The Integrated Resources Plan (IRP 2019) serves as the blueprint for the South African energy sector—providing guidance on how to de-commission aging coal power stations and the future expansion of national energy mix in response to the country’s growing energy demand. In addition, South Africa is developing a ‘2050 Vision’ which will guide just transition pathways in the energy, water, and land-use sectors toward a [net] zero-carbon economy by 2050. The challenge, however, lies in the effective implementation and alignment of such set of policies and strategies. Other private sector challenges to implement adaptation and mitigation actions in South Africa include:

SOUTH AFRICA

a. Establishing the business case for adaptation planningand action, particularly where climate change is re-garded as an environmental issue, rather than as a riskthat could impact medium to long-term organisationalsurvival;

b. A lack of sector coordination and collaboration, which li-mits information sharing, regional adaptation and mitiga-tion planning and the achievement of economies of scale;

c. The availability of locally relevant climate change dataand tools, in particular the ability to access high resolu-tion climate modelling data (both temporal and spatial)with known levels of uncertainty, in order to support de-cision making;

d. Investment planning, and the difficulties associated withdeveloping a sound financial case for spending on fu-ture anticipated risks and mitigation options;

e. The need for stronger policy and legislative frameworksas well as support and coordination mechanisms toguide and enhance private sector adaptation and miti-gation actions;

f. Policy related: Misalignment between green economyvision, industrial policy and structure of the financial sys-tem;

g. Structural: (a) Financing early-stage (b) high risk pro-jects and for moving projects from early development

Implemented by a consor�um led by:

climatefinance@afdb.org

South Africa is vulnerable to natural disasters such as drought, flooding, extreme storms and fires and has faced a number of devastating climate-related disasters over the last few decades and their impacts have been varying. The country is already experiencing a higher frequency of climate variability and climate-related disasters that are increasing in intensity and manifested through changes in rainfall patterns (DEA, 2018).

South Africa is Africa’s largest emitter of greenhouse gases, and these result primarily from energy production and consumption. South Africa’s National Development Plan (NDP) advocates for a just transition to a low-carbon, resilient, and poverty free society.. The strategic roadmap to achieve this objective is outlined in the country’s National Climate Change Response Policy (NCCRP)

as well as its first Nationally Determined Contribution (NDC) that is committed to have GHG emissions peak during 2020-2025, plateau for a decade, and then decline in absolute terms.

The government’s climate change policy landscape also recognizes the importance of private sector funding in achieving national climate change response actions and will work with the financial sector to explore the most appropriate mechanisms to achieve adequate funding flows. Moreover, the government seeks to implement climate action at scale and provide the greatest opportunity for attracting, mobilising and leveraging investment from both the private and public sectors towards South Africa’s NDC priorities.

COUNTRY CLIMATE CHANGE CONTEXT

PRIVATE SECTOR CHALLENGES

CHALLENGES AND OPPORTUNITIES FOR PRIVATE SECTOR INVOLVEMENT IN NDC IMPLEMENTATION AND GREEN INVESTMENT

Implemented by a consor�um led by:

climatefinance@afdb.org

South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is a good example of what can be achieved with ambitious energy sector reform, coupled with political leadership and an engaged private sector. Government guarantees helped to de-risk the long-term power purchase agreements. Proposed opportunities to mitigate or address some of the identified challenges include:

PRIVATE SECTOR OPPORTUNITIES

stages to commercialisation (c) Funding for mid-size projects (d) Sub-optimal coordination between commer-cial banks and development finance institutions (DFIs);

h. Skills and capacity: (a) Capacity constraints of imple-mentation partners (b) Project development skills shor-tages within project developers (c) Project sourcing andevaluation skills shortages within commercial banks,and;

i. Funding design: (a) Li-mited focus on non-energyrelated low carbon projects(b) High transaction costs forcommercial finance of low-car-bon projects (c) Design andstructure of concessional creditlines (d) Legislative barriers to in-vesting in low carbon projects.

PRIVATE SECTOR CHALLENGES

SOUTH AFRICA

a. Adopting a more strategic approach to climate finance access would help local government to leverage further funds from donors and development banks.

b. Climate finance could be strengthened through tracking and monitoring the progress of climate change across all spheres of governance.

c. A call for a revision of the intergovernmental grants for climate resilience and low carbon development through transformative approaches in order to reduce national po-

verty, unemployment and inequality (the triple challenge).

d. Alternative municipal revenue models should be consi-dered, given the transformation that embedded electri-city generation will bring.

e. Interpretations of the regulatory framework, such as the MFMA, should be reviewed in light of South Africa’s triple challenges (poverty, unemployment and inequality), low carbon and climate resilient development future.

Elaborate further on opportunities (besides those in the energy sector) for example, sustainable cities (green building, etc.), sustainable transport, water, agriculture or waste (e.g. recycling).

Despite the existing challenges, a number of leading South African private sector companies have applied innovative approaches to respond to climate change impacts by integrating mitigation options and adaptation planning into their risk management processes and supply chains, which have led to the identification of cost reduction opportunities. Emerging mitigation and adaptation planning practices should be considered in the following four areas:

RECOMMENDATIONS

a. Companies should focus on good corporate governance of climate change and on integrating climate change into existing risk management systems.

b. Companies should turn climate risks into business op-portunities. This includes opportunities to strengthen customer, supplier and community relationships, as well as to develop new products and services that are cli-mate-smart.

c. Companies should recognize the benefits of collabo-rative partnerships. This includes the sharing of costs, expertise and resources to improve shared infrastruc-ture, local capacity, disaster preparedness as well as business opportunities.

d. Companies should make informed decisions by underta-king climate-related vulnerability and risk assessments, including partnering with subject matter experts

Implemented by a consor�um led by:

climatefinance@afdb.org

SOUTH AFRICA

RECOMMENDATIONS

a. Establish a South African climate change Lab, similar to the Brazil Lab or India Lab, to finance NDC actions and green investments;

b. Identify and incubate standalone high-impact, transfor-mative projects.

c. Request for proposals (RFP) by local Accredited En-tities (AE) and the major local commercial banks in partnership with AE, with targeted funding windows, based on either (i) specific GCF results areas (ii) type of funding support required based on stage/maturity of project. These RFPs, would complement any RFP’s is-sued by the GCF.

d. Sustained capacity building with respect to project development, project finance and project implementation, especially at the sub-national level ( municipalities and

local project developers and local finan-cial institutions), including support for an enabling environment through policy advocacy and technical assistance.

e. Incentivize commercial banks to innovate and scale fun-ding for green projects (e.g. Energy Efficiency, ClimateSmart Agriculture, Green Buildings, Social SustainableHousing), through co-finance and/or outcomes-basedgrants and highly concessional loans for a specifiedperiod to build the respective markets.

to understand company-specific climate impacts and opportunities.

Large standalone climate change projects involving the private sector should consider the following: