Moving SA into a greener future through investments

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We spoke to Arvana Singh, Nedbank’s Head of Sustainable Finance Solutions, recently at Africa’s Green Economy Summit 2023 to get some of her thoughts about moving South Africa into a greener future through investments, and what is needed.

You’ve spoken about a move to a greener grid. What has been a blockage for that? 

The challenges to generating energy were largely due to licensing arrangements and regulatory caps that previously prevented the generation of more than 100 megawatts without certain approvals. However, these caps were lifted last year, and that was a major breakthrough for the industry. Since then, more corporates and private sector players have been investing in embedded generation capabilities. 

What has this meant for Nedbank?

We’ve facilitated this through the extension of green loans to assist in financing the rollout of Solar PV. This includes having extended a 200 million Rand green loan to  Vukile Property Fund to finance a solar PV rollout for 19 of their shopping centres. We also arranged an R1.5 billion green loan for Harmony Gold to finance a 137-megawatt solar PV project to support the powering of their operations.

Transitioning to renewable energy-powered sources has been important in the context of inflationary increases from Eskom, which has prompted more interest in alternative energy procurement and management strategies, such as power purchase agreements and wheeling through the Eskom grid. These options offer another solution for corporates looking to invest in renewable energy without the need for large upfront capital expenditure.

*(Wheeling is a very energy-specific term; the movement of power from one area to another.)

Why did it take so long for that aforementioned unblock to happen?

There has always been uncertainty around the private sector generating its own electricity, especially since Eskom is the utility provider with its own generation capacities. This could potentially take away revenue from the utility. 

What can we expect to happen in the next 18 months with regard to accessing the grid?

Accessing the grid is starting to happen already, and we can expect to see many more companies looking to access it in the next 18 months. However, companies still need to apply for access, and the grid must be able to transmit, which is not always possible in a loadshedding context. In The next 12 to 18 months it will be interesting to see how much access there is. It is important to note that there are two types of access: embedded generation and off-grid. Embedded generation is where a company generates its own power and is not necessarily dependent on the grid. The recent tax incentives announced in the budget may serve as a little more incentive to implement these types of solutions. The window for these incentives is now, and we don’t know what will happen in the following budget, so we’ll have to see how it goes in terms of pace and scale.

Moving to a green economy isn’t just about a non-reliance on fossil fuels. You’ve spoken about how city design and infrastructure can help us build a green future, what do you mean by this, and where are the investment opportunities within it?

The focus should be on building resilience to climate events through adaptation, often overlooked in favour of mitigation efforts, such as reducing emissions which is equally important but not the full answer. The engineering aspect of constructing buildings to withstand heavy rains and floods is important, particularly in countries like South Africa, where cyclones and monsoons have not traditionally been common. The city design should cater to the increased frequency and severity of climate events anticipated to retain property value and prevent destruction. To achieve this, investment in stronger materials and CapEx is necessary, which may require exploring funding sources. Learning from global best practices can also provide insights into building resilience to climate events.

Do we have the expertise at hand to begin green city design yet or do we need to invest in those areas of education still? 

We need to take the initiative to build climate-focused engineering solutions. This requires collaboration between actuaries, scientists, and engineers to ensure that the science is embedded in the traditional skill set for planning. I think it is necessary to develop new coursework and even new degrees to make this happen. Some countries have already successfully implemented resilient approaches to climate change, and we could learn from their examples. Innovative financing mechanisms, such as contingent capital and insurance-linked securities, could also be explored to build financial resilience and support financial stability during times of adverse climate events.

In South Africa do we have the financial potential to look properly into these areas?

South Africa has deep capital markets and a well-respected financial system, which can be advantageous for us. If we bring together all our skills and focus to solve for the right things, we can achieve our goals. Our economy is very liberalised, and we can draw on a lot from global practice. Furthermore, we have good relations with trading partners such as the EU, which puts us in a favourable position.

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