How South Africa is building partnerships with BRICS energy investors
South Africa took over as Chair of BRICS on January 1, 2023 in a difficult national and global economic environment. The conflict in Ukraine and the West's unilateral sanctions, have battered economies that were struggling to recover from the Covid-19 pandemic.
With Russia being the world’s third-largest oil producer, second-largest natural gas producer, and a top producer of steel and wheat, the conflict has led to substantial increases in food and energy prices that have disproportionately impacted those of us in the Global South.
As a government, we have the South African Economic Reconstruction and Recovery Plan with detailed interventions to address our energy crisis with the aim of fixing Eskom (South African Energy Supply Commission), fundamentally transforming the electricity sector to achieve long-term energy security, and enabling and accelerating investment in the energy sector. It is clear that we cannot do this alone. President Cyril Ramaphosa has called on our BRICS partners to assist South Africa in our recovery.
Our first priority responds to the significant transformational changes we are making in our economy, particularly in the energy sector. Therefore, we aim to "Develop a partnership towards an equitable Just Transition." This priority focuses on finding solutions to transformational energy change which will also improve people's livelihoods in the sectors that supported the old economy, such as mining.
BRICS countries are uniquely positioned to support South Africa's energy recovery. Member countries contain almost half the world's population and account for approximately 40% of the world’s energy consumption, including 48% of coal, 22% of oil, and 13.5% of natural gas.
While renewable energy consumption is only 16% of the BRICS total at the moment, it has been growing year by year driven by members’ commitment to mitigating climate change.
BRICS countries are not only consumers of energy, as all members have substantial fossil fuels and available renewable energy resources. Members hold 40% of the world's coal reserves, 25% of the world's natural gas reserves and 8% of the world's oil reserves. In the renewable energy sector, solar power from South Africa, Brazil and India, wind power from Russia and China, as well as biomass from Brazil, all enjoy substantial resource advantages.
Within BRICS, China is the world's largest coal producer with 50% of the world's output in 2020 with India at 10%. Russia produced 12% of the world's oil and 16% of the world's natural gas. Brazil is rich in biomass energy and its output was 25% of the world's total in this sphere in 2020.
With our natural resources, BRICS countries are major players in the global supply of energy and its dynamics. Member countries have developed similar energy policies to manage energy risks while having both expertise and technologies to use their energy resources to enhance energy security and cooperation.
BRICS recognised these complementarities and in 2020, it adopted a Road Map for Energy Cooperation up to 2025 aimed at building a strategic partnership. The Road Map is being implemented in phases.
The research phase is first and started under South Africa's chair of BRICS in 2018 with the establishment of the BRICS Energy Research Cooperation Platform. The platform brings together experts, companies and research institutes to coordinate common interests of members in research and development of innovative technology and policies, with seven studies being released to date at the BRICS Ministers of Energy meetings. Last year, China presented an additional study on the development of renewable energy and smart grids in the member countries. This year, Russia is leading a study on energy security. The roadmap also established the publication of the annual BRICS Energy Report.
During the second phase, BRICS countries will identify the needs and challenges to energy security and find areas where member cooperation can provide solutions. The third phase aims at advancing mutually beneficial cooperation including the exchange of best practices, use of advanced technology, as well as opportunities for trade and investment in each other's economies. Of course, we are not waiting for this third phase before we work with our partners on energy solutions.
India is already South Africa’s biggest coal export market and generates almost half of our total coal revenue. China is reopening opportunities for imports from South Africa, following its political fallout with Australia, previously an important coal source. China has substantial oil and gas trade with Russia, oil and gas cooperation with Brazil, a joint natural gas pipeline project with India as well as renewable energy trade with South Africa. South Africa is a pioneer in the area of clean coal, in which India and China have an interest. The Russian state energy company Rosatom has signed an agreement with South Africa to construct small hydropower plants in Mpumalanga as a key component of South Africa’s energy security strategy.
Part of South Africa's response to the energy crisis involves implementing a just transition to a low carbon economy. Climate change also poses considerable risks to jobs, businesses and the economy. South Africa is among the most water-scarce countries in the world, and recent events in KwaZulu Natal have shown that extreme weather events such as floods are occurring more often and with a devastating impact on our infrastructure.
The response to the electricity crisis provides an opportunity to also mitigate our contribution to, and the risks from, climate change and adapt to a low carbon economy.
South Africa's Just Transition Plan aims to significantly lower emissions of greenhouse gasses and harnesses investments in new energy technologies, electric vehicles, and energy-efficient appliances. As a consequence, South Africa's Integrated Resource Plan, which drives our energy policy, envisions that renewable solar and wind energy will generate almost 25% of our electricity by 2030. Coal, which currently accounts for 85% of South Africa’s electricity generation, will drop below 60% in less than a decade.
The impact on communities reliant on coal extraction and production is an important element of the Just Transition as it aims to ensure that communities tied to high-emitting energy industries are not left behind and are provided with new skills and new economic and employment opportunities.
During South Africa's Chairship of BRICS in 2013, we established the BRICS Business Council to strengthen and promote economic, trade, business and investment ties among the business communities of the member countries. The BRICS Business Council also identifies problems and bottlenecks and recommends solutions.
This year, under South Africa's Chairship, the Council's Energy and Green Economy Working Group is focused on concrete outputs on the Just Transition. The Council has developed an energy skills roadmap for South Africa which will be rolled out to the other members. The roadmap identifies the necessary and available skills and identifies training programmes as well as sponsors across the member countries.
There are discussions on the possible establishment of a BRICS African Centre of Excellence on the Just Energy Transition which would support a network of researchers focused on technology, socio-economic, environmental, financial and other aspects of the Just Transition that would inform policy makers in collaboration with the BRICS Energy Research Cooperation Platform.
The question is how to identify funding for investment in renewable energy. There is significant money available globally for renewable energy projects, with the National Treasury estimating $12 trillion in available sources such as the Green Climate Fund. But developing countries struggle to access these funds because of the perceived risk of investing in a developing country. South Africa's policy uncertainty and regulatory challenges have been cited as obstacles to South African investment opportunities, with other funders also banning financing and investment in coal for energy, even if it is clean coal.
India and China are able to source their own international finance for renewable energy by offering their own-currency Green Bonds known as Green Masala Bonds and Green Panda Bonds. The Green Panda Bond is issued by the BRICS New Development Bank (NDB).
The NDB is a multilateral development bank established by BRICS countries to mobilize resources for infrastructure and sustainable development projects. Sustainability is fundamental to the founding principles of the NDB, and aims to deliver transformative impact to member countries with a target of 40% of all the NDB’s loans funding projects in mitigation of and adaptation to the effects of climate change by 2026.
South Africa and China have so far been the leading beneficiaries of sustainable financing from the NDB with respect to clean and renewable energy. South Africa is the beneficiary of 12 projects financed by the bank valued at $5.4 billion. Five of these projects support the energy sector, with three of those funding renewable energy projects worth 13 billion rand ($710 million).
The opportunities for BRICS to support transformative change in our economy are obvious. As Chair of BRICS this year, our strategic vision is to harness our existing mutually beneficial cooperation to address issues of national interest and national concern for South Africa in a holistic and multi-disciplinary way. The depth and strength of our partnership allows us to bring multiple solutions to the table, including financing, trade, investment, industrialization, training and development, research, innovation, as well as partnership with African countries and leading countries of the Global South.
This article was originally published on the BRICS information portal
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.
