'Billions in cheap green energy funding not used because Eskom loath to take on new debt'

Bruce Whitfield gets the lowdown from Carol Paton, editor-at-large at News24 Business.

The climate deal South Africa struck at COP26 more than two years ago delivered promises of billions of dollars in cheap loans for the country's Just Energy Transition (JET).

But this funding has stalled because Eskom is reluctant to add more debt to its balance sheet, writes Carol Paton for News24 Business.

The power utility is also operationally constrained in terms of how fast it can expand the transmission grid, she reports.

"The climate finance deal saw the International Partners Group - the UK, US, EU, Germany, France, and the Climate Investment Fund - pledge $8.5 billion to assist SA's JET from coal to greener forms of energy. The JET also aims to ensure that communities that depend on coal mining and power generation for their livelihood are not left stranded in ghost towns, as the role of coal diminishes."  

"The funding pledged for the JET has since grown to $11.596 billion. The SA deal was the first to be brokered in the world. But only 10% of the money has so far flowed to SA."

Carol Paton, Editor-at-large - News24 Business

In conversation with Bruce Whitfield, Paton reminds us that this deal was a world first.

"It was heralded as a great thing that the developed world was now going to be assisting the developING world to transition from coal to cleaner energy."

Paton says the lending countries, governments and institutions want this money to into Eskom, as they believe this is how they'll get bang for their buck.

"They think that if their money goes into expanding Eskom's transmission grid which could then allow more renewable energy to connect to it, that they'll be doing a good service for climate change and the world which I think holds true..."

"The problem is Eskom's saying they can't build the grid any faster than they already are, and they have enough money right now."

Carol Paton, Editor-at-large - News24 Business

Paton clarifies that the blockage lies with Eskom and NOT with National Treasury.

She says while the international partners have been under the impression that Treasury won't allow this money to flow to Eskom because of the utility's debt relief conditions, this is NOT the case. 

"The National Treasury said very clearly that if Eskom wants to borrow money it can, and so all it needs to do is get permission."

The truth is that Eskom doesn't want to take on more debt, she reiterates.

"It's kind of really a ridiculous situation where we're being offered this money now and we can't really take advantage of it.... It's not going to help them at all, and not going to help us at all."

"The obvious solution then, is that there must be an innovative financing mechanism which can make use of this money in a constructive way".

Carol Paton, Editor-at-large - News24 Business

To hear more from Paton, listen to the interview audio at the top of the article