JUST PROFIT NOT JUST TRANSITION

by May 12, 2023Amandla 87, Articles

IN THE SPACE OF A YEAR AND A HALF, South Africa has agreed to borrow billions of rand in foreign currency. This is for a programme of economic restructuring on the basis of a Just Energy Transition Investment Plan (JET-IP). Unions and civil society have been contesting two things: firstly, the lack of transparency and the consultation which only took place after the event just for compliance; and secondly the content of the plan.

It is becoming abundantly clear that the JET-IP is a programme of green structural adjustment. It aims to privatise the energy sector and create new opportunities for profiteering. And it keeps South Africa tied to a trajectory of neoliberal development.

Structural Adjustment in South Africa

South Africa was never a major borrower from institutions such as the IMF or the World Bank. But that did not stop the post-apartheid South African state from imposing structural adjustment on itself. It took the form of the 1996 Growth Employment and Redistribution (GEAR) policy.

Key to GEAR was the notion that public spending could not be allowed to serve as an engine of growth. Rather, the private sector must be crowded in through the creation of profitable business opportunities by the state. To this end, it outlined reforms such as the liberalization of trade and capital controls, tight monetary policy, fiscal discipline, privatization of state assets and labour market flexibility. Textbook Washington Consensus stuff.

Of course, there were those who argued that the failures of structural adjustment worldwide were due to it not going far enough. For GEAR’s failures they give the example of the incomplete privatisation of Eskom. The punishment for our lack of faith has been to roam the desert as neither a developmental welfare state nor one fully committed to market-led development. That is, until the Ramaphosa presidency arrived to pick up the torch and, like a neoliberal Moses, take us to the promised land.

The Ramaphosa presidency has gone beyond the austerity enacted in the midst of the pandemic and the renewed commitment to the marketisation of the energy sector. The government has signed on to the World Bank Country Partnership Framework in 2021 in exchange for a ±R13.5bn loan. The Framework is a condition of the loan. It outlines standard-issue neoliberal development policies. So it includes a focus on enabling business environment reforms, addressing labour market rigidities and facilitating private investment. It emphasizes Foreign Direct Investment and Public-Private Partnerships.

This was not a critically necessary loan. The government has chosen to voluntarily commit itself to these loan conditions because it never intended to act differently in the first place.

South Africa’s current JET-IP can be considered the latest expression of this commitment to homegrown, voluntary structural adjustment. However, the JET process is also quite different from what came before, in that it can be considered a kind of “green” structural adjustment. It is justified primarily on the basis of the need for decarbonisation and climate action, and only secondarily on the need to grow the South African economy.

Cyril Ramaphosa handing over South Africa’s Just Energy Transition Implementation Plan at the COP27 conference in Egypt. It is becoming abundantly clear that the JET-IP is a programme of green structural adjustment.

Why “green” structural adjustment?

In the aftermath of the 2008 global financial crisis, workers’ organisations, such as Cosatu, had already begun to articulate a more radical perspective on the climate crisis that situated it within capitalism. They saw the relentless commodification that had characterised neoliberal development in the recent past. And they called for a “just transition” that protected livelihoods, but also transformed society.

Some had hoped that these forces might coalesce into a global movement for ecosocialism. But the supporters of the Washington Consensus were already a step ahead. The World Bank’s 2012 report, Inclusive Green Growth, recognised both lacklustre growth and climate change as severe issues. But it asserted that both of these could be resolved by making tweaks to neoliberal economic policy. As Trade Unions for Energy Democracy put it, it saw that “the role of governments was simply to provide an ‘enabling policy environment’ so that investors could fulfil this mission.” Perhaps we could have our planet and eat it too.

Just Transition or Green GEAR?

In the aftermath of the 2008 global financial crisis, workers’ organisations such as Cosatu, had already begun to articulate a more radical perspective on the climate crisis that situated it within capitalism.

In November 2021, South Africa’s JET- IP was unveiled at COP26. JET-IP is an agreement between South Africa and the International Partners Group (US, UK, France, Germany, and the EU). Through this agreement, South Africa would receive an $8.5billion mix of loans, a small proportion of grants, and other forms of finance in order to enable decarbonisation efforts with a focus on the energy sector.

As a crucial part of the JET process, South Africa has produced an Investment Plan (the JET-IP) that serves as an overview of our Just Transition strategy, and the finance required to implement it. This would not only guide the allocation of the first $8.5bn commitment. It would also be used to secure the remaining $91.2bn.

The JET-IP puts forward a market-led solution to decarbonisation that focuses primarily on the energy sector. This can be roughly summarized in four steps.

  • First, the plan lifts restrictions on new private power generators. At the same time, it pours a colossal amount of funds into the expansion of the electricity grid to make space for new generation. The investment for this would come through Eskom. It would be financed either through loans to the state, or possibly through public-private partnerships.
  • Secondly, the JET-IP expects that a proper market for energy would be introduced. This would be done partly through the unbundling of Eskom and the creation and management of a “non-discriminatory” market platform through which energy can be traded. 
  • Thirdly, the JET-IP explicitly calls for a deregulation of the price of electricity. This would allow for the full recovery of costs via tariffs, creating sufficient profits for the sector to remain financially sustainable. 
  • Finally, these reforms would create a sufficiently attractive environment to “crowd in” largely private (i.e. profit-seeking) investment in wind and solar around R1.3 trillion over the next 12 years. Eskom’s decommissioned coal stations will be seamlessly replaced by a wellspring of wind turbines, battery facilities, and solar panels. These will be funded by a flood of foreign and domestic capital, and sustained through a healthy and independent energy market.

There is little reason to be optimistic about the outcome of this project.

Globally, the green growth model has not succeeded in pushing a market-led transition to renewable energy anywhere. Instead, there is only an overall energy expansion. Renewables have not grown fast enough to replace the share of energy provided by coal or gas, in a meaningful time frame. In South Africa, electricity prices are already too high for the majority, with many switching to alternative energy sources such as paraffin. To sustain investment in private power generation, tariffs would need to be high enough for investors to be able to get sufficient returns on their investment. This would further impoverish the working class. It would result in a market that caters only to the relatively rich middle class and above not an unfamiliar reality in our economy.

The JET-IP makes plenty of references to the “Just” part of the Transition but is very thin on substantial commitments. 

  • It appeals to the notion of localised renewable value chains. But it allocates an insignificant amount of funding towards this. And it makes no mention of the trade tariffs and subsidies that would be required to support and protect local manufacturers. 
  • Its section on transport focuses on the shift towards manufacturing electric vehicles. So it protects South Africa’s vehicle exports as Europe begins to ban new diesel and petrol cars. But it allocates only 4.7% of transport financing to public transport.
  • Measures to protect workers and communities dependent on at-risk industries such as coal are extremely thin. It appeals to neoliberal fantasies about skills development programmes and support for small-scale entrepreneurship.

It is no mistake that the JET-IP happens to neglect measures which would not provide opportunities for profiteering, such as state-protected localisation of manufacturing, or publicly funded public transport systems. The ultimate goal of neoliberal structural adjustment is to increase the opportunities for sufficiently profitable investment, to provide a fix for falling rates of profit. The leaders of European development banks are not driven to provide loans to South Africa because they are committed to our decarbonisation. They do it because public-private partnerships might provide them with an ownership stake in South Africa’s energy infrastructure. Or because a liberalised energy market would enable the mass import of European wind turbines.

Similarly, our political elite are not particularly concerned with whether the private sector could deliver cheaper electricity for the working class. Their primary concerns are whether their own businesses will suffer when the North starts taxing South African exports produced with coal-fired power.

At its core, the JET represents an agreement between domestic and foreign elites to undertake a programme of green structural adjustment. This is fundamentally opposed to working-class interests. It is a betrayal of the radical vision that gave rise to the concept of a true Just Transition.

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