Hello and welcome to the So What podcast, in which political economic analyst JP Landman
discusses the issues uppermost in the minds of South Africans.
You can find a written version of this content on JP's website, jplandman.co.za.
I am Ruda Landman and I am your host.
These first few recordings were done at our dining room table, but we will soon be moving
into a studio.
Hello and a very warm welcome to another recording to go with JP's newsletter.
This one is dated the 23rd of November 2022 and the heading COP27 and South Africa, a
basic introduction.
I think we need to, as you do in your first paragraph, sort out some background, some
jargon.
Why is it called COP?
Why is it 27?
Why is Paris important in the history and how does South Africa fit in?
Yeah, now indeed, those are the starting points.
COP is simply the convention of the parties.
The full title is the Convention of the Parties of the United Nations Climate Change Conference.
This is a conference that has been held every year now for 27 years.
The first one, COP1, was in 1993 and as I say, it's been going on every year.
South Africa has got a long political commitment to the COP process.
We were involved from the very first one.
We also hosted COP17 in Durban in South Africa and the whole COP process actually came out
of the Johannesburg Sustainable Development Conference, which was held way back before
that time.
Paris is important because over the 27 years, the parties to the United Nations Conference
on Climate Change have struggled to reach meaningful consensus on what can be done about
climate change.
An agreement was reached at Kyoto, but George Bush, previous US president, would draw the
United States from that agreement.
So it collapsed.
Then the parties had to start all over again.
And then in 2015, an agreement was made at Paris.
And the Paris Agreement essentially said that the nations of the world commit themselves
to take steps to reduce carbon emissions to a level sustainable with an increase in global
temperatures of not more than one and a half to 2%.
South Africa was part of that agreement.
When Zuma was then the president of the country, he was in Paris, he agreed to it.
And the following year in April 2016, Edna Muleva, who is late minister in the cabinet
of Zuma, signed the agreement, the physical document on behalf of South Africa.
So yeah, we've had a long commitment to this convention of the parties.
It's about climate change.
And the commitment that South Africa has made, like so many things in the Zuma government,
the ideas were articulated, but they were not in them.
Two years ago in 2021, South Africa actually set a target for a number for the reduction
in carbon emissions from the country to be sustainable or to be on a level of climate
change of 1.5 degrees Celsius.
And the government determined that to be 350 to 375 tons per annum, the maximum number
of tons that can be emitted.
Now at that stage, we were admitting as a country about 450 tons.
It has come down to 420, but from 420 to 350 to 375, it's still a 17% reduction.
And that is what the Just Economic Transition Plan is about.
It sets out the practical steps that need to be taken to achieve that 17% reduction,
but it also sets out the money side.
How are you going to pay for it and fund this reduction?
Where do we fit into the global picture?
Are we a big emitter?
It does this matter?
Yes, we are a big emitter.
We are really just look at the number of tons of carbon emissions, carbon equivalent emissions,
then we are the 13th largest in the world.
Now if you think that our economy is about 28 to 29th in size, if you think that the
companies like the US, like China, India, much, much bigger companies and much bigger
economies than ours, for us to be number 13, nonetheless, is quite high.
If you adjust for population and you look at emissions per capita, then we're coming
at about number 15 in the world, still high.
So our per capita emissions are sitting at about 7.5 tons per person per year, and the
global average is about 4.8.
So we are a really big emitter in all terms.
Why is that the case?
Why are we such a big emitter?
I suppose the short answer is history catching up with us.
It's coal.
South Africa generates, at least used to generate almost 100% of its electricity from coal.
Plus we have a simple fuel industry, which is a very successful industry and it serves
South Africa very well, but it has had enormous negative consequences around coal.
So what are those negative consequences?
Well, carbon emissions is number one, but there's also environmental and a health dimension.
You're going to Mopulanga, where most of the coal activities are concentrated.
There are a range of indicators indicating that the people living there are suffering
severe health consequences, self disadvantages.
You look at the pollution of soil, you look at the pollution of water.
These things are all the downside of coal.
So coal on the one hand was very good for us, but coal on the other hand has been very
bad for us.
It has certainly been bad for our relationships.
And that's why we need to do something about it.
So do we have a plan?
Yes, that is the whole point of the so-called JET, Just Energy Transition.
It's a plan for how we can move from where we are to where we want to go.
But it's also a plan for trying to manage the negative consequences of this transition.
A lot of people will lose their jobs.
A lot of small towns will close down.
A lot of businesses will close down, use their business models.
So you have to try and manage these things as well as you can.
And that is what is called JET, or Just Energy Transition.
It's a 216 page document, government has published.
This note is merely the briefest of summaries, but it's a very comprehensive plan of where
we want to go.
And essentially, it talks about the three priorities, electricity, new energy vehicles
and hydrogen.
Now the plan will cost about in round terms, 1.5 trillion rand over five years, 1.48 actually
over five years.
70% of that money will be spent on electricity.
Can I just put that in perspective?
What is South Africa's national budget for the year?
Well, our GDP this year will be about 6 trillion rand.
So 1.5 is an enormous chunk.
But that's of course, it's 1.5 spread over five years, but it's still a lot.
And if you bring into consideration that most of that 1.5 trillion over 1.3 trillion will
be capital expenditure, infrastructure expenditure, then you can see that it's going to have a
huge impact on the country.
So as I've said, 70% of the money will go to electricity.
Whatever that be used for, it'll be used for the first, the biggest item will be to build
more and new capacity.
About 46% of that money will be spent on building new wind farms and new solar farms.
So it's clear which way the wind is blowing, so to speak.
The second biggest project, about 130 billion rand will be spent on upgrading the South
African transmission grid, so then you could accommodate all these renewables.
It's no good having wind farms and some solar farms, and you can't get the electricity generated
there spread over the country to where it is needed.
To do that, we've got to upgrade the grid.
And that'll be about 131 billion.
And then the third element of electricity is the distribution systems, i.e. electricity
inside municipalities.
Now we all know how that infrastructure has been neglected and depleted in those cases,
if not all.
And you will have to spend a lot of money to upgrade that and bring that to the level
that is needed.
And the money it visits for that is about 200 billion.
Now in the context of emissions, which is where this whole thing starts, ESCOM is going
to close down nine of its 15 coal-fired power stations.
Basically it is now eight of 14 because commodity closed down on 31 October.
They switched the last unit off according to 12 on the 36th.
So there are now 14 coal-fired power stations, eight of them will be closed down, and you
have to replace that with something else.
And the replacement will be largely new, but also a bit of gas and probably a bit of nuclear.
In the context of emissions, the closing down of those nine or now eight power stations
will cut the coal consumption for electricity production by 50%.
It will cut it from 113 million tonnes per year to about 55, 56 million tonnes.
So it's a huge cut in coal consumption, and that will help to bring down our emissions.
They're aiming to do that, Bonnie, what did you say?
The date for closing down the power stations, the last date is 2034.
It'll happen in phases, but the last one will be out by 2034.
Now you think that is now, that's only about, it's up in 2022, it's only 12 years away.
It's actually not at one time.
So you have to really move to get renewables and other sources of power generation into
the system before you close down the last of those power stations.
The second element is the new energy vehicles.
That's not something that's so much on our radar.
Now that all and note the category, the category is new energy vehicles, not just electric
vehicles, although that is where the attention is.
It's also using hydrogen as an energy source for particularly heavy transport.
Now and your platinum, for example, is running those huge trucks that they use for mining
at the mine in Mokolakwina using now hydrogen trucks.
It's quite an astonishing thing.
So the idea is that you slowly expand the frontier and go from those big trucks to other
trucks running on the highways, to buses if possible, to trains and of course, airplanes.
Those are your big energy emitters.
And if you can deal with them by way of electricity and hydrogen, it will make a big contribution
to the reduction in emissions.
The nice thing about new energy vehicles, as in the case of platinum, the private sector
can do the investment.
They will make the money out of it, out of selling electric vehicles as they're currently
doing.
They'll make the money out of new infrastructure, which is put out to accommodate the vehicles.
So one can expect them to do the bulk of the investment in this category of new electric
vehicles, just as private companies are doing almost all the investment in renewable energy
up to date.
It's a typical private sector activity.
And then the third element, green hydrogen, what does that mean?
Yeah, hydrogen, you're seeing hydrogen in terms of colors, hydrogen is being manufactured
to the moment in the world and it's called gray hydrogen, white gray, because fossil
fuels are used to produce that hydrogen.
When you switch from fossil fuels in the production to renewables, then the resultant hydrogen
is called green hydrogen.
It is called pink hydrogen if you use neoclear power and it is called blue if you use fossil
fuels, but you do capturing of the carbon emissions.
So these colors tell us about different processes.
And essentially the point is to switch the worlds to do two things.
First of all, switch hydrogen production from carbon gray that is using fossil fuels to
green, which is using renewables.
But secondly, also to expand the fields and the areas of natural life where hydrogen can
be used.
Hydrogen has got three problems.
Basically there's a price problem and there is a safety problem.
If hydrogen interacts with oxygen, it can lead to a huge blow up.
And thirdly, storage.
It's not that easy to restore and transport hydrogen.
But a lot of people are investing a lot of time and money into pushing the technology
frontiers of all these areas as India Platinum is doing at their mine.
So I would expect huge probabilities to come in the next couple of years.
The war that Russia has launched on Ukraine will also help.
At the moment we see some regressions that's inevitable because it's an emergency situation.
But what the war has done is to illustrate how vulnerable the world is to fossil fuel
supplies and that is spurring particularly the Germans on to look at alternatives.
And the German chancellor has been here to South Africa on a state visit.
And as I've said to people, the visit only lasted about 20 hours.
The Luftwaffe couldn't fly from Berlin to Johannesburg and back in 20 hours.
You flew more than the time you spent on the ground here.
Why did the chancellor do it?
Well, he's done it to come and sign agreements with the government, but also with SASL around
developing hydrogen technologies for use in Germany, for use in the world, but essentially
sponsored by the German government.
So hydrogen is the next big thing where a lot of energy and money and the search for
new technology will go on.
You and I have been to the West coast of South Africa, to Wohel Bay, which is 60 kilometers
north of Port Mollusk, between Port Mollusk and the mouth of the Orange River, the border
with Namibia.
There's nothing there as you will recall, but the idea is to, the feasibility studies
are going on now to build a deep sea harbor there.
And not just a deep sea harbor, but also a railway line and to use that as a point for
exporting hydrogen to Europe.
So I would expect over the next 10 years for hydrogen in South Africa to become a major
economic activity and exporting it to world markets.
You have touched on this, but all of this is going to cost enormous amounts of money.
Well, what does the funding plan look like?
Yeah, that is in the sense that most, not the most interesting, but it is an interesting
part of the basic jet plan.
As we discussed earlier, it'll cost about 1.5 trillion over the first five years and
of course much more thereafter.
We just remember South Africa has not only made a goal now for reducing carbon emissions,
it also set the goal of being carbon neutral by 2050.
So it's an ongoing process.
It's not something that can stop after five years.
But the first five years will cost 1.5 trillion.
Now a group of countries and the European Union and the World Bank, basically the UK,
the US, France, Germany, those four companies, the EU and the climate change funds, which
are administered by the World Bank, so it's all in all six players, have contributed $8.5
billion US dollars to this just economic transition of South Africa.
You work at an exchange rate of 15 to one, which is perhaps conservative, you're looking
at 128 billion rare that will come into the country.
Most of that money, the first phase, not all of it, but most of it will probably be used
to upgrade the grid.
The first monies have already coming, France and Germany have signed agreements with the
National Treasury in South Africa for 600 million euros, euros, not dollars, of concessional
cheap funding.
20 years, five year growth period, interest rate about three and a quarter cent.
So that money will flow into Treasury and Treasury can then allocate the two programs
around just transition.
Then we had 495 million US dollars, that's about 9 billion grand, which has been linked
by the World Bank, ISCOM, again on really favorable terms, for ISCOM to do the repurposing
of the commodity power structure.
Now there's a difference between closing something down and repurposing.
The repurposing will cost money and the idea is to help ISCOM to achieve that and change
what is there now from coal to renewables.
So that money has also come in.
Then an interesting development is the third channel of the money so far are from international
charity organizations.
There's a very interesting list of them.
There's a Bezos Foundation, for example.
Clearly while Mr. Bezos is busy trying to fight with the moon or whatever, he also has
a charity that's looking after, wants to look after this environment here on the planet.
And they are sponsoring mainly training and research activities, things for which there's
no commercial return.
$10 million in one case and 180 million rand in another case to do training and in general
help with just transition at Comarty and now also at Switzerland, which will be another
tower stage metal closed down.
So you've got these, you've got governments, you've got international institutions, multilateral
banks and you've got international charities, those three.
And then of course, South Africa itself would have to invest and the way it will come is
by way of biosector investment, as we've discussed.
The private sector have both the solar industry and the wheat industry so far in South Africa.
I foresee that they will build the electric vehicle industry in South Africa.
I foresee that they will build the hydrogen industry.
Those are all classic biosector investments because there's no return.
CEC is really an example of how this can play out and it makes the just transition much
more tangible.
Yeah, absolutely.
So what's happening at Comarty, as I've already said, they closed it down and switched the
last unit off on 31 October.
And what they're doing there is they're putting up 150 megawatts solar plant, a 70 megawatt
wind farm so that'll produce about 220 megawatts between those two technologies, as well as
150 megawatts of batteries.
So you produce the power that goes into the battery and that can help you to extend the
supply of electricity.
The transmission lines are right there so you don't have to build anything.
You just feed it into the grid and goes to wherever the power is needed.
Now, of course, the building of the new plants and so on and the batteries will cost money.
And that's part of what ISCOM got the money from.
But ISCOM has also signed an agreement with the Cape University of Technology because
at the Cape University of Technology, they've developed curricula and a program around retraining
people to switch from coal into solar industry or to go into the wind industry.
And those curricula programs have now been accepted by CEC for use...
At ISCOM?
At ISCOM, sorry, by ISCOM, and then I keep on saying CEC for use at Kumati.
And they will also use it at the third flight and the other stations.
So there you retraining people.
A third aspect which is taking place at the moment in Kumati is that you use the land,
which is available around the power station, for agricultural purposes.
So you establish small farmers there and enable them to grow food for the local area and so
on.
And it's all part and parcel of learning how to live with this transition.
And one can only learn as one goes along.
I think that's what ISCOM is doing.
It's interesting that you say that under the debate they've raised 180 million for a training
center through its lay and observed that there are 16,000 vacancies right now in solar and
wind industry.
So people are going to do these jobs, but there will also be new opportunities.
Oh, absolutely.
You know, if you think about it, 60,000 vacancies in an industry which is really flourishing.
I mean, a lot of wind farms have been built, a lot of solar farms have been built.
So the people skills, they don't have enough skills, 60,000 vacancies and we have millions
of people unemployed.
It is just such a logical fit.
Now, not everybody who will be the trench from a power station will necessarily get
a job at a wind farm.
We must just be realistic about that.
But you are creating new jobs in a new industry and you are helping people, training people
to get into those industries.
So that's the upside of the transition.
That's also the just element of the transition.
Such huge changes will not come without resistance.
Absolutely.
What's happening politically?
Well, politically, you basically have two groups out of service to go to the one group
which is jokingly known as the Green Taliban.
They are absolutely against anything except wind and solar and of course, batteries.
Now that's a nice pure position to have, but that's not how it's going to be for like
a while.
So actually, we'll still use coal for a long time and we will probably have to look at
nuclear for base power as well.
And you cannot have renewables if you don't have gas.
The big thing about gas, as you know from your house or you know from a gas stove, it's
dispatchable.
You can switch it on and off.
You cannot switch a coal-fired power station on and off.
You also cannot switch a nuclear power station on and off.
So you need dispatchable power.
It's part of your mix.
So the idea that only wind, only solar, nothing else will serve so much energy needs is very
pure but it's a bit extreme.
And the people that are really far on that side have now gone so far as to lobby international
governments and the national philanthropists not to give any money to South Africa because
South Africa is not closing down coal completely.
So that's the one side of the political spectrum.
On the other side of the political spectrum, you have people with an interest in the coal
industry or just people with a political interest in coal.
And they're saying that people will lose their jobs, which is quite right.
Towns will die, which is quite right.
And they have much more validity in their argument than the other side, I dare say.
But industries decline.
This country, the coal mining industry, declined and it's a shadow of what it was.
Agriculture has shed hundreds of thousands of jobs after the deregulation of agriculture
in 1996.
Telecom is a shadow of what it was.
Many people have lost their jobs because technology has driven change.
So industries change, that is how life is.
It's like the sun rising and setting.
You can't stop that.
What you can do is to try and manage to fall out as well as possible.
Now if you compare the Just Energy Transition Plan now with training centers of commodity
and retraining people and creating new economic activity, you compare that to the way that
we handled or not handled the decline of the coal mining industry or how we've not handled
the decline of employment and agriculture or not handled the decline at the SOEs like
telecom and trans-state and others, then this is much, much better than anything that we've
done in the past.
In the past, we've never really paid any attention.
We spoke about the social contract and social upliftment, but also all was said and done
much more than was actually said and done.
Compared with energy, there is a chance of managing the negative fallouts from the process
more effectively.
There will still be bodies in the street, might not mistake, but at least you can try
and minimize the bodies.
I'm going to just lift out three of your so-whats.
The first one, you say the catastrophe of load shedding is actually galvanizing the
transition to green energy.
Expand in a minute.
Yeah, look, all of us who read history, people who are interested in large, must be struck
by the irony of what's going on here.
We're having really a catastrophe with load shedding.
I don't think anybody will disagree with that statement, but this catastrophe is also spurring
the country along to alternatives.
We had 100% electricity supply all the time coming from coal-fired power stations.
We would not have started the just transition.
We would have kept pumping out those 435 tons of carbon equivalent emissions every year,
and we would have had no commercial or political incentive to change.
Load shedding paradoxically, and what must be one of the biggest ironies in our history,
is actually pushing the country towards an energy transition.
The fact that we now have a democracy and an open political society is also forcing
that transition to look at the just element.
Something that we didn't do in the decline of gold mining, we didn't do in agriculture.
The other examples I've mentioned.
I think we are in that sense quite lucky that we have to do the transition.
We forced to do it, but the fact that we have a democracy is helping us to do it in a more
just way.
I also want to make the point lead to that.
You've got that, so Patrick has got a long political commitment to climate, to the whole
climate change process.
The World Summit on Sustainable Development was held here in Johannesburg.
One of the COP meetings were held in Durban.
We've agreed to do originally to the Kyoto Protocol.
When that collapsed after the US were drawn, we agreed to Paris, Trump took the US out
of Paris.
We stayed, and we were committed to the process all the way through.
It is not true or not correct that we've now suddenly woken up and signed onto this.
I think that's an important perspective to bring.
One of the so what's is the long political commitment.
This is merely a practical outflow of that commitment.
The other point you make that I think is really important for people to note is that this
is not simple and it's not going to happen overnight.
Absolutely.
This Just Energy Plan covers only the first five years of a process that will run the
2050.
There will be a multiple transition.
It's not just one.
Kumati will transition, Kharutphule will transition, ISKCON will transition, but the whole country
over time will transition.
The auto industry will transition.
The logistics industry will transition with hydrogen and so on.
It's several transitions.
It will come over a multitude of years.
It's not going to be an overnight story.
It will cost many, many multi-families to pay for all this.
It's an old new ballgame.
It's a country we will have to learn and we will learn to adjust to it and to play according
to a new set of new set of roles.
The run of ISKCON?
One can be provocative and say ISKCON will decline and you can say it's finished in
Tlar, that's not necessarily the case, but it certainly will have a much diminished hope.
That is the whole purpose of the changes going on.
That's the whole outcome.
Where we had five years ago, 10 years ago, a monopoly supplier of electricity that belonged
to the state, you will move to a competitive market in electricity belonging to private
sector players, certainly on the generation side.
If you take Transmission out of ISKCON as well, then it will not be left with very much
it to become a shadow of its former self.
But I think what is important here, I've written about this and we've covered it, that what's
important here is that we must distinguish between ISKCON and electricity.
Even if we say for purposes of the argument that ISKCON is kaput, it's finished in Tlar,
that doesn't mean that electricity is finished in Tlar, in spite of the kind of load shifting.
Especially because so much more money is going into new generating capacity in new technologies.
And that's where the future of electricity will come from.
So draw a distinction between ISKCON and electricity.
They are increasingly not the same.
Thank you very much.
This draws a picture of a quite different future.
Sounds almost like the Industrial Revolution, where steam came into the picture and changed
everything.
I think that's a very fair comparison.
We like to talk about the Fourth Industrial Revolution as technology and digital and so
on, and that's of course correct.
But the Green Revolution is certainly also going to be an Industrial Revolution of enormous
magnitude.
And technology of course will help with that.
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