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Energy transition

South African coal heartland is ill-prepared for energy transition

South African coal heartland is ill-prepared for energy transition
A truck transports coal towards the Eskom Holdings SOC Ltd. Kendal coal-fired power station in Mpumalanga, South Africa, on Friday, May 5, 2023. Debt-strapped Eskom is currently implementing daily blackouts because its dilapidated power plants are unable to supply enough electricity to meet demand and it doesn't have the money to invest in capital equipment. Image: Bloomberg

(Bloomberg) --South Africa’s main coal producing province of Mpumalanga, the focus of the country’s $8.5 billion Just Energy Transition Partnership, has received no government funding to help workers and communities find alternative livelihoods, a new study shows.

The province, which accounts for 83% of national coal production, will lose 48,500 jobs at power plants and the mines that feed them by 2030 due to closures, Krutham, a South Africa-focused research organization, said in a report released on Tuesday.

Ultimately as many as 120,000 jobs could be affected as companies such as trucking firms service the industry and studies to date have paid little attention to the coal-dependent informal economy, Krutham said. Initiatives to prepare workers and communities have to date been mainly donor funded.

“Provincial and local governments do not have a specific budget line that is dedicated to the Just Energy Transition initiatives,” Krutham researchers said in the report. “There is a clear indication that municipalities do not have a clear understanding of addressing the energy transition.”

South Africa and its north-eastern Mpumalanga province are in focus as the $8.5 billion climate finance pact, known as the JETP, with some of the world’s richest nations – France, Germany, the US, UK and European Union – is a prototype for similar projects that are being pursued in Indonesia, Vietnam and Senegal. Key to those deals are how coal-dependent communities will be shielded from the impact of the transition.

“The lack of JET mainstreaming in public financing is one of the key barriers to unlocking financing at scale for JET initiatives,” Krutham said.

The government should ring-fence funds for the transition, restore the creditworthiness of municipalities in Mpumalanga and create a fund within the National Treasury from which projects can be funded, Krutham said.

More effort should also be made to attract private financing to projects to meet the scale of the challenge, the research group said.

By Antony Sguazzin

© 2023 Bloomberg L.P.

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