South Africa’s Just Energy Transition is central to its efforts to address climate change and economic inequality. The Just Energy Transition Partnership (JETP), a $8.5 billion financing deal with international partners, aims to support South Africa’s shift to renewable energy. However, the current focus on electricity infrastructure risks sidelining broader economic diversification and the needs of workers. This policy brief explores how monetary policy reforms can ensure a fair and inclusive Just Energy Transition that prioritises job creation and sustainable growth.
The Challenge of Economic Diversification
South Africa’s growth model has long relied on capital-intensive industries like mining, which have failed to generate widespread economic benefits. Investment remains concentrated in sectors that do not create jobs or foster innovation, leaving the economy vulnerable to inflation and financial instability. The JETP, while a step forward, must be complemented by policies that redirect financial resources toward sustainable, job-creating industries.
Unlocking Liquidity for a Just Transition
South Africa’s financial system holds significant untapped potential. By reallocating just 10% of bank lending toward developmental projects, approximately R52.41 billion could be mobilised. Additionally, reforms to the retirement industry, such as reducing offshore investment limits, could unlock an estimated R600 billion for onshore projects. These measures, combined with a coordinated approach between the National Treasury and the South African Reserve Bank (SARB), could drive a Just Energy Transition that benefits all South Africans.
Policy Recommendations
- Green Financial Taxonomy: Expand the South African Green Finance Taxonomy to include mandatory transition plans for workers, ensuring that sustainable investments also address social risks.
- Credit Allocation: Introduce targeted refinancing lines and green capital requirements to incentivise lending to renewable energy and job-creating sectors.
- Worker-Centred Reforms: Mandate corporate transition plans that prioritise workforce training and skills development, embedding the needs of workers in the transition process.
By aligning monetary policy with the goals of the Just Energy Transition, South Africa can build a more resilient and inclusive economy.