accepting it is going to take courage all round.