As South Africa embarks on a just energy transition (JET), coal mining projects and coal-fired power stations remain relevant in the interim, but securing funding for them has become challenging due to reputational risks and a prioritization of funds for the JET. This was highlighted during the Coal and Energy Transition Day event held in Johannesburg on July 18.

Speakers at the event noted that the coal industry faces criticism from finance institutions, with many reluctant to provide funds for coal projects due to potential reputational risks in the future. To mitigate this, stakeholders need innovative financing structures. However, securing the full capital required for coal projects often proves difficult, necessitating exploration of alternative funding avenues.

Despite these challenges, opportunities exist to attract funding in certain aspects of the coal industry. For instance, sustainability in coal mining, such as financing renewable energy projects supplying power to coal mines and electric mining vehicles, can be appealing to investors if a compelling business case with a good return on investment is presented.

The Industrial Development Corporation (IDC) continues to fund coal mining projects, recognizing the ongoing need for raw materials to supply power stations. While applying for funding from the IDC can be daunting and requires proper due diligence, the introduction of business development managers aims to simplify the process for applicants.

International sources may offer funding opportunities, but they often come with conditions and can be challenging to secure. International investors appear inclined to allocate funds to the private sector through entities like the IDC and the Development Bank of Southern Africa, rather than providing all funding to the State-owned utility Eskom. Additionally, they show interest in investing in transmission and distribution infrastructure.

To make the most of available financing for sustainability and JET processes, South Africa must align its policies. The lack of alignment between industrial policy, renewable energy policy, and educational policy makes it difficult to undertake a smooth JET. A proper funding model is needed to deploy funds effectively to relevant projects.