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Op-Ed: We should be sceptical of climate loans

By Andile Zulu | Mail & Guardian | 25 Nov 2022

Who does the government serve? As people across the country struggle to survive, witnessing their country deteriorate because of pervasive economic dysfunction and misgovernance, the lethargy and inaction of the ANC government invites questions about to what ends its power is being used. 

Whose political and economic interests are served by the ANC’s governance and policies? An answer lies in critically assessing the climate finance deals entered into by the government. 

The government has for years acknowledged the reality of climate change, promising to make policy out of its environmentally friendly rhetoric and initiate a “just transition” by shifting the energy sector onto renewable energy, thereby cutting fossil-fuel emissions and transforming South Africa into a low-carbon economy. 

To finance the transition, tremendous amounts of money have been pledged, primarily as loans, to aid in our ambitious but crucial objectives to shield the population from the escalating climate catastrophe. But what will all the money be used for? 

Which stakeholders were consulted? Could the public comment? What are the terms and conditions of the loans? President Cyril Ramaphosa’s climate loans lead us down a perilous path. 

Climate crisis  — the drastic change in temperature and weather patterns due to burning fossil fuels and releasing greenhouse gases into the atmosphere — is at times perceived as a calamity of the distant future. 

This is an understandable but dangerous misconception. In the past 20 years, scientists have noted a shocking increase in extreme weather events around the world, particularly in the global south. Afghanistan, devastating floods in Pakistan, powerful storms in the Philippines, wildfires in central America, cyclones in Mozambique and who could forget the floods that ravaged Durban earlier this year. 

The United Nations High Commissioner for Refugees, an annual average of 21.5 million people have been forcibly displaced by extreme weather events. The Institute for Economics and Peace estimates that this number of climate refugees could escalate, predicting that by 2050 1.2 billion people could be displaced globally due to climate change and natural disasters. 

Although climate change concern and advocacy is at times presented as a priority for the privileged, not daunted by the daily task of survival, the destruction unleashed by climate change has been felt primarily by the urban poor, the working class and rural populations. A flooded home or barren crop can be a slow death sentence for a poor farmer or working-class family who lack financial resources or a social security net. 

Aggravating the climate crisis are political elites, especially within wealthy nations such as the US and Germany, and titans of the fossil-fuel industry, who constantly express commitment to cut emissions and transition to renewable energy, while continuing to lead the world in greenhouse gas emissions and pollution. 

Reports by the United Nations Environment Programme (UNEP) have found that attempts to cut emissions, since the Paris agreement, have been “woefully inadequate”. 

Sadly but unsurprisingly, this report was released in the same month that Shell and TotalEnergies announced their profits in the third quarter. Combined, these two kings of oil recorded $20 billion in profits. The global oil and gas industry expects to amass more than $1.5 trillion in earnings this year alone. 

To express the need for urgent action and the scale of efforts required, UNEP executive director Inger Andersen said: “Only a root-and-branch transformation of our economies and societies can save us from accelerating climate disaster.” 

Even as political elites and fossil-fuel industrialists take heed of these warnings, their plans and policies to confront the climate crisis reflect their narrow political interests, not the well-being of society at large. 

After the failure and disappointment that was COP26, South Africa announced it was embarking on a Just Transition Partnership. With funding from Britain, Germany, France, the US and the EU, $8.5 billion was secured, primarily as loans, to boost investment in and production of renewable energy. 

In October the World Bank announced it had approved the government’s request for $497 million to decommission and repurpose the Komati coal-fired power station.

Adding to this mountain of foreign loans was €600 million from France and Germany to finance South Africa’s energy transition plans. In the lead-up to COP27, Ramaphosa’s administration received considerable praise from nations in the global north for endorsing the just energy transition investment plan to the International Partners Group. The plan aims to target funding towards green hydrogen, electric vehicles, the electricity sector and investment in renewable energy infrastructure. 

Since 1994, the ANC has embraced — with varying success — a series of economic policies and political practices aimed at satisfying the interests of transnational corporations and the domestic private sector, believing that thriving domestic businesses and foreign investment will reduce poverty, create jobs and trigger economic growth, the fruit of which will trickle down to the lowest classes. 

This evident commitment to neoliberalism and the political interests it advances is why the ANC government takes on more foreign loans, even as foreign debt stands at $170 billion. The consequences of having to service foreign debt will reverberate in the lives of the country’s poor and working-class majority. 

The present austerity measures will be maintained and enhanced, meaning more budget cuts towards public healthcare and education, basic service provision and social welfare. With more than 50% of the population poor and 34% unemployed, further diminishing the state’s capacity to provide support structures or fulfil its basic mandates will invite more crime, political instability, economic stagnation and mass suffering. 

When dealing with powerful states and international finance institutions, nothing is truly free. Loans are contingent upon the pursuit of neoliberal economic reforms. It isn’t surprising that the financiers of these loans support the continued privatisation of the energy sector, unfolding now as the unbundling of Eskom.

The World Bank’s climate and development reports claimed that South Africa “achieving these transitions will require substantial external financing and a combination of structural reforms, including a more flexible labour market, and improvements in fiscal and financial policies.” 

Simply, this means austerity, more precarity for workers, more power to employers and a population plunged deeper into destitution. In other words, green structural adjustment. 

The neoliberal reforms favoured by the World Bank and the International Partners Group have largely failed in South Africa and around the world, but the ANC persists. Why? Above the needs of the South African public, and its most vulnerable segments, are the interests of private sector players — domestic and foreign — seeking to make profit in the renewable energy industry, no matter the costs. 

The news of the Just Transition Partnership was a total surprise to the public. Is it not concerning that these climate deals, which will impact the future of all South Africans, occurred behind closed doors? Throughout 2021 and 2022, the public and stakeholders such as workers in the fossil-fuel industry, trade unions, environmental movements and civil society were not given substantial opportunities to make contributions in the formation of these agreements.  

Such deliberate oversight on the part of the government is another reminder that we have become spectators in our own democracy, meant only to observe and endure the suffering and instability released by its continuous abuse and misuse. 

If the financing of the just energy transition has already begun to occur, shielded from accountability or impactful critique, can we expect the government or private sector not to implement their plans for the transition in the same manner? 

Gradually moving onto renewable energy will require the transformation of economic production, construction and infrastructure developments, agricultural reforms, revitalising public education and healthcare, rebuilding state capacity and centring governance on human development. 

Such an expensive project cannot cohesively and fairly occur without meaningful deliberation with the South African public. Unfortunately, democratic processes often collide and conflict with the imperatives of capitalism. The Just Energy Transition Partnership and Just Energy Transition Plan walk in the spirit of the recent and previous COPs: corporate-sponsored and formed within elite circles averse to democratic processes while failing to produce impactful policy and action as the climate crisis escalates. 

Andile Zulu is with the Alternative Information and Development Centre in Cape Town. He writes in his personal capacity.

*This Opinion Piece was first published by the Mail & Guardian.

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