In his Budget Speech on 21 February, Finance Minister Enoch Godongwana said that as climate-related disasters intensified, a multilayered risk-based approach was being developed to manage the associated fiscal risks.

“This considers various funding instruments, from grants to contingency funds, including the Climate Change Response Fund, depending on the incidence and intensity of the disaster event,” he said. 

Godongwana said the Treasury was developing a climate-budget tagging framework to influence policy, planning and budget decisions by tracking climate-related expenditures in public budgets. However, this had been in the works since 202o.  

Another key development was the increase in the limit for renewable energy projects that could qualify for the carbon offsets regime, from 15 megawatts to 30 megawatts.

He also announced incentives for the production of new energy vehicles (NEVs), expanding on the White Paper published last year.

In 2026, producers of electric or hydrogen-fuelled vehicles will be able to claim 150% of their investment in the first year.

The Electric Vehicles White Paper aims to transform the automotive industry from primarily producing internal combustion engine vehicles to a dual platform that includes electric vehicles by 2035.

Read more in Daily Maverick: Finance Minister Enoch Godongwana’s national financial blueprint for SA 

Analysis from climate commentators 

“The volume of finance needed to make these actions happen was still not fully realised, but at least there was an acknowledgement that an all-hands-on-deck approach was needed, including crowding in the private sector, and that these solutions need to be multifaceted.”

This is according to Candice Stevens, founder and CEO of the Sustainable Finance Coalition and co-chair of the IUCN World Commission on Protected Areas sustainable finance specialist group.

“The … budget … also fails to integrate and address water and biodiversity (both as risks and as opportunities for the South African economy), and in my view, the actions outlined are simply not ambitious enough to make a change. 

“To move our country beyond our energy crisis, to safeguard us from the looming water crisis, and to sustainably and effectively utilise South Africa’s vast natural wealth (vital to boosting the emerging sectors we need to help get us out of the slump), ambitious, decisive and disciplined leadership and solutions are needed,” she said. 

Harald Winkler, a professor at UCT’s School of Economics, told Daily Maverick: “Minister Godongwana’s Budget Speech is pretty explicit about climate change. On balance, it’s good news. We have a new [Climate Change Response] fund to help people who suffer loss and damage; and are moving to electric vehicles, a bit cautiously. Those are good directions. But still not enough clarity on ambitious domestic measures to reduce greenhouse gas emissions.”  

Difficult tradeoffs

Economist Anton Cartwright said the new fiscal incentives did not confront the difficult tradeoffs that South Africa would have to make to transition from a carbon-intensive and resource-extracting economy to something more competitive and climate-resilient. 

“By delaying the difficult decisions, South Africa continues to lose ground in the global economy and passes up the jobs that would be created in the building of a climate-resilient economy.

“In that sense, this budget looks to move towards the ‘new’ without letting go of the ‘old’, and that dilutes the message to investors and is not good enough in the context of the climate crisis and shifting economic fortunes,” he said.

Cartwright said the measures announced in the Budget were not sufficient to reform the energy sector and result in long-term energy security. 

“We need a very clear signal that, within one generation (25 years) we will phase out coal. That gives companies, communities and individuals enough time to reskill and reposition their focus,  and it also does away with the current ambiguity which keeps everyone hanging on until it is too late,” he said.    

Presidential Climate Commission (PCC) executive director Dr Crispian Olver said, “The key question is, what are we going to do with the old coal-fired power stations and are they going to be refurbished? Or are we going to run them for a few extra years? There are some big questions about that coal fleet. There’s a lack of clarity about the decommissioning schedule.”  

He said the incentives for rooftop solar and private-sector renewable energy projects “are a little lame”

“Households that put [solar] panels on their roof should be able to sell power back to the grid when they’re not using it. Like in Cape Town, but we should be doing this at a national level — not doing it individually, one by one with municipalities.” DM