By Hugh Hacking, Head: Structured Investments Executive: Momentum Corporate.
The notion of “just transition” has gained a lot of attention in recent years, particularly in the context of addressing the challenges of climate change. At its core, just transition refers to a transition from an economy that is heavily reliant on fossil fuels to one that is more sustainable, but, importantly, without leaving behind the employees and communities that depend on fossil fuel industries for their livelihoods. The idea is to have the transition be done in a way that is equitable, inclusive, and just, with a focus on ensuring that the most vulnerable communities are not left behind once fossil fuel mines and industries reach their expiry date.
South Africa, like many other developing countries, is faced with the challenge of transitioning to a more sustainable economy, while also addressing the inequalities of the past. Currently, our country is heavily reliant on coal for its energy needs, and the transition to a more sustainable economy must be done in a way that does not leave behind the workers and communities that depend on this industry. This is in the context of a country that is currently struggling to keep the lights on, with talks about investing in more alternative sources of energy dominating the headlines.
As an Executive in Structured Investments and Annuities at Momentum Corporate, I get to work with many such companies that are in the process of transitioning away from their legacy mining businesses. But before going further, what exactly does just transition mean?
What is Just Transition?
According to many scholars and public data, the term “Just Energy Transition” also known as JET is a concept that was first introduced by the US labor and environmental activist, Tony Mazzocchi in the 1980s. It has since gained widespread recognition as a framework for addressing the challenges of climate change and transitioning to a more sustainable economy.
How does Just Transition play out in South Africa?
Not many people know this, but South Africa is actually one of the world’s largest producers of coal in Africa and we are also heavily reliant on this fuel for our energy needs. The country’s coal industry employs over 93,000 people as of 2021, many of whom live in communities that are highly dependent on the industry.
The transition to a more sustainable economy will have a significant impact on these workers and communities, and it is essential to ensure that they are not left behind. Thus in 2018, the South African government established the Presidential Climate Change Coordinating Commission to oversee the development of the just transition strategy. The strategy is currently being developed, with the intent to ensuring that the transition to a more sustainable economy is done in a way that is equitable and just towards those who benefit from mining.
The aim is to ensure that their approach to the transition addresses the economic, social, and environmental impacts of the transition, especially in a time when we are all seeing the impact of climate change on the economy, food security, infrastructure, and communities. This includes measures that support the workers and communities affected by the transition, especially when it comes to providing them with alternative employment and income opportunities, as well as support for retraining and education. The strategy also intends to address the environmental implications of the transition, with a focus on making sure that vulnerable communities are not disproportionately impacted by the shift to a more sustainable economy.
It goes without saying that the impact of just transition in South Africa will be significant. There are already local mines that are leading the way in this transition by investing in new energy projects, such as wind farms and solar power. The shift to a greener economy has the potential to create new job opportunities in renewable energy, energy efficiency, and other sectors. These new jobs will be critical for ensuring that workers and communities affected by the transition are not left behind. By doing so, these companies are creating additional employment opportunities in these communities, while also contributing to the country’s overall shift towards a more sustainable energy system. This demonstrates how just energy transition has the potential to benefit both workers and communities, while also addressing the urgent need for climate action.
What role does Momentum Corporate play?
The journey to building sustainable businesses
There is the question of financial sustainability for the businesses, employees, and the communities where the mines are situated. As Momentum Corporate, our aim is to empower and enable all the stakeholders to get ready for a changing environment by providing tools and financial education.
How does it work:
- Firstly, we are there to help them ensure that they have a healthy balance sheet before the end comes, while unlocking new revenue streams that can grow the business and replace their legacy mining businesses.
- There is also the matter of the employees at those companies. Our role is to work in partnership with the companies to assist in empowering their employees on financial literacy. This can assist to ensure that those reaching their retirement age have saved enough for retirement or helping those still able to work to build up savings for the future where they may no longer be employed.
- Just transition also includes the need to put measures in place for the communities where the mines are situated. People don’t realise that mines can’t just be shut down without considering the communities. Their existence in those communities means people who live in those areas benefit directly or indirectly from the infrastructure of those mines (like water and schools) or foot traffic, so there is careful planning that goes into transitioning those communities for a post mining phase.
So where to from here:
According to a recent statement from the Minister of finance during the 2023 budget speech, their just transition policy “aims to significantly lower emissions of greenhouse gases and harnesses investments in new energy technologies, electric vehicles, and energy-efficient appliances.
Through the Just Energy Transition Investment Plan, launched by the President in 2022 at the COP27, R1.5 trillion will be invested in our economy over the next five years, supported by a coherent industrial policy to enable innovation and economic diversification. South Africa, through its role in the G20, the IMF and the World Bank, has stressed that developed nations could do more to support the energy transitions of developing nations, especially by ensuring that the financial support includes a much larger grantfunding component.” We all have a long way to go, but with that said, Momentum Corporate will also continue to support its partners to transition so their businesses are futureproofed and set up to have financially healthy balanced sheets on their journey to success.