Minister Creecy’s opening keynote address at the Standard Bank Climate Summit: Africa’s journey to Net Zero, in partnership with SOAS

04 October 2021

Good afternoon ladies and gentlemen,

I would like at the outset to acknowledge and applaud Standard Bank, in partnership with the School of Oriental and African Studies at the University of London, for organising this important and timely climate change summit to address Africa’s journey to net zero emissions.

There can be no doubt that climate change is one of, if not the greatest challenges facing the world today. In recognising the magnitude of the climate crisis we face, it is important to note that governments do not have all the answers, and it is imperative for us to recognise that we all have a role to play in addressing the challenges we face and implementing the solutions and opportunities posed. Government, business and civil society need to come together in partnership and collaboration to jointly address climate change.

It fills me with confidence to know that Africa’s largest banking group by assets recognises that the financial services sector should play a substantive role in addressing the social, economic and environmental challenges facing the world today, while placing a clear focus on driving sustainable and inclusive economic growth across Africa, our home.

South Africa warms at twice the global rate and the latest Intergovernmental Panel on Climate Change report shows 1.5 degrees Celsius of warming globally is likely, which translates to a 3 degrees’ Celsius increase for South Africa. It is only with ambitious emissions cuts that the world can keep global temperature rise to 1.5 degrees, which is necessary to prevent the worst climate impacts.  All parts of the world are experiencing heatwaves, floods, droughts and other extreme weather events as a result of human-induced climate change. The warnings are clear that these events will dramatically increase in intensity with further global warming. Most African countries are already seeing the effects of climate change in weather patterns and events such as tropical cyclones, droughts and floods. In January this year more than 20 people lost their lives in Mozambique, Zimbabwe, Eswatini and South Africa, as a result of the destruction caused by tropical cyclone Eloise. It also left almost 7000 people displaced in an area already battered by two deadly cyclones in 2019.

Both the public and private sector are all exposed to both physical and transition risk, but the degree of exposure and the resultant costs will manifest unevenly, with communities in developing countries and the global being hardest hit. This places a heavy burden on the African continent. If we continue on the path we are on, large parts of Africa will become uninhabitable. Historically, the African continent has been responsible for only one percent of green-house gas emissions. Today our continent contributes a mere four percent to global emissions, with our country being responsible for half of that figure. So, while Africa has not caused the problem, we will be massively affected by it.

Africa has no choice but to join the global drive toward limiting greenhouse gas emissions, however this action must be considered within the context of Africa’s just transition toward a low-carbon economy and in a manner that recognises the deep energy poverty across African economies.

South Africa is a signatory to the Paris agreement which requires us to contribute to the global effort of holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production; and making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

I am proud to say that the South African government remains firmly committed to contributing our best effort toward the global cause of addressing climate change. In this regard, President Cyril Ramaphosa has created the Presidential Climate Commission to research and identify pathways for a just transition to a low-carbon economy and a climate resilient and sustainable society by mid-century.

This Commission is developing a clear plan to take us from an aspirational commitment to a low-carbon, climate resilient economy and society to the reality of new technology, new investment and above all new jobs. The Commission will provide the much-needed institutional mechanism to bring together government, civil society, business and labour to advise government on the just transition. The Presidential Climate Commission is also leveraging partnerships and collaboration across all relevant sectors to implement programmes that encapsulate the just transition in a coherent and coordinated manner.

Cabinet has recently approved South Africa’s revised Nationally Determined (NDC) Contribution to the Paris Agreement for submission to the UNFCCC ahead of COP26 with climate change mitigation target range for 2030. South Africa has revised its target range for 2025 to 398 - 510 and for 2030 to 350 – 420 megatons of Carbon Dioxide equivalent Noting that the top of the range of our revised NDC is consistent with the Paris Agreement's temperature limit of "well below 2 degrees", and the bottom of the range is consistent with the Paris Agreement's 1.5-degree temperature limit. Crucially, where we get to in the range depends on the support we get for our transition from developed countries

The National Climate Change Bill which was approved by Cabinet for submission to Parliament will seek to provide a legal instrument towards the implementation of the National Climate Change Response Policy allowing for alignment of policies and providing a transitional arrangement for South Africa’s move towards a lower carbon and climate resilient economy.

As a country heavily reliant on coal for electricity generation, we need to however ensure that those employed in the coal value chain are not excluded from any planning and policy implementation towards a low-carbon future. Hence we are committed to ensuring that the transition we have is a just one; that the most climate-vulnerable groups participate in decision making and that the climate-compatible social and economic development addresses the needs of workers and communities.

Our ambition in the context of a just transition involves pursuing our development goals in the process of cutting emissions and building resilience, expanding employment and building a skills base and managing adjustment processes. Transitioning to a lower-carbon economy will undoubtedly require extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change.

In this regard, it is important to note that Eskom, our largest greenhouse gas emitter, has committed in principle to net zero carbon emissions by 2050 and has already released a call for proposals to repower and repurpose Komati power station in Mpumalanga. Studies to facilitate similar initiatives are underway for Hendrina, Grootvlei and Camden. This work represents a decisive shift in our energy trajectory and should be welcomed.

Ladies and gentlemen,

Significant long term financial resources, at concessional rates, will be needed to introduce new technologies and open up significant new job creation opportunities so that our country joins others who are benefitting from the green technological transition across the world.

There is already evidence that the market value of equities of firms in some heavily polluting industries is being impacted by policy measures and market trends related to a transition to a low-carbon economy. Studies show that the discounted loss in global wealth that could result from stranded assets may range from US$ 1 trillion to US$ 4 trillion, or less than 3% of global managed financial assets.

Reorienting capital to more sustainable investments requires a comprehensive shift in how the financial system works. This is necessary if South Africa is to develop more sustainable economic growth, ensure the stability of the financial system and foster more transparency and longevity in the economy. The transition will need to be gradual in order to support economic growth, while gradually transitioning away from a carbon-based economy.

A number of initiatives have been identified for implementation to promote the greening of the South African economy, as highlighted in the draft Financing a Sustainable Economy Technical Paper 2020-2022 released by National Treasury. These include:

• Putting a price on carbon, via the carbon tax, and the publishing of offset regulations to enable a reduction of those taxes through climate-positive investments.
• Fiscal allocations, such as those for risk mitigation and job creation projects such as Working for Water and Working on Fire which directly combat the effects of climate change and help build our resilience to events such as wildfires.
• Draft regulations for carbon offsetting.
• Incentivising the sale of vehicles with lower carbon emissions during their operating phase. A key development in this regard in the automotive sector is the announcement by Toyota SA that their eThekwini plant will begin the assembly of a new hybrid modal in the fourth quarter of this year.

Investment in the green economy and green technologies provides strategic advantages for our country and continent. It opens access to new green financing opportunities; it offers the possibility of significant proven job creation; it has potential to localise production and services which will build small and medium enterprises and of course it enhances our long-term competitiveness while mitigating our transition risks.

A recent study by Accenture estimates green industries and technology could unlock economic activities to the value of US$350 billion on the African continent. My Department in collaboration with the GIZ - the German Development Agency- has completed guidelines on a step by step process on how to prepare for green bond issuance including addressing the costs attached to the issuing of such bonds, as well as reporting requirements. Two municipalities - Tshwane and eThekwini have already been trained in this regard.  We are also exploring opportunities to expand on the green bonds work together with National Treasury as part of the GIZ supported green economy transformation programme.

The department as the focal point for the various multilateral climate funds such as the Green Climate Fund (GCF) or the Climate Investment Funds (CIFs) has also been supporting efforts to mobilise financing from these funds facilitate de-risking of investments and creating opportunities for leveraging and catalysing sustainable finance.

One such initiative that has received concessional finance of US$ 50 million from the Green Climate Fund is the DBSA’s new Climate Finance Facility (CFF). The facility aims to address market constraints, playing a catalytic role with a blended finance approach, to increase climate related investment in the Southern African region. The facility will be a first-of-its-kind application, based on the Green Bank model, adapted for emerging market conditions.

Ladies and gentlemen

To avoid the stark future foreshadowed by the IPCC report, COP26 needs to prioritise securing finance, technology and capacity building support from developed to developing countries.

If we can make progress in this regard in Glasgow it may be possible to turn Africa’s climate change liability into a new opportunity for green growth and the job-creation opportunities that accompany it – driving sustainable development across the continent as envisaged in Agenda 2063.

As stated, South Africa remains committed to the Paris Agreement, and believes that all three aspects – adaptation, mitigation and means of support and finance must be given equal priority.

In closing, I wish to extend once again my thanks to Standard Bank for organising this important climate summit in partnership with the School of Oriental and African Studies. I truly believe that such initiatives will play a key role in creating commonality and collaboration to address what is arguably the greatest challenge facing our generation. I am confident that the next two days will be filled with insightful and fruitful engagement as we all look to play our part in realising Africa’s just transition to net zero emissions.

I thank you all.