Programme Director
Members of the Board of Directors of Eskom
Chief Executive and other Executives of Eskom
Ladies and gentlemen,
It speaks for itself that Climate Change is top of the agenda with COP17 being hosted in Durban in a few weeks time.
In that regard, we are determined that South Africa will host a successful and fruitful event and make a meaningful contribution to the global effort to combat climate change.
South Africa’s National Climate Change Response White Paper which was finalised this year sets out Government’s vision for an effective climate change response and the long-term transition to a climate resilient and low-carbon economy.
The South African economy is highly energy intensive being built on the so-called minerals-energy complex, which reflects our historical industrial policy.
Much of our industry relies heavily on the use of electricity, which is generated primarily from coal, with around 85% of the electricity generated by Eskom attributable to it this year alone.
In spite of our heavy reliance on coal for electricity generation and other industry where coal is used as feedstock, South Africa is still only one of the 30 largest emitters of greenhouse gases (“GHG”) globally in absolute terms, and we are amongst the highest per capita carbon emitters which places us at the forefront of the climate change challenge.
We know that the bulk of Greenhouse Gas emissions in South Africa comes from the energy sector which contributed 78% of South Africa’s total Green House Gases in 1994 and more than 90% of carbon dioxide emission.
It is acknowledged that the electricity generation portions of that sector accounts for around 50% of our emissions.
Consequently, a key principle that needs to guide our efforts to reduce carbon emissions is to ensure that these initiatives and programmes have a sound economic logic, are integrated into our national economic strategy and must contribute to job creation, skills development, industrialisation, technology innovation and economic growth and development.
In the absence of this discipline, it is unlikely that the transition will be sustainable or receive broad-based support.
And yet, it is critical to ensure that we get a buy-in from the masses of our people as we make the decisive shift towards the green economy. The people must be able to identify, realise and accept the tangible benefits that will accrue from this move.
We cannot impose undue burdens on our population who have already suffered far too much for far too long and economy in a context of high levels of unemployment and poverty.
State-Owned Companies (SOCs) are not ordinary commercial enterprises, in that they have a mandate to achieve longer term strategic economic and developmental objectives in addition to achieving commercial success.
Consequently, we recognise and embrace the need for them to demonstrate leadership in the way they engage with the climate change challenge.
That being said, a fundamental challenge of our climate change policy framework is to establish achievable goals for the SOCs in relation to the overall National Response to Climate Change while maintaining an appropriate balance between potentially competing financial, economic, developmental and environmental objectives.
After all, some of our SOCs are the largest contributors to carbon emissions in the country and it is that contribution that we need to invert so that it becomes a positive contribution that spares the environment for future generations.
The SOCs that the Department of Public Enterprises (DPE) oversees are either key role-players in our country’s efforts to mitigate and reduce carbon emissions or will be vulnerable to measures imposed locally or globally to combat climate change which may impact on their business sustainability.
The New Growth Path (NGP) and the Industrial Policy Action Plan (IPAP) have identified the transition to a “green economy” as an opportunity to develop new industrial and technological capabilities requisite to support employment and economic growth, and our SOCs have an important role to play in effecting that transition.
It is in this context that our department has developed a climate change policy framework to guide our State Owned Companies as they engage with the requirements of climate change and the need to support Government’s objectives in reducing carbon emissions whilst transitioning to a green economy.
It is not always easy to maintain an appropriate balance between potentially competing financial, economic, developmental and environmental objectives.
There are thus four key principles that the DPE climate change policy framework is based on:
- Firstly, to optimise the overlap between commercial, economic, developmental and environmental objectives whilst carefully managing areas where these objectives conflict
- Secondly, the integration of climate change, broader environmental and green economy considerations into the State Owned Companies’ planning, procurement and operational processes on an on-going process or learning and continuous improvement basis , rather than a big-bang approach
- Thirdly, there must be flexibility in the way the SOC responds to the challenges of climate change given the diversity of sectors within which the SOC operate, and
- Finally, the development of the green economy requires a high level of collaboration across SOC and between SOC and government and the shareholder will have to play a facilitating role in this regard.
The focus of the policy is thus to start the process of integrating climate and green economy considerations in the SOC planning processes and to facilitate a high level of collaboration between the SOC and government to enable the efficient implementation of green economy initiatives.
The DPE climate change policy framework has not set specific targets relating to SOC emission reduction or for the investments they promote in green economy initiatives.
This is because, as a starting point, we would like the SOC to set their own targets based on what they believe they can achieve.
In this way, we can demand a high level of accountability.
A second complicating factor is that a range of green economy initiatives will require a high level of collaboration between the SOC and government.
Over time, we will strive to set targets for what the portfolio as a whole can achieve in both promoting green economy initiatives and limiting carbon emissions. This will enable collaboration and will help us to more systematically contribute to achieving our national transformation targets.
I want to briefly concretise the policy in order to illustrate how SOC emission reduction activities can catalyse green economy initiatives which will require a high level of SOC and government collaboration.
South African Airways (SAA) intrinsically operates in the global market and is consequently extremely vulnerable to policies in countries that it operates that impose penalties and taxes on carbon emissions.
In the short term, SAA is exploring the implementation of a voluntary carbon offset project that can support the development of forestry in the region.
Indications are that SAA will require that bio-fuels make up half its fuel supply by 2020 in order to avoid future penalties. This will create a pressing demand for an extremely large quantity of bio-fuels which can form a base-load against which a fully vertically integrated bio-fuels industry can develop in South Africa and in the region.
To address this challenge will require a coordinated government program that promotes investment in second generation bio-fuel crops both in Southern Africa.
South African Forestry Company (SAFCOL), an SOC that has considerable experience in forestry, has been developing intellectual property which can support this process.
It is also worth noting that Transnet’s rail business is intrinsically environmentally friendly.
Rail transport is safer, involves fewer emissions, decreases road damage and congestion and lowers overall transport costs.
Transnet will play a leading role in the development of a rail-related manufacturing industry in South Africa.
Eskom is playing a leading role in the introduction of renewables to the South African energy mix with the commencement of its 100Megawatt Wind Farm and 100 Megawatt Concentrated Solar Power Projects, which, together with the 3 725 Megawatts of Renewable Energy being procured by Government will, I hope will catalyse the development of an underlying renewable manufacturing industry.
In addition, Eskom is also investing in the development of cutting edge climate friendly technologies such as under-ground coal gasification and other technologies aimed at making coal fired power cleaner such as carbon capture and storage.
Of note is that Eskom’s new coal-fired power stations Medupi and Kusile will be fitted with state of the art gas and particulate emission and water usage reduction technologies and will be the most environmentally friendly of their kind globally once in operation.
In support of Government’s climate change aspirations and the stated objective of diversifying its energy mix to include renewable energy, Eskom has commenced with installation of a number of photovoltaic solar energy projects at a two of its power stations and its head office as demonstration facilities and to provide green power for in-house consumption.
The launch of this Solar PV installation at Lethabo Power Station today will mean that the power station itself will run on green energy for much of its needs and, whilst symbolic in nature, demonstrates the commitment to transition to the green economy, whilst taking cognisance of the need to manage it ensure that we do not lose our competitive advantage that coal-fired power has given us as we move to a diversified energy mix.
Finally, in order to enhance our learning, the DPE will be hosting a workshop at the forthcoming COP 17 event, with a number of our state shareholder manager counterparts from key emerging economies on how we as shareholder managers and the companies in our portfolio can most effectively engage with climate change.
In conclusion, this policy framework is a living document. Nothing is cast in stone!
We are open to feedback and ideas from our SOCs and other stakeholders as to how we can be more effective.
This is an area that requires continuous innovation, which would not be possible if we had closed minds.
I hope however, we have started a process of mobilising the considerable SOC resources and capabilities to pragmatically support our climate change and green economy objectives.
I thank you.
