How can China help South Africa achieve a just transition?

South Africa joined the UK, the US, France, Germany and the EU on 2 November to announce the ambitious International Just Energy Transition Partnership. Over the coming five years, the partnership will provide around US$8.5 billion in multilateral and bilateral grants and concessional loans to assist South Africa in achieving its low-carbon transition goals.

The deal sets a precedent for delivering “just transitions” in developing nations. The idea of a just transition was initially used in environmental protection to ensure worker and community rights were taken into account. The idea gradually made its way into the climate agenda, but mainly within the context of developed nations.

At Africa Climate Week, held in late September, the idea of an “African just transition” was floated for the first time, with calls for attention to the continent’s grave social and economic challenges, including its vulnerability to climate change and its huge informal economy.

Africa is looking at China’s presence in energy on the continent with hope for a just transition. On 22 September, speaking at the UN General Assembly, China’s president, Xi Jinping, announced China would provide strong support for green transitions in developing nations and stop building coal power overseas. On 30 November, the 8^th Forum on China–Africa Cooperation issued a declaration reiterating those points on climate change. At the recent annual meeting of the Africa Coal Network, the hundred-plus organisations attending from over 20 African nations welcomed the move and called for China to be a responsible partner in supporting renewables in Africa.

What is a just transition, and why is it important for climate governance in Africa and future China–Africa cooperation on renewables? We can turn to South Africa, the first African nation to start discussing the idea, for answers.

Coal phase-out and a just transition

South Africa has been discussing just transitions for over a decade. One of the critical points of contention has been when and how coal should be phased out.

The Congress of South African Trade Unions (COSATU) was the first to raise the idea. South Africa’s biggest trade union federation published a climate change policy framework in the run-up to the 2011 climate change talks in Durban. A just transition was fundamental to its position and insistence that economic transitions should not harm the interests of the working class or developing nations and that developed nations should act appropriately based on their historical responsibilities.

The term began to appear in various South African government documents. In 2015, the country’s nationally determined contribution (NDC) was the only one to stress a just transition. However, thanks to support from several countries and international trade union movements, that year’s Paris Agreement referred to a just transition in its preface.

But research commissioned by South Africa’s National Planning Commission found there is still a lack of consensus on several aspects of the just transition, mainly due to tension between “justice” and “transition”. The first implies that decarbonisation should not worsen social inequality; the second suggests an urgent coal phase-out.

South Africa did not sign up to the Global Coal to Clean Power Transition Statement at the COP26 climate talks in Glasgow. In a media interview, Barbara Creecy, South Africa’s environment minister, said that developed nations have not yet provided enough financing for such a transition. A sudden coal phase-out would result in huge numbers of stranded assets, damaging the interests of developing countries. Energy minister Gwede Mantashe has recently stated that the government would not entirely remove coal from the energy mix. He said that the government was committed to a just transition but would not favour renewables if it meant sacrificing economic growth.

Unions are concerned that a rushed phase-out would lead to mass job losses in the coal industry, while the replacement Renewable Energy Independent Power Producer Procurement Programme, headed up by private firms and overseas investors, uses a privatised model that will not protect laid-off workers’ interests.

In March 2017, South Africa’s state power company Eskom announced the closure of five coal power plants, sparking opposition from the National Union of Mineworkers. Coal truck drivers have protested against renewable energy, and the Coal Transportation Forum and National Union of Metalworkers have sued to prevent power purchasing agreements from being signed.

But South Africa is the world’s 12th largest carbon polluter, drawing over 80% of its power from coal. Environmental groups such as groundWork and Earthlife Africa have called for an urgent phase-out of coal and other fossil fuels to protect vulnerable communities from climate change and air pollution caused by industries associated with coal. They point out that the coal sector is, in any case, in decline.

Jay Naidoo, founding general secretary of COSATU and a member of President Mandela’s first cabinet, told China Dialogue that inequality has worsened since the end of apartheid, with elite corruption bringing the once world-leading Eskom energy firm to its knees. Coal power will not provide electricity to remote rural areas or mushrooming informal settlements. But, with government support and subsidies for community-owned microgrids, solar power could do both reliably and cheaply. That would provide energy, reduce emissions, create community entrepreneurs and address devastating unemployment.

South Africa’s top energy programme, the 2019 Integrated Resource Plan, still includes 1,500 megawatts of new coal power. But two weeks ago, three environment groups took South Africa’s energy ministry and energy regulator to court in an attempt to block the projects.

South African environmental groups are also looking hard at the Chinese financial institutions and firms involved in the country’s coal chain.

In recent years, plenty of Chinese public money has flowed into South Africa’s coal power sector. A report from Just Finance International found that in 2017 the China Development Bank loaned $1.5 billion to Eskom’s Medupi plant and $2.5 billion for the Kusile coal plant in 2018.

The Industrial and Commercial Bank of China (ICBC) was also an indirect investor in the Medupi project, as it is the largest shareholder in Standard Bank, Africa’s biggest commercial bank. An analysis by Capital Monitor shows that Standard Bank has more exposure to fossil fuel risks than any other South African bank and has not yet come up with a coal phase-out policy.

Currently, the hottest topic of discussion is the Musina Makhado Special Economic Zone in the northeast of the country. Headed up by private Chinese firms, the zone includes a 1,320-megawatt coal power plant to be funded by the Bank of China. However, talks between the South African government and the Chinese side are ongoing, and the details of China’s commitment to stop building coal power plants overseas are not yet clear.

Environmental groups say a comprehensive phase-out of coal is essential if South Africa is to enjoy a just transition. Makoma Lekalakala, director of Earthlife Africa Johannesburg, told China Dialogue: “We hope China will honour its commitment to stop funding overseas coal plants and intervene in the financing of this project.”

There are also question marks over the retention of oil and natural gas. Eskom’s latest plans to transition from coal include 4,000 megawatts of new natural gas generation. Barbara Creecy, the energy minister, described natural gas as an “important transitional fuel”. But this view was sharply criticised by the South African Federation of Trade Unions, which said Eskom should speed up wind and solar development rather than extract more fossil fuels.

It is unclear if the International Just Energy Transition Partnership will back those natural gas projects. However, South Africa’s most influential just transition campaigning group, Life After Coal, has said scarce climate funding should go to development in mining areas and emerging community energy projects rather than fossil fuels.

Community-based renewables

The founding of the International Just Energy Transition Partnership led to South Africa reaching a quick consensus on phasing out coal and expanding renewables. The debate over a just transition shifted from how to drop coal to how to expand renewables.

Life After Coal said that $8.5 billion is “a promising start”, but a lot more detail is needed, particularly on ways to protect mineworkers and mining communities. Unions have also questioned how many long-term jobs renewables will create.

The distribution of different types of energy in South Africa means that existing renewables projects do not overlap with coal mining areas. Holle Wlokas, a renewable energy expert and consultant, told China Dialogue that workers and communities in those areas do not directly benefit from wind and solar development. The government must now work out how to attract companies into those areas.

Also, renewables projects may not necessarily benefit nearby communities.

The Renewable Energy Independent Power Procurement Programme, launched in 2011, made power producers responsible for community involvement and economic development, with such socio-economic criteria accounting for up to 30% in the assessment of bids. This was reduced to 10% in the latest round of bidding.

A minimum 2.5% share of the project still has to be held by nearby communities, with an ideal figure of 5%. A community trust is usually set up to hold those shares. But research has found that the current model often ends up with community members becoming passive participants, unable to make real improvements to local living standards. Wlokas said: “We want to have more empowered and active participation of communities in projects so that real social ownership could be achieved.”

Social ownership of renewable energy projects is a core demand of South Africa’s just transition. That could mean ownership by communities, municipalities or the state rather than private ownership.

And positive policy signals are starting to appear. According to Wlokas, it has been hard for community organisations to independently participate in the power purchasing plan, forcing them to work with multinationals. But in June, the government announced an increase in the threshold for distributed power generation licenses to 100 megawatts. That makes more space for community projects, as they are now exempt from the main bidding process, where competition is fierce.

But Alex Lenferna, a climate justice campaigner for 350.org, told China Dialogue that it is still challenging to build community-owned renewable energy. In the early stages of project development, local communities need financial and technical support, especially with upfront capital costs.

So far, the International Just Energy Transition Partnership has not offered up any details on its funding, such as the ratio of disbursements to preferential loans or where the money will go. Nor will the sum be enough for South Africa’s just transition. Eskom estimates that it will need at least $30 billion despite labouring under around $26 billion of debt.

China-Africa cooperation on renewables

China’s halt to overseas coal power construction could result in a new era for China–Africa cooperation on renewables. China can do much to help the continent with its just transition.

And in a historically coal-reliant country like South Africa, where private capital tends to lead on developing renewables, there are high hopes for Chinese firms. Lenferna told China Dialogue that Chinese investment could take a less market-based route, using renewables projects to promote the development of communities and local industries. Jay Naidoo called for China’s government and businesses to partner with community organisations to help deepen democracy, foster social entrepreneurship, create livelihoods and ensure access to green energy.

But Shen Wei, an energy expert with the UK’s Institute of Development Studies, says that in South Africa and elsewhere on the continent, Chinese firms involved in renewable energy projects usually act as engineering, procurement and construction contractors – few are actually the project developer. That limits what Chinese firms can do to help with a just transition.

But that doesn’t mean Chinese firms can’t act or take precautions. Shen thinks Chinese firms should build long-term community partnerships and produce long-term plans for their operations. In particular, they should have specific teams and budgets dedicated to understanding local needs to help the firms win more renewables projects.

According to Wlokas, hiring professionals to enhance social performance and manage community relations is already an emerging trend in renewable energy projects in South Africa. Chinese companies can learn from this approach and work with local governments to design solutions to help Africa gradually build its local renewable energy manufacturing capacity.

“The role China can play in this regard is actually underestimated,” said Saliem Fakir, the African Climate Foundation’s executive director. He said that China should play a stronger leadership role in renewable energy technology, but relying on individual projects and companies alone will not be sufficient to achieve this goal. He believes that climate and renewable energy should be considered part of broader strategic planning for China–Africa cooperation, with corresponding support on financing and institutions also needed.

Shen Wei thinks there could be more institutional cooperation between China and Africa. China could set up knowledge-sharing mechanisms and provide renewable engineering consultancy services to African nations and share its experiences with planning for the expansion of renewables.

“But before anything, we have to clarify the overall goal of China–Africa cooperation on renewable energy,” Fakir said. He added that China and African countries need a clear strategic framework on the relationship between climate and energy because renewable energy development is set to profoundly impact Africa’s social and economic future.

There is a steady stream of such policy signals. China recently published a white paper on a “new era” of cooperation with Africa, with the fight against climate change and the use of renewables described as a “strategic consensus”, while the recent 8th Ministerial Conference of the Forum on China-Africa Cooperation saw joint statements on tackling climate change, with China committing to increase its investment in renewables and help Africa “optimize its energy mix.” Notably, in the joint statement, both sides agree to make natural gas projects eligible for the support of green finance, a move that will likely re-focus the just transition debate on this fossil fuel.

African countries have high hopes for the upcoming increase in China–Africa cooperation on renewables. But it remains up to Chinese firms, financial institutions and policymakers to ensure they do their bit to ensure their contribution to the energy transition is fair and just.