Public Enterprises Minister Pravin Gordhan has assured South Africa’s Parliament that the R131 billion climate deal money would be used for the country’s just energy transition and not Eskom’s debt.

Gordhan emphasised that the R131 billion is just an “offer” at this stage and that work remained to turn it into a reality. Negotiations will only start now to ensure that the offer turns into a deal.

“This is an offer from the developed countries, it is not a deal,” he said, adding that funds would not go towards servicing state-owned power utility Eskom’s crippling R400 billion debt. 

He also emphasised that the funds would be specifically used for Eskom’s energy transition, enabling the power utility to move from coal to cleaner green technologies.

Gordhan was answering questions in Parliament on Wednesday, 17 November, on South Africa’s watershed multibillion-dollar climate finance deal announced at the COP26 climate talks in Glasgow two weeks ago. 

South Africa committed to ambitious targets at the talks to attract billions in climate funding from wealthy nations. South Africa is one of the world’s most coal-dependent countries, and its commitments are a huge milestone at the conference.The deal will be watched closely to see if it can be used as a model for other developing countries looking to move away from coal.  

The historic deal saw France, Germany, the United Kingdom, the United States and the European Union pledge R131 billion over the next three to five years in the form of grants, concessional loans and investment and risk-sharing instruments, including mobilising private sector funding.

In return for the funds, Eskom has promised to close down its coal power stations before the end of their normal lifespan, over the next 15 years. When announcing the deal the South African government said it would be used in part to fund Eskom to build a strong renewable energy sector.

Gordhan said negotiations would now take place at a technical level to determine if the offers were compatible with South Africa’s financial requirements and capabilities. 

It is now over to a group of ministers, led by South Africa’s Environment Forestry and Fisheries Minister Barbara Creecy, to negotiate on the offer. 

“A technical team has been established and includes South African lenders and experts as well as international experts, to engage in negotiations.”

Crucial points to be discussed were how much of the funding would be grant money, and just how “concessional” the concessional funding will be.

Gordhan added that the deal was a “government project”, not specifically an Eskom project, and the money would also be used for two other projects – a green hydrogen project and the production of electric vehicles in South Africa.

Eskom will get the lion’s share of the funds and one of the projects that the state utility will use it for is to refurbish its old coal power plant Komati. Eskom plans to turn the aged coal power station into a clean power plant as part of its just energy transition.

Gordhan said that if Eskom received funding for the Komati refurbishment, it would have an important impact on repurposing and repowering the station. Plans for the plant include an agri-voltaic plant which allows for dual land use for the generation of solar power and agriculture.

He said funding could be used to retrain workers, and prepare the plant for new workers, as well as mitigating the impact on communities.

Gordhan said the R131 billion is “merely a start” and does not cover all of South Africa’s transition issues. A lot more money needs to be raised by developed countries, either before or after 2030.