By Larry Claasen
SOUTH Africa’s greatest opportunities to move towards net zero at present come from the private sector, according to KPMG’s Net-Zero Readiness Report 2023.
The report, which examines steps taken by 24 countries as well as key economic sectors to reduce the greenhouse gas emissions that cause climate change, said that the private sector will be the driver of decarbonisation.
It noted that foreign-listed multinationals and companies with international investors will in many cases have to increase their reporting on climate change risks and develop plans to decarbonise.
It pointed out, however, that there are financial pressures to delay such work.
“There is not a big drive for companies in South Africa that are trying to make ends meet in a very slow economy to embrace additional measures linked to net zero,” says Pieter Scholtz, partner and Africa ESG lead, KPMG in South Africa.
Companies are likely to lead decarbonisation work but the state of the economy, slowpace of regulatory change and unreliability of electricity supply are hindering progress, while heavy-emitting industries could be affected by the European Union’s (EU) Carbon Border Adjustment Mechanism.
The EU introduced its Carbon Border Adjustment Mechanism from October 2023, which will eventually require those importing some goods to pay an equivalent price for their emissions to manufacturers based in the bloc.
Australia and the UK, which both have emissions trading, are considering similar mechanisms. India may challenge the EU mechanism and South Africa is considering how it should respond, but over time border adjustments look likely to reinforce the importance of low carbon production as a source of competitive advantage.
For its part, the government is doing little to help or force companies to decarbonise, whether through legislation or other measures, says KPMG.
A June 2021 speech by President Cyril Ramaphosa discussed an expansion of renewable energy, which at present provides only a small proportion of the country’s electricity, but this has not been sustained.
“The slow pace of regulatory change is a challenge,” says Poogendri Reddy, associate director, Sustainability Services, KPMG in South Africa.
Plans from 2019 to break up the government-owned and coal-dependent power group Eskom are progressing slowly, although in July the country’s energy regulator licensed its plans to set up a separate transmission operator.
Eskom frequently imposed load shedding — planned power cuts — on customers, given a chronic lack of capacity resulting from severe financial, plant and labour problems with cuts occurring on 288 days in 2022.
In February 2023, President Ramaphosa declared a state of disaster because of what he called “the electricity crisis”.
As part of its response, in March 2023, the government created a new minister of electricity post, initially held by Kgosientsho Ramokgopa, previously the head of the Presidency’s Investment and Infrastructure Unit.
The government has also allowed Eskom to bypass sulphur dioxide pollution controls at its Kusile coal power station so the company could resume production from generation units providing 2GW of electricity, despite this risking severe health problems for those living nearby, said KPMG.
“Stability of supply right now outweighs current emissions concerns,” says Reddy, although this has an impact on the uptake of levers for decarbonisation adopted in other countries.
One example is the slow adoption of electric vehicles if access to power needed for charging them is unreliable and such power is still generated from coal, said KPMG.
