South African DFI CEOs Forum on Just Transition Finance
12 May 2022
1. Overall Objective of the CEOs Forum
The overall objective of the DFI CEOs Forum is to strategically locate, define and execute the just transition financing role of DFIs in South Africa, including assuming conceptual leadership roles through ideas and actions that contribute to the global discourse on transitioning towards low carbon economies and climate resilient societies.
The approach of the CEOs Forum is to set up a work programme to be implemented by the DFI Just Transition Task Team made up of executives from each DFI, which in turn will form technical workstreams to focus on a few carefully selected work areas at the initial start of the programme. The Forum is open to all public national and provincial funds, DFIs and fund managers in South Africa. The workstreams conceptualised to frame the work programme of the technical working groups in line with the CEOs roundtables outcomes are outlined below. Each DFI is represented by an executive in the workstreams.
2.1 Workstream 1 – Define the strategic thrust of South African DFIs and their role in the decarbonization journey of South Africa’s economy
This workstream is expected to outline the individual interests and actions of all DFIs towards just transition and produce a one pager on the overall focus area; outline how the collective DFI role will evolve over time; identify opportunities for collaboration and coordination amongst the South African DFIs and their foreign counterparts; drive the domestic DFI thought leadership on just transition and provide a platform for including other DFIs in South Africa.
2.2 Workstream 2 – Understand the financial impacts and opportunities associated with the transition, as well as map strategic options for mobilizing climate finance to a low carbon economy and climate resilient society in South Africa by 2050.
In exploring opportunities, this workstream is expected to detail conceptual leadership programmes and projects, drawing on existing leads and experience from investment opportunities and green corridors that respond to the objectives of the DFI Forum. This should include a deliberate consideration of the vulnerable sectors and groups, such as the SMEs, as well as women and youth. The technical workstream should further explore various strategic and innovative measures within existing and new instruments to raise domestic and international capital for financing the just transition. The workstream should leverage the experience of other international DFIs to enhance its approach based on international best practice.
2.3 Workstream 3 – Assess and outline DFI opportunities in advancing/participating in the carbon credit market
This workstream is expected to coordinate the participation of DFIs and other public funds or fund managers in the national carbon credit markets. A clear collaboration plan with private and public sector institutions, must be outlined for implementation. This will include a review of the Carbon Disclosure Methodology programme with a view to play a role in influencing South Africa’s policy and regulatory environment on carbon markets. The UNFCCC registry can also be explored for benchmarking purposes and to ensure collaboration and alignment with the international community.
3. Strategic Considerations for the Focus Areas of all DFIs.
The Presidential Climate Commission (PCC) has developed a Just Transition Framework (JTF), which seeks to present an over-arching set of principles and strategic guide for all stakeholders as South Africa’s just transition to a lower carbon economy and climate resilient society unfolds. The DFIs will collectively and individually support the PCC in its endeavours.
There is an emerging consensus that the decarbonisation of South Africa’s economic structure will require fundamental and deep transformation of the economic base in the country. Recent flood events, now acknowledged to be at least partly due to climate change, in KwaZulu-Natal have shown that a far-reaching adaptation and socially just transition is an imperative in South Africa.
For the decarbonisation of the industrial base, there is now consensus that immediate attention is required to decarbonise the electricity system, with a focus on decommissioning and repurposing Eskom’s coal-fired power stations, upgrading and extending the grid, and a rapid ramp-up of new renewable projects. Early scoping of technology and project pathways as well as financing the development of a hydrogen production sector is essential to achieve the decarbonisation of the petro-chemical sector. Support for a transformation of the motor and transport sector towards electric vehicles, is also important. These industrial transformations are critical to put the country’s economy on a good foundation by 2030, to achieve net-zero by mid-century. The decarbonisation of the critically important export outputs in the agriculture, manufacturing and mining sectors will depend on the achievement of low-carbon energy inputs into each sector. South Africa’s technology and manufacturing capabilities and capacities should be allowed to play a localized participating role in the deep industrial and economic transformation across all sectors.
Also of great importance is the development of mechanisms, institutional capacity, and governance frameworks, for the successful implementation of a just transition that is adequately geared to finance both the transition and social aspects of South Africa’s decarbonisation journey. In this regard, justice for workers and communities who are negatively impacted by the phase-down of the coal value chain must be ensured. As new value chains develop for servicing and supporting a growing green economy with a focus on the renewables sector, the transition must ensure that skills are developed among the younger population to play a meaningful role in growing these sectors. The assistance that SMMEs will need to transition to new value and supply chains must also be provided for.
It is in this context that each DFI considered the role that it could play. Within the broader ambit of each institution’s core mandate, the areas in which each can support South Africa’s just transition have been analysed. A consolidated view, to harmonise, unify and align the collective programmes of South Africa’s DFIs, has also been developed.
Endorsement from the Founding CEOs
Mr Patrick Dlamini
Chief Executive Officer
Development Bank of Southern Africa
Mr TP Nchocho
Chief Executive Officer
Industrial Development Corporation
Ms Philisiwe Mthethwa
Chief Executive Officer
National Empowerment Fund
About the Development Bank of Southern Africa (DBSA) - The DBSA is a leading Development Finance Institution (DFI), wholly owned by the government of South Africa. Established in 1983, the DBSA is mandated to promote economic growth and regional integration by mobilising financial and other resources from national and international private and public sectors for sustainable development projects and programmes in South Africa, SADC, and the wider African continent.
For more information visit www.dbsa.org
About the Industrial Development Corporation (IDC) – The IDC was established in 1940 through an Act of Parliament and is fully owned by the South African Government. The Corporation pursues development impact through job-rich industrialisation and contributes to an inclusive economy by, among others, funding black-owned and black-empowered companies, black industrialists, women and youth-owned enterprises.
For more information visit www.idc.co.za
About the NEF
The National Empowerment Fun (NEF) was established in terms of the National Empowerment Fund Act No 105 of 1998 and is the entity of the Department of Trade and Industry (the dtic). The NEF’s mandate is to be a catalyst of Broad-Based Black Economic Empowerment in South Africa by enabling, developing, promoting and implementing innovative investment and transformation solutions to advance sustainable black economic participation in the economy. Through the implementation of its mandate, the NEF is a driver and thought leader in promoting and facilitating black economic empowerment through the provision of financial and non-financial support as well as the entrenchment of a culture of savings and investment among the black people, as defined in the BB-BEE Empowerment Act No 46 of 2013.
For more information visit www.nefcorp.co.za