Climate finance required for SA municipalities to seize opportunities in Just Energy Transition

Khwezikazi Windvoel is the Municipal and Project Finance Manager in the Presidential Climate Commission Secretariat responsible for Climate Finance and Innovation. Photo: Supplied

Khwezikazi Windvoel is the Municipal and Project Finance Manager in the Presidential Climate Commission Secretariat responsible for Climate Finance and Innovation. Photo: Supplied

Published Aug 23, 2023


By Khwezikazi Windvoel

As the global community rallies to combat the pressing challenges posed by climate change, the role of local governments cannot be underestimated. In the context of South Africa, municipalities stand at the forefront of the battle for a more sustainable future.

The Just Energy Transition, a key element of this endeavour, hinges upon the effective mobilisation of climate finance to ensure that municipalities can transition to cleaner and more resilient energy systems.

The Presidential Climate Commission seeks to explore, through various interventions in partnerships with our metros, cities and towns, the pivotal role that South African municipalities must play in the just energy transition, highlighting the need for climate finance flows into these entities, while addressing the challenges they currently face in accessing and utilising climate finance.

These challenges are worsened by local government’s current dwindling revenue generating streams and erstwhile national revenue division formulas and policies, which may not have caught up with the times.

Municipalities are the linchpins in the transformation to a low-carbon, sustainable future. Their close connection to communities and local resources positions them uniquely to spearhead impactful changes at a grassroots level. By promoting renewable energy projects, enhancing energy efficiency, and prioritising sustainable transportation, municipalities have the potential to reshape the energy landscape while addressing socio-economic disparities.

The Presidential Climate Commission's critical appraisal of the Just Energy Transition Investment Plan document underlines the indispensable role municipalities must assume. In this appraisal, we emphasize the necessity of local leadership and collaboration, asserting that these entities are ‘’crucial hubs’’ for driving the transformation. However, the magnitude of this task requires substantial financial support, which is where climate finance becomes pivotal.

South Africa’s Just Energy Transition Investment Plan (JET-IP) for the initial period of 2023 to 2027 notes municipal capacity as a cross-cutting investment priority, and out of the R1.48 trillion that’s needed, and accounts for a total need of R319 billion worth of investments into municipal infrastructure, operational investments, capacity and collective planning, and revenue modelling. This is just more than 20% of the total initial investment needs that have been identified as catalytic and having the greatest prospect of supporting the achievement of the country’s Nationally Determined Contributions target and longer-term decarbonisation goals.

Climate finance is going to play a significant role in realising the ambitious goals of the Just Energy Transition. Although municipalities are crucial to a low-emission and climate resilient future, a lack of finance and access to finance is a major barrier preventing them, particularly in a developing country such as ours, from realising their sustainability ambitions.

Our municipalities vary in size, geographical location, fiscal status, creditworthiness, and financial autonomy, and they face different challenges in implementing the national policy plans for the just energy transition.

Each municipality requires a nuanced and contextualised approach to planning and financing, and technical support requirements need to be customised to meet the needs and priorities of that particular municipality.

This calls for greater awareness around climate finance among municipal-level parties to enable them to plan and increase their ability to mobilise and access climate finance while creating an enabling environment to help retain the capacity to utilise climate finance for the long-term goals of the just transition.

The allocation of climate finance is not just an act of financial support; it is an investment in the future of both the environment and society. As municipalities embrace renewable energy solutions, they generate employment opportunities, stimulate local economies, and reduce carbon emissions. Furthermore, these initiatives have the potential to alleviate energy poverty, ensuring that vulnerable communities have access to affordable and sustainable energy sources.

Despite the recognition of municipalities' importance and the potential benefits of climate finance, several challenges obstruct their ability to access and utilize these funds effectively. Some of these challenges include:

Capacity Limitations: Many municipalities lack the ability and resources to navigate the intricacies of climate finance mechanisms. Developing the capacity to prepare, manage, and report on climate finance projects is crucial.

Institutional Barriers: Fragmented governance structures and insufficient coordination between national and local governments hinder the smooth flow of climate finance. Strengthening institutional frameworks can streamline the process.

Project Bankability: Municipalities often struggle to develop projects that meet the stringent criteria of climate financiers. Enhancing project planning and preparation can enhance the bankability of initiatives.

Limited Technical Skills: Implementation of innovative energy solutions requires specialised technical skills. Investments in training and skill development are essential to overcome this challenge.

While these challenges might appear daunting, they are by no means insurmountable. The very recognition of these obstacles highlights the growing awareness of the need to address them.

By fostering collaboration and knowledge-sharing, municipalities can bolster their capacity and expertise.

The Just Energy Transition hinges upon the proactive engagement of South African municipalities. Their unique position within communities, coupled with their potential to drive tangible change, underscores their indispensable role. As the demand for climate finance swells, municipalities must be equipped with the necessary tools to access and use these funds effectively.

The collaborative efforts of the government, the private sector, and all other stakeholders will be pivotal in overcoming the challenges outlined above. By addressing capacity limitations, refining institutional frameworks, enhancing project feasibility, and investing in technical skills, municipalities can emerge as powerful catalysts for change.

The road ahead is both challenging and exciting. As municipalities embark on this transformative journey, they have the opportunity to not only mitigate the impacts of climate change but also to shape a more equitable and prosperous future for all. Through curious exploration and unwavering optimism, South African municipalities can lead the way toward a just energy transition that leaves no one behind.

Khwezikazi Windvoel is the Municipal and Project Finance Manager in the Presidential Climate Commission Secretariat responsible for Climate Finance and Innovation.