FIFI PETERS: Let’s bring you up to speed with the latest happenings from COP27 now in its second week. We are catching up with the head of the Presidential Climate Finance Task Team, Daniel Mminele. Daniel, thanks so much for your time and thanks for joining the Market Update. This is week two of COP27 and I’d like your impressions of how the conference has been so far, and your key takeaways from it.
DANIEL MMINELE: Thank you very much. I returned yesterday from spending a week in Sharm el-Sheikh. I was part of only the first week of the conference, which extends over two weeks. The first part of the conference was mainly dominated by the Leader Summit and those kind of issues. The real core of the negotiations in terms of the climate negotiators is what the second week is going to be about. So the first [week] is essentially about setting the scene. I think the key issues that were discussed and which you can see are going to be coming to the fore in terms of the negotiations are really about financing – making sure that previous commitments from developed countries to help developing countries as they transition and to make financing available – are being adhered to [and] that the developed countries are held accountable in that regard.
And the next big piece, I think, which featured last week and will dominate this week, will be one of saying ‘let us please move beyond undertakings, beyond commitments, beyond promises to action, to implementation, which will be impactful and felt on the ground’. I think that’s what are going to be the key issues apart from, of course, other big issues that have to do with the whole complex of what is referred to as ‘loss and damage’, which basically says ‘In addition to focusing on mitigation and adaptation measures, how do we deal with the realities of today and the damage and the and the suffering that’s been experienced as a result of the impacts of climate change, as they have [been] and are registering today?’
FIFI PETERS: Daniel, I imagine that you would’ve gone to Egypt with an agenda and a list of items that you wanted to tick off or achieve. So in terms of your stay, did you achieve everything that you set out to do? How many of those boxes you can now tick, and how many are perhaps still in progress?
DANIEL MMINELE: Fifi, I’m very pleased to be able to say to you all of those boxes and more – not that I went there with too many boxes. Really my role first and foremost was following the launch of our Just Energy Transition Investment Plan in South Africa on November 4, through a special sitting of the Presidential Climate Commission. The Investment Plan was officially presented to the leaders of our International Partners Group on the November 7, and subsequent to that, of course, to the broader international community.
So my role was to sit on panels, to have bilateral meetings in which we unpacked to the international audiences the features of the investment plan: talking to how we were thinking about how investments would be sequenced, how they’d be financed across the three priority sectors, how we will weave through and mainstream through the investment plan, those central features of the just transition.
[This] is an association and alliance that was formed in Glasgow last year for Net Zero among our financial institutions – a very powerful group that has the potential to be very catalytic and play a very important role, given that by now I think the group encompasses 155 members, which have something like $150 trillion under management.
I’m pleased to say that the plan was very well received, was widely welcomed by the international community, and was endorsed by the leaders of the the International Partners Group, also by a group of philanthropists and by the organisation called GFANZ (Glasgow Financial Alliance for Net Zero).
So the critical point of being able, as part of the implementation process, to use and discuss public resources to crowd in the much bigger pools that sit in the public, in the private-sector markets, were those discussions that we had.
So from that point of view I was very happy that the plan was well received. [There was] lots of talk about this being a ground-breaking initiative, a pioneering exercise. Of course what we’d always said is we hoped that at the very least this would provide a basis upon which others could build, but in similar situations, given that this is the first of its kind that we embarked on. But it looked like many people were happy to say, ‘Look, this seems like a benchmark. This seems to be a model that we can follow’, although, of course, one has to accept that there are countries, specific circumstances that don’t make a plan like this, a one-size-fits-all.
But to answer your question, I was very happy with the way in which we were received, and how the plan was welcomed quite broadly by the international community.
FIFI PETERS: This time last year at the previous COP conference, we learned of the $8.5 billion commitment that had been made by the Just Energy Transition partners – the UK, US, France, Germany and the EU – towards South Africa’s greener parth, as it were. But I think the full details of that have until now, over a year later, been a bit thin in terms of the full Ts & Cs and how much of this money is loan money, how much of it is grant money. Is there anything you can tell us right now, any new developments around that particular package?
DANIEL MMINELE: That is essentially what we were presenting. The full plan is out, it extends to somewhere around 200 pages and sets out all the information with regard to the composition of the funding, the contribution that the individual partner countries will be making, the distribution across instruments, whether grants, whether commercial loans, whether guarantees. We are putting all that out in this plan. All that information is now out in the open.
As we’ve indicated, we have produced a plan that does not speak only to the initial $8.5 billion that our partners had committed to mobilise… It is a plan that sets out South Africa’s scale of need for the first five years, into which then the partners contribute their commitment on the strength of the quality of this investment plan.
DANIEL MMINELE: So it includes a distribution between allocation [into] the three priority sectors – being the electricity sector, new-energy vehicles, and green hydrogen – and goes into a fair amount of detail in terms of the various investments that are needed.
[This includes], alongside the technical investment, the just investments that will make sure that those workers and those communities that would be most impacted by the phase-down of coal are taken care of, and their interests are adequately considered in the short term, but also in the longer term.[And] that this is part of economic diversification and re-engineering our economy on the basis of a whole-society, whole-economy approach that then is also part and parcel of informing a new growth and development model, the greener more sustainable model, as we decarbonise to meet our international commitments.
FIFI PETERS: Just lastly, Daniel, all this money coming our way in terms of support for the Just Energy Transition and the money specifically that’s coming as loans, does this not risk fuelling another crisis further down the track, and a crisis of debt? What’s the thinking around the ability to be able to pay all of this back in future?
DANIEL MMINELE: Fifi, one of the issues right at the outset when we start thinking about how we would approach these negotiations, particularly with regard to the financing package to underpin any investment plan, was to work out a set of principles, a guiding principle as to how we would approach the financing package and [we] came up, as you’d see in the plan, with nine of them. I won’t go through all of them,
but some of the critical ones include making sure that any financing package that we agree upon speaks to and takes into account our fiscal realities and challenges from a point of view of affordability and sustainability.
You are quite right. You have to be alive to the fact that, while you are trying to solve one set of problems that have to do with climate-change risks and migrating our economy to a low-carbon economy, a more climate-resilient society, you do not inadvertently create another problem in the form of loading up with climate-related debt and obviously putting a burden on future generations in that regard.
That was one principle that we had to make sure fits in with our fiscal frameworks as they evolve.
As a result of that, National Treasury would’ve been and was a very important partner in developing these financing plans.
The other issue in terms of a principle was that any debt-related terms need to be on more attractive terms than the government could raise. So a high level of concessionality such that, if we have to take on debt, it is at least affordable and is not more expensive.
Last week the Treasury did actually issue a statement. Because the first two of these concessionary loans were actually signed on the fringes of COP to the tune of two loans from the French and the Germans at €300 million a piece, the Treasury actually put out the numbers and the terms and conditions to show that these are significantly more advantageous, in terms, than they could secure in the market.
I guess the final point I wish to make is a very important one when it comes to the Ts and Cs that you asked about. Of course with every lending and every borrowing, whether it’s you for your car or me for my house, there are Ts and Cs that apply, and lenders want to satisfy themselves that funds are being used appropriately and they can be repaid, and so forth.
But what is important to highlight is that these are not conditionalities that would result in South Africa losing sort of sovereignty and flexibility with regard to its own policies and the ones that people tend to worry about when they talk about conditionalities. There is nothing in there that would restrict that.
So the policy sovereignty and policy flexibility remain firmly in the hands of the South African government.
FIFI PETERS: All right. That’s good to know. Daniel, thanks so much for your time. Daniel Mminele, the head of the Presidential Climate Finance Task Team.