Development Finance Institutions (DFIs) are pivotal in driving climate finance transformation to support South Africa’s Just Energy Transition (JET). As the country strives to meet its climate commitments under the Paris Agreement, DFIs like the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA) are essential for mobilising resources to foster sustainable development and inclusive economic growth.
The Challenge of Scaling Climate Finance
Despite their critical role, DFIs face significant challenges in scaling up climate finance. The JET Financing Mechanism (JET-FM) proposed by the Presidential Climate Commission (PCC) highlights the need for greater public finance to de-risk investments and enhance collaboration between government and DFIs. The IDC, as South Africa’s largest DFI, is uniquely positioned to support industrialisation, localisation, and job creation, making it a key player in the transition to a greener economy.
Key Recommendations for Climate Finance Transformation
To align DFIs with South Africa’s climate finance needs, several reforms are essential:
- Recapitalisation: The IDC should access additional financial support, including capital injections of up to R100 billion and guarantees for long-term loans.
- Concessional Lending: DFIs should provide loans at below-market rates, with grace periods of over five years, to support long-term green projects.
- Governance Reforms: The IDC’s Board should include representatives from civil society, workers, and the private sector to ensure transparency and accountability.
The Path Forward
By adopting these measures, DFIs can drive climate finance transformation, ensuring that South Africa’s transition to a low-carbon economy is both socially just and economically inclusive. This shift will not only reduce inequality but also create opportunities for workers in emerging green industries.