Failure to prioritise a just transition would be a huge mistake
In SA we are prisoners of path dependency. We need to strategise about how to break with two main path dependencies that constrain the possibilities of a just transition in our country. These are our economic model built around a carbon-heavy minerals energy complex, and a political-economic governance model built around rent-seeking.
My conceptual approach to the political economy is influenced by institutional economists such as Douglass North and Daron Acemoglu. They place emphasis on how institutions — in other words the rules of the game — are shaped by specific interests.
Especially important are those ideas that inform the so-called “common interest”, around which the nation state is organised in the case of sovereigns, and, in a globalised world, around which the multilateral agenda is organised.
I am also drawn to futurist thinking. Futurists suggest that “society is at once pulled forward by its own magnetic images of an idealised future and pushed from behind by its realised past”.
Our transition was pulled forward by images of freedom and a better future, but the structures and practices of the past continue to shape the kind of society we seek to build.
So, what is the current balance of forces, and how is this likely to shape the choices that present? Do we have a magnetic image — to borrow from Fred Polak — of a green, just transition? Is this a shared vision across different interest groups? Which interests are likely to be spoilers, and derail this vision? How do we neutralise these threats, and ensure our strategy accommodates the broadest coalition of interests? And what levers and agency do we need to muster to pull us forward towards this just transition?
It is clear the global economy is going through dramatic technological and economic disruption, accompanied by massive changes in production and consumption. The new techno-economic era — a global just transition — will be based on green energy and the fourth industrial revolution, and more anchored in solidarity and equality.
But the transition is likely to be characterised by economic turmoil, unfavourable geopolitics, natural disasters driven by global warming and increased attacks on democracy by demagogues and populists.
Debt and governance
The Covid pandemic has increased global inequality and fragility.
National Covid stimulus packages have been unprecedented, in excess of 20% of GDP for developed countries. To put this into perspective, the combined size of the stimulus across Western European countries was 30 times larger than the current value of the Marshall Plan. This allowed developed economies to weather the Covid storm.
The same options have not presented for developing and underdeveloped countries, which are bearing the brunt of the economic fallout.
The pandemic has increased global inequality. The International Labour Organisation estimates 500-million jobs were lost worldwide in 2020, 1.4million of which derive from SA. Some 150-million people have moved into extreme poverty. Digitisation brings productivity and competitiveness benefits, but it also brings risks of a growing digital underclass.
Though the pandemic may have shifted global political sentiment away from populist extremes, evidenced for example through the victory of US President Joe Biden, the objective conditions for anti-democratic populist resurgences remain. This is something we must closely monitor.
The other trend we must closely monitor is the divergent paths to recovery that different countries will take. Fragile economies with high public debt are particularly at risk of slower recovery.
The World Economic Forum’s 2021 “Global Risk Report” identifies the existential threat of state collapse in highly indebted countries. This could have significant implications for the just transition. A high number of African countries, for example, now have debt servicing at above 20% of tax revenues (and many a lot higher), limiting own funding for climate change mitigation, adaptation and resilience, among other social security needs.
Strategies for effecting a just transition in Africa must simultaneously deal with debt and governance.
A new, green path
SA has outlived its historic growth model centred on the minerals energy complex and commodities exports. Its high carbon footprint (the 14th-highest globally), and weak growth performance are strongly linked to its historic growth path centred on commodity exports. Ours is a typical boom and bust economy dependent on global commodities up-cycles for growth. This worked in our favour in the early ’90s when China was powering at nearly double-digit growth, but has resulted in sustained economic stagnation and revenue shortfalls since the commodities down-cycle in 2012.
Various iterations of industrial policy have failed to diversify the economy. Green industrialisation, through a renewable energy transition, offers possibilities to break with our path-dependent growth model.
A build programme of 5GW per annum (which is not inconceivable) could see the creation of tens of thousands of direct jobs per year, and would create an approximate R30bn market for renewable local content.
The just transition is not only about reducing our carbon emissions to comply with global net zero targets; it is fundamentally about placing the country on a new, green industrialisation path, which will simultaneously address growth, jobs and transformation outcomes if it is properly managed.
Therefore, trying to decouple growth, just transition and transformation in the South African context is not feasible.
Governance has steadily improved with the rollback of state capture, but we should not let our guard down.
The second major path dependency SA needs to break is rent-seeking and state capture. Failure to do this will render the just transition and the new, green industrialisation path unsustainable.
President Cyril Ramaphosa has made steady progress in rolling back state capture. On the just transition, there has been significant progress with respect to both policy and governance.
The 2019 integrated resource plan fully recognises the centrality and cost effectiveness of renewables in SA’s energy mix. Eskom now has effective leadership, and there is general consensus on the need to unbundle.
As things stand, however, there is still no decision on Eskom’s R401bn debt. This is accelerating its terminal death spiral, and if the utility goes down, so does the economy. The debt also precludes Eskom from accessing finance for new generative assets in renewable energy, which is key to its business model and sustainability going forward. None of the options would be our first choice — debt write-offs, Public Investment Corporation buyouts, debt swaps for future generative assets — but they need to be considered based on well-thought-out and transparent costbenefit analyses.
On the governance front, as favourable as our leadership arrangements are currently, we cannot guarantee their continuity, nor rule out the possibility of state capture 2.0. This also brings into question bigger issues about how to sustain the just transition and Net Zero 2050 over the next 30 years. I am quite sure if we had been engaging on the just transition in the early 1990s, there would be a constitutional provision to bulwark the project against attack. Is this something to consider?
Until our economy is driven by innovation rather than rent-seeking, we remain vulnerable. But just like rent-seeking makes us vulnerable, so too does extreme racial inequality. We cannot be comfortable as a society where black Africans only make up 20% of the country’s elite. Our new path of green industrialisation must factor this in.
We need a new model, with dynamic and innovative black-owned enterprises at the centre of new wealth creation, especially in tradable goods and services.
We need the right policies and an ecosystem of enterprise support, including skills, digital access, finance, professional practice support, product development, as well as trade and export support. Corporations, including our banks and investment funds, need to play an enabling role.
Changing our pariah status
The just transition precisely provides these opportunities — if barriers to entry can be addressed, which can also help reposition SA globally. This brings me to my next point: changing SA’s pariah status.
With its global best practice constitution, its policy of reconciliation and with Nelson Mandela at the helm, SA was the poster child of democracy. This followed through into multilateral environmental networks, culminating in SA hosting the UN World Summit on Sustainable Development in 2002 in Johannesburg.
But SA’s sweetheart status quickly declined after this amid growing concerns about the slow pace of addressing our “carbon heavy” energy sector.
Despite various commitments, including at the 2015 Paris COP 21 to a “peak, plateau and decline” approach, whereby emissions would peak between 2020 and 2025, plateau for roughly a decade, and then start to fall, SA remains the 14th-largest emitter of greenhouse gases on the planet and the worst in Africa. The country is warming at almost double the global rate, and is now considered the 30th-driest country globally.
Currently, SA has aligned its own CO2 emission targets — Net Zero 2050 — to the global targets, and is rapidly scaling up its renewable build programme. At 5,000MW to 6,000MW per year over the next 10 years, SA will undoubtedly be one of the global frontrunners in green industrialisation. If done well — transparently and corruption-free — the country could regain its poster-child status, this time for the just transition.
Meeting net zero targets will be the new barrier to trade for the developing world. Failure to effect the just transition and meet carbon reduction targets will see SA lose markets and financing. Led by global asset managers and development finance institutions, companies and countries are now being categorised on a risk scale, dependent on their carbon footprint. Global investment for fossilfuel assets will become increasingly difficult to leverage, ultimately making them “stranded assets”.
This becomes a huge challenge for carbonheavy developing economies, especially those with high debt and poor governance. The current inadequacy of multilateral instruments for funding the just transition in the developing world must be a major focus of COP 26.
SA’s Net Zero 2050 strategy offers significant opportunities for a new growth path built on green industrialisation. This is entirely feasible, given the expansive, planned renewable energy build programme over the next 10 years.
Strategies for climate resilience, mitigation and adaption may seem less important as we grapple with the immediate crisis points of joblessness, rising crime and political unrest.
However, it will amount to a historic mistake if we do not prioritise the just transition. Failure to realise net zero targets will see SA lose investment, and face mounting trade and export barriers. The just transition offers possibilities of new forms of collaboration between the state and private sector, which we can all agree have been far from optimal.
The just transition also holds out new opportunities for a re-imagined multilateral politics, that prioritises the redirection of global surplus to underdeveloped and developing countries, especially in Africa.
It also holds opportunity for re-imagined domestic politics. Currently, we do not have a shared vision that binds us. The just transition towards Net Zero 2050 could be the anchor of this vision, and needs to be the subject of popular engagement and mobilisation. Our country needs to play catch-up in understanding that a just transition is not a “nice to have” but that the future of humanity depends on it.
✼Jonas is chair of MTN. This is an edited version of an address on the political economy at the Presidential Climate Commission Conference on a Just Climate Transition