South Africa, the world’s coal junkie, is trying to quit

January 22, 2022

TRAVEL EAST from Johannesburg – the economic capital of South Africa – and dusty industrial towns line the road to the town of Emalahleni (‘place of coal’ in the local Tswana language). The flat steppe is dotted with mines and the chimneys of coal-fired power plants.

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This is South Africa’s coal belt. Here, miners dig about three-quarters of the coal that powers one of the world’s most heavily coal-fueled economies. The sooty stuff supplies 27% of the world’s energy, but no less than 77% of South Africa’s energy (see chart 1). That includes almost all of its electricity and – uniquely – 28% of its gasoline and diesel, which it synthesizes from coal using a process perfected during an oil embargo in the 1980s to end apartheid.

The fuel that once helped keep apartheid alive continues to cause problems for the party that eventually ousted it, the African National Congress (ANC). Diversifying away from coal would help end South Africa’s decades-long energy crisis and with it a period of economic stagnation characterized by stagnant or falling incomes. The smoldering political row over whether to do so could also determine the fate of Cyril Ramaphosa, South Africa’s timidly reformist president, who hopes to secure the ANC’s nomination for a second term in 2024 at a party convention later this year.

The reasons for moving away from coal are obvious. South Africa is windy and sunny. It can produce renewable energy by building new wind turbines and solar farms much cheaper than digging up coal and shoveling it into power plants already built. (Plus, many of these coal-fired power plants are old and about to close.) Because wind and solar farms can be built quickly, they’re well suited to ending a desperate power shortage. State-owned utility Eskom has rationed electricity by scheduling regular blackouts every year since 2018, making it harder to run almost any type of business.

The wind through the international capital markets is also blowing in this direction. Even though Eskom is broke and unable to service its debts without government help, private investors are happy to put money into renewable projects. This also applies to Western governments. At last year’s COP26 climate change conference in Glasgow, a group of rich countries including America, Britain, France and Germany pledged $8.5 billion in grants, cheap credit and investment to help South Africa move away from coal finance. For its part, South Africa released ambitious new climate commitments to start reducing greenhouse gas emissions from 2025, a decade earlier than previously planned.

The COP deal places special emphasis on supporting workers and areas that will be affected by the coal phase-out. That’s no small thing: the industry directly and indirectly employs around 200,000 people and supports the regional economy around Emalahleni. Such concern typifies the conciliatory approach to politics of Mr. Ramaphosa, once a hard-line mining union boss who now favors compromise over conflict and consensus over rapid change.

Take the latest version of South Africa’s Integrated Resource Plan, which maps the future of energy infrastructure. The document, approved in 2019, calls for the retirement of 35,000 of the 40,000 megawatt (MW) coal-fired capacity currently in operation by 2050. Most of the new capacity is expected to come from wind and sun. But little has happened since then, largely because of opposition from mining unions, populists and politicians who have made their fortunes selling overpriced coal to Eskom.

One of the most prominent coal advocates is Gwede Mantashe, Minister for Minerals and Energy and former miner. In the 1980’s, when Mr. Ramaphosa headed the National Union of Mineworkers, Mr. Mantashe co-founded and ran the Union’s Witbank branch, as Emalahleni was then known. He later rose to the top of the union.

Although once a close ally of Mr Ramaphosa, Mr Mantashe has sought to thwart the President’s plans to alleviate electricity shortages by attracting private investment in renewable energy. Regulations made it virtually impossible for large corporations like mines to generate their own electricity, as private generation capacity in excess of one megawatt required unobtainable licenses. Mr Mantashe staunchly resisted efforts to raise the cap to 50MW, despite pleas from power-hungry companies. In an act of uncharacteristically bold, Mr. Ramaphosa overruled it last year and increased the cap to 100MW.

The episode did little to chastise Mr. Mantashe, who continues to advocate for new coal-fired power plants even as he retires with the approval of private investor deals to build wind and solar farms. He also appears determined to award an expensive 20-year “emergency power” contract to Karpowership, a Turkish floating power plant operator. That deal has been blocked by environmental regulators and also faces legal challenge from an unsuccessful bidder, who alleged in court documents that he was asked to pay bribes in order for his bid to be considered. Mr Mantashe said the tender was “accurate, flawless and transparent”. Karpowership has also denied any wrongdoing. But until the case is resolved, the banks whose loans are needed will stay away from the deal.

Time is of the essence for Mr Ramaphosa, whose rivals within the ANC are already lining up to challenge him for leadership of the party at his next five-year conference in December. With national elections more than two years away, the party has a habit of defenestrating incumbent presidents. It ousted two of Ramaphosa’s predecessors, Thabo Mbeki and Jacob Zuma, before the end of their terms as president.

Mr Mantashe may well stand with Mr Ramaphosa against the ANC’s pro-corruption wing – as he did in 2017 – although some experts say he is also considering stabbing the President to wage his own struggle for power. In any case, he would like the support of the country’s two main industrial unions, which represent miners and metalworkers and together have around 650,000 members. Both unions support coal, a major export (see Chart 2), and have opposed renewable energy, which has become a touchstone for the political left: Floyd Shivambu, a leader of the populist Economic Freedom Fighters party, says renewable energy is “ a colonialism planned by the West”.

As the ANC focuses on its internal infighting, many South Africans will see the 2024 national election as an opportunity to voice their views on energy policy. The beginning of Mr. Ramaphosa’s campaign for the party’s presidential nomination provides a fitting metaphor. As he was speaking at a fundraising gala in Polokwane, a northern city, the power went out, leaving him and the assembled ANC greats in the dark.

This article appeared in the Middle East & Africa section of the print edition under the headline “Soot, Booty, Reset”

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