By Carrington Tlale
Energy security is an enormously complex and urgent challenge, especially at a time when most stakeholders appreciate the critical need to rapidly develop renewable power infrastructure. And in an interconnected world, collaboration and solidarity between and within countries will be more important than ever.
The Just Energy Transition Partnership (JETP) – in which the US and European countries pledged billions in financing for South Africa’s green energy transition – a notable example of the kind of productive partnerships we need and a milestone in global energy financing.
However, President Cyril Ramaphosa noted at the New Global Financing Pact Summit that the JETP funds are just a drop in the ocean; a first step aimed at unlocking funding from the private sector and other institutions. After all, a comprehensive and just whole society energy transition is a hugely ambitious endeavour that will require massive investment and co-ordination.
Unfortunately, the global economic outlook is uncertain, and the domestic economy is hardly faring better. Regardless, South Africa urgently needs quality investment, at scale. To secure the funding required, we can’t afford to put all our eggs in one energy basket. We need a multilateral policy that cultivates investment and develops strategic partnerships with partners across the world, with a particular focus across the Global South.
The taps of global financing are running dry
Global rates of investment have been hampered by high interest rates and other macro factors. Even more concerning is that the World Bank has cautioned that reduced investment will hit developing economies particularly hard. On the domestic front, the outlook isn’t any brighter. Many business leaders are defensively focused on preserving their market share rather than proactively driving innovation.
One of the primary reasons for the lack of business vitality is the energy crisis. We need a massive injection of capital to build new green energy infrastructure and kick-start economic growth. But chronic load shedding is holding our economy back, costing desperately needed jobs and wreaking havoc on growth. We therefore need to broaden our investment horizons.
Fortunately, South Africa remains well-placed to attract investment from multiple markets. However, this needs to be approached carefully. Global terms of trade are shifting dramatically. The threat of a trade war between the US and China could dramatically alter the flow of goods, services and capital investment.
At the same time, the war in Ukraine is further polarising global trade. Concerns about “friendshoring” and deglobalisation mean that we can’t take anything for granted when it comes to security of supply of good or investment.
However, for South Africa, global financial uncertainty also presents an opportunity. Rather than try pick the “winning” side, we should deepen and broaden our economic relationships in a strategic manner. That is a delicate balancing act, but one we are potentially positioned to effectively navigate.
For instance, while Europe and the US are our main export markets, we are also part of the ever expanding BRICS nations. That combination of factors has important implications for trade and diplomacy. A smart energy security strategy will welcome investment from all these sources and, importantly, look beyond existing trade frameworks.
Within the continent, the value of robust trade between countries in Africa is increasingly seen as a key driver of growth and economic resilience, as evidenced by the African Continental Free Trade Area agreement.
Drawing on the experience of Turkish investment in energy infrastructure, South Africa can learn valuable lessons. Turkish firms such as Karpowership have played a crucial role in powering developing economies, including Brazil, Ivory Coast, Indonesia and Mozambique. Through their investments, they have not only contributed to domestic energy security but also facilitated employment opportunities and community development.
South Africa could be next if we welcome the urgently needed investment. Ultimately, ending load shedding – and the transition to a sustainable future – depends on our ability to attract investment from Turkey, the BRICS nations, and from across Africa, Asia and South America, as well as from investors in the US and Europe.
If we’re serious about developing energy resilience and creating electricity infrastructure suitable for the future, we need to prioritise investment between peer countries in the non-aligned Global South. The transition process must prioritise social impact, provide substantial and predictable financial support, and promote green industrialisation through technology transfer and skills development.
Together, we can navigate the challenges of energy transition and forge a path towards a more sustainable future for South Africa. The world is changing rapidly, and we will only be able to compete through partnerships that enable us to win together, even while others are drifting apart.
Carrington Tlale, Black Business Council.