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Mapping the green economy landscape
in South Africa
- Final Report -
Mapping the Green Economy Landscape in South Africa
ii
This report was prepared for the Green Fund,
Development Bank of Southern Africa by:
Contact: Dr. Mao A. Amis
African Centre for a Green Economy (AFRICEGE)
P.O. Box 30178 Tokai 7966, Cape Town
www.africege.org
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CONTENTS
1 KEY MESSAGES .............................................................................................................................. V
1.1 Emerging sectors ............................................................................................................ v
1.1.1 Rural energy including mini-grid and off-grid (Low Carbon Economy) ...................................... v 1.1.2 Biogas and biofuels (Low Carbon Economy) ..........................................................................................vi 1.1.3 Sustainable water management (Green Cities and Towns) ...........................................................vi 1.1.4 Sustainable human settlements, the built environment and green buildings (Green
Cities and Towns) ...................................................................................................................................................................... vii 1.1.5 Industrial cleaner production and consumption (Low Carbon Economy) .............................. vii 1.1.6 Ecosystem services ............................................................................................................................................ vii
1.2 Capacity development and research .................................................................. viii
1.3 Financing mechanisms ............................................................................................. viii
2 INTRODUCTION: BACKGROUND, OBJECTIVES AND STRUCTURE OF THIS REPORT ............... 9
2.1 Background........................................................................................................................ 9
2.2 Project objectives ............................................................................................................ 9
2.3 Structure of this report.................................................................................................. 9
3 PROJECT APPROACH AND METHODOLOGY ............................................................................ 10
3.1 Desktop review of Green Fund Portfolio ............................................................ 10
3.1.1 Overview of the response to the call for applications ....................................................................... 12
3.2 Literature review ........................................................................................................... 12
3.3 Interviews with key stakeholders .......................................................................... 13
3.4 Reporting of results and guidelines for interpretation ................................. 13
4 THE GREEN FUND: VISION, OBJECTIVES AND OPERATING PRINCIPLES ............................. 14
4.1 Vision of the Green Fund .......................................................................................... 14
4.2 Operating principles .................................................................................................... 14
4.3 Funding windows ......................................................................................................... 15
4.4 Financial instruments ................................................................................................. 15
5 NATIONAL GREEN ECONOMY POLICY CONTEXT .................................................................... 17
5.1 The development challenge in South Africa ..................................................... 17
5.2 The green economy policy framework in South Africa ................................ 18
5.3 National priorities related to the green economy ........................................... 19
6 RESULTS ON MAPPING THE GREEN ECONOMY LANDSCAPE ................................................. 21
6.1 Geographic and applicant spread of green economy interventions ...... 21
6.2 Key sectors driving the green economy ............................................................ 21
6.2.1 Renewable energy and energy efficiency ............................................................................................... 22
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6.2.2 Sustainable waste management .................................................................................................................. 24 6.2.3 Biodiversity and ecosystem services ......................................................................................................... 25 6.2.4 Sustainable human settlements ................................................................................................................... 26
6.3 Potential for job creation and costs of projects .............................................. 28
6.4 Financing the green economy ................................................................................ 29
6.4.1 Unpacking the role of the Green Fund ............................................................................................................... 30 6.4.2 National public finance ...................................................................................................................................... 31 6.4.3 Donor funding ......................................................................................................................................................... 32 6.4.4 Private sector funding ........................................................................................................................................ 33 6.4.5 Proposed funding mechanisms in the Green Fund portfolio ........................................................ 35
6.5 Key trends in the projects that were funded .................................................... 35
6.5.1 RFP1: Projects funded ...................................................................................................................................... 36 6.5.2 RFP2: Research in the green economy ................................................................................................... 38 6.5.3 Capacity building in the green economy .................................................................................................. 39
7 KEY RECOMMENDATIONS AND CONCLUSIONS ........................................................................ 40
7.1 Funding windows ......................................................................................................... 40
7.2 Emerging sectors ......................................................................................................... 41
7.2.1 Rural energy including mini-grid and off-grid (Low Carbon Economy) ................................... 41 7.2.2 Biogas and biofuels (Low Carbon Economy) ........................................................................................ 42 7.2.3 Sustainable water management (Green Cities and Towns) ......................................................... 43 7.2.4 Sustainable human settlements, the built environment and green buildings (Green
Cities and Towns) ...................................................................................................................................................................... 43 7.2.5 Industrial cleaner production and consumption (Low Carbon Economy) .............................. 44 7.2.6 Ecosystem services ............................................................................................................................................ 44
7.3 High impact projects vs Programmatic Support............................................. 45
7.4 Capacity development and research ................................................................... 45
7.5 Financing mechanisms .............................................................................................. 45
7.5.1 Additional funding sources .................................................................................................................................... 45 7.5.2 Innovative funding mechanisms .......................................................................................................................... 46
8 REFERENCES ............................................................................................................................... 48
9 APPENDIX 1: SUMMARY OF INTERVIEWS WITH KEY STAKEHOLDERS .......................................... 50
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1 KEY MESSAGES
This report on mapping the green economy landscape in South Africa was based on
a systematic review of the Green Fund portfolio, stakeholder engagement and a
review of South Africa’s green economy priorities to develop understanding on key
trends in the green economy landscape. This section summaries the key lessons that
emerged from the analysis and the potential role that the Green Fund could play in
advancing some of those issues.
1.1 Emerging sectors
The following sectors have been identified as potential key priority sectors in the
green economy landscape in South Africa, where the Green Fund could potentially
play an important catalytic role.
1.1.1 Rural energy including mini-grid and off-grid (Low Carbon Economy)
Given the robust and favourable policy environment surrounding renewable energy,
the high investment costs and the fact that renewable energy projects are largely
targeted for the medium to long term (New Growth Path), the Green Fund may not be
in the best position to finance such change. However, the Green Fund can catalyse
more investment from the private sector in renewable energy through supporting
municipalities in Public Private Partnerships (PPPs). Furthermore, support for
municipal leadership in renewable energy can help increase local participation
through encouraging local innovation and entrepreneurship and soliciting local
manufacturing.
Support could also be directed towards other renewable energy projects that require
less catalytic funding but can have a large impact e.g. rural off grid and mini grid
energy and the development of biogas and biofuels. Energy access is an issue of
major concern in South Africa, where most of the rural population still remains very
vulnerable, with very low level of access to basic services such as water and
sanitation, employment opportunities and food security. It is on this basis that the
various government policies have made pronouncements on the need to build
inclusive societies (NDP) and build sustainable communities (NSSD). The Medium
Term Strategic Framework (MTSF) specifically states that there is a need to build
“vibrant, equitable, sustainable rural communities contributing towards food security
for all.
Sustainable energy solutions for rural communities is at the nexus of building
inclusive societies, and considering that extending the grid to rural communities may
not be cost effective in the short- to medium-term, promoting energy solutions such
as solar PV, wind power and bio-digesters may help to improve energy access in
rural communities in the interim.
This sub-theme is also directly linked to the development of rural adaptation plans
that is critical for building rural community resilience and for harnessing ecosystems
services. The rural adaptation plans sub-theme also received very few applications,
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despite it being critical for activating local economies and testing models that help to
promote grassroots interventions and solutions.
1.1.2 Biogas and biofuels (Low Carbon Economy)
The significance of the biofuels and biogas sector is that it is closely linked to building
resilience in rural communities, as it will encourage smallholder agriculture. For
example biogas generation could utilize manure from animals such as cows, pigs,
goats and poultry, which is linked directly to agricultural production. Considering the
need for sustainable farming practices, generating energy from biogas could
contribute to cutting emissions from the agricultural sector in South Africa.
By the time the pricing regulations were published in January, only 4 biofuels and
biodiesel companies were licensed. It was difficult to ascertain from current available
information, how many companies are active in the bio-energy sector in South Africa,
and the amount of financial resources invested. The Southern Africa Bio-energy
Association (SABA), which purports to promote the establishment of a biofuels
industry in South Africa, has a membership of close to 50 companies, which is a
good indication of interest in the sector.
However, there is still considerable debate around biofuels, regarding their efficacy
as a source of clean energy, due to questions that have been raised around the
choice of feedstock, land use degradation and CO2 emissions from biofuels. The
Green Fund could play a significant role in clarifying some of the outstanding
controversies, specifically in relation to research and feasibility studies
1.1.3 Sustainable water management (Green Cities and Towns)
South Africa is a water-stressed country, with many of its economic hubs located in
water stressed regions that are projected to suffer from severe water shortages with
major implications on the economy. Effective implementation of water conservation
and demand management measures will be critical in ensuring that cities adapt to the
potential risks posed by lack of water availability and poor quality. At present a
significant amount of water is lost as a result of poor water infrastructure, and
opportunities exist for innovative partnerships between the private and public sector
to address this challenge. The push for water demand management by local
authorities may also stipulate the installation of water saving devices, which could
potentially stimulate a potential manufacturing of such devices, which however
requires incentives for such initiatives to take off.
Based on the water challenges that the country faces, and potential risk water
scarcity poses to various sectors including the private sector, there is an opportunity
for the Green Fund to catalyze projects that promote green innovations in the water
sector in South Africa. Such innovations should not only be limited to technologies,
but also include green business model innovations (GBMI), that help companies to
manage their water-related risks but with significant impacts at the landscape level.
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1.1.4 Sustainable human settlements, the built environment and green
buildings (Green Cities and Towns)
Current projections show that by 2050 close to 80% of South Africa’s population will
be living in cities and towns, which presents a major challenge for service delivery.
Cities are already burdened by the large informal sector, and the need to provide
basic services including housing, water and sanitation. Most of these responsibilities
lie with local government authorities that are poorly capacitated to deal with these
challenges.
Sustainable human settlements and the built environment and green buildings is
therefore a key sector within the green economy landscape, that is key for
addressing the triple challenge of environmental sustainability, social equity and
economic development. The Green Fund could play a key role in stimulating this
sector by promoting private sector participation, testing new models for sustainable
housing and building local government capacity.
1.1.5 Industrial cleaner production and consumption (Low Carbon Economy)
The manufacturing sector is important for South Africa’s economy, because of its role
in sustainable job creation. However the sector is also responsible for significant CO2
emissions and pollution. As a result there is need for the manufacturing sector to
adopt cleaner production measures that are more resource efficient and reduce
waste discharge into the system.
The South African government recognized the importance of this sector and
established the National Cleaner Production Centre (NCPC). The goal of NCPC is to
enhance the competitiveness of the manufacturing sector by promoting energy
efficiency and waste minimization.
The NCPC is playing a critical role in promoting sustainable practices within the
manufacturing sector, but unfortunately this effort is not adequate. It was therefore
recommended the Green Fund, through its capacity building interventions and
research, explore measures of bolstering the activities of entities such as the NCPC.
This would be achieved through a process of effective engagement between the
Green Fund and other players such as the NCPC, to explore modalities for
collaboration.
1.1.6 Ecosystem services
A significant amount of research on ecosystem services has been conducted in
South Africa, including ecosystems valuation and ecological infrastructure mapping
techniques. However, very limited actual ecosystem services that promote actual
investments have been conducted in South Africa. The Green Fund has provided
funding for two such projects during the research window (RFP2). However, there is
a need to support more of such projects, but under project finance instead of the
research window, since significant research work has already been carried out on
ecosystem services research in the country. It would be useful if the Green Fund
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could pilot actual payment for ecosystem services, preferably linked to water. In this
case this theme would be linked to that of sustainable water management.
1.2 Capacity development and research
There is urgent need to build public sector capacity to effectively participate in the
green economy transition, especially local government which is responsible for
ensuring effective implementation of green economy programmes on the ground. As
it stands now, capacity challenges are still prevalent which presents a major barrier
to unlocking opportunities at the local level.
In view of the global financial resources that are currently being considered, it would
be useful if the capacity building element focuses specifically on climate finance
readiness of South African public, private and civil society institutions.
In relation to research, there was a call on the Green Fund to support innovative
programmes that help to unlock systemic barriers in the transition to a green and
inclusive economy. The perception survey found a strong call for the Green Fund to
support innovative research programmes that look at base of the pyramid (BOP)
models as key for sustainable job creation and the activation of local economies in
the country.
1.3 Financing mechanisms
There are three main sources of potential funding for the green economy in South
Africa, i.e. international climate and donor funding, public sector and private sector
financial resources. However, these funds are not well distributed along the project
value chain, creating the ‘valley of death’ for projects that don’t qualify for the
financial mechanisms such as grants, but have also not matured enough to access
equity funds. In this regard, the Green Fund could play an important catalytic role to
unlock some of these barriers, but at the same time invest in high impact projects
that could help to drive the transition to a green economy and create jobs.
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2 INTRODUCTION: BACKGROUND, OBJECTIVES AND STRUCTURE OF THIS
REPORT
2.1 Background
The Department of Environmental Affairs (DEA) established the Green Fund (GF) as
a vehicle to catalyze the transition to a green economy in South Africa. Over the last
18 months, the GF has disbursed more than 50% of its ZAR 1.1 billion allocation.
This disbursement took place using various mechanisms including Requests For
Proposals (RFP) from the public identified as passive origination in the Green Fund
Investment Strategy, and through active origination and stakeholder engagements.
This process yielded a considerable amount of data on the green economy
landscape that has never been gathered before in South Africa. It provided an
opportunity to develop a good understanding of the green economy landscape,
including identifying the most active sectors, key stakeholders and other available
resources outside of the Green Fund. This project was initiated to analyze the data
generated to inform the Green Fund’s funding focus areas going forward and to
develop an understanding of the emerging green economy landscape in South
Africa.
2.2 Project objectives
The objective of this project was to map the green economy landscape in South
Africa, and to develop an understanding of the Green Fund’s strategic positioning
and assess its role in the broader green economy landscape. This project involved:
1) A comprehensive analysis of the Green Fund’s portfolio including all funding
applications and approved projects, with the aim to:
a. Identify key sectors;
b. Assess alignment of the portfolio with national programmes and
priorities; and
c. Inform development of a programmatic funding approach.
2) Review of key documents related to the green economy transition in South
Africa.
3) Interview key stakeholders participating in the major sectors of the green
economy.
4) Develop a set of recommendations to inform the Green Fund’s focus in future,
taking into consideration key stakeholders, sectors and alignment with
national priorities.
2.3 Structure of this report
The report is structured as follows:
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o Chapter 2 describes the background of the Green Fund to provide some
context to the analysis. It specifically outlines the vision, objectives and
funding principles of the Green Fund.
o Chapter 3 outlines the national policy context and national green economy
priorities to which the Green Fund is responding.
o Chapter 4 is a detailed description of the project approach (methodology)
undertaken to arrive at the stated results and recommendations of this report.
o Chapter 5 describes key results from the mapping exercise.
o Chapter 6 outlines preliminary recommendations emerging from the mapping
exercise.
3 PROJECT APPROACH AND METHODOLOGY
The schematic representation below (Fig. 1) is the framework that was used to map
the green economy landscape in South Africa, which comprised a comprehensive
analysis of the Green Fund portfolio, literature review and stakeholder interviews.
Each component of this framework is described below.
Figure 1: A schematic representation of study methodology
3.1 Desktop review of Green Fund Portfolio
This review involved a comprehensive analysis of the Green Fund Portfolio, to try
and understand key trends from the applications that were submitted and link it up
with the broad green economy landscape. In total more than 700 applications were
received for all the phases of the Fund thus, which comprised:
The first request for proposals (RFP1) that focused on green economy
projects;
Green Fund Portfolio mapping
Literature review Interviews with
selected stakeholders
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The second request for proposals (RFP2) on research in the green economy;
Capacity building: This phase of the Fund, consisted of both passive and
active origination through a process of stakeholder engagement and
proposals that were submitted by key stakeholders.
This rich data source provided an opportunity to develop an understanding of the
green economy landscape in South Africa, based purely on the level of activity as
depicted by the response to the calls. The Green Fund portfolio is the first
comprehensive green economy database of its kind in South Africa, where most
green economy interventions have been sector specific.
The desktop analysis of the GF portfolio was seeking to achieve the following
objectives:
Based on the submissions, develop a good understanding of the market
response to key sectors that are driving the green economy in South Africa;
Develop an understanding of the job creation potential of key sectors of the
economy, including potential jobs that will be created from the projects that
were successfully funded by the Green Fund;
Develop an understanding of the nature of funding instruments that are suited
for green finance;
Based on the emerging trends, identify those sectors that the Green Fund
could potentially focus on in the next funding phase; and
Identify other emerging trends and gaps that the Green Fund could use to
focus the future deployment of the Fund.
Based on the above objective, the desktop analysis was designed to be an objective
and scientific process. Due to the nature of the data and the approach that was used
to undertake the analysis, some critical assumptions were made, which included:
The information provided by the applicants was accurate to the best of their
knowledge and not just random information that was supplied just for the sake
of winning a grant;
In relation to sector, we assumed that by the mere fact that applications were
received from those sectors, they are already active in the green economy
space or are actively looking for points of entry. In this way, the key sectors
identified would be a true reflection of the level of engagement on the ground;
and
The amounts requested are a true reflection of the actual cost of the project,
and not just arbitrary figures, which are not based on any well-established
process for evaluating the project needs.
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In terms of the actual analysis, basic quantitative analysis were performed to
document key trends in the portfolio, with all the analysis carried out using excel and
other related statistical packages.
3.1.1 Overview of the response to the call for applications
In total there were more than 700 applications that were received, which included
590 applications submitted during RFP1 and 155 applications in RFP2. The total
amount that was requested was more than ZAR 10 billion, which is an indication of
the immense interest on green economy issues in South Africa. Here are some very
basic figures on the Green Fund portfolio:
RF1: Green economy projects
Number of applications received: 590
Number of projects approved: 21
Total amounts of projects approved: ZAR 591 Million
RF2: Green economy research
Number of applications received: 155
Number of applications approved: 16
Total amounts approved: ZAR 36 million
Stakeholder engagement: Capacity building
Number of approved projects: 7
Total amount approved: ZAR 59 million
Capacity building projects: 50%
Capacity building programs: 50%
These funds were allocated using various funding instruments, as discussed in the
related sections below. Even though all the listed amounts have been committed, as
a risk management strategy, for most of the projects not all the funds committed are
disbursed upfront. In the following sections, some emerging trends from the Green
Fund portfolio are discussed in more detail.
3.2 Literature review
The main questions that the literature review sought to address are as follows: a)
what are the green economy priorities in South Africa, and what policy frameworks
underpin those priorities? b) What other green economy programs and resources are
currently being implemented outside the Green Fund? c) What is the private sector
role in the green economy in South Africa?
The response to these questions was predominately based on a literature review of
freely available information on public platforms. This was complemented by expert
knowledge on existing initiatives by the private, public and civil society sectors.
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Discussions with key stakeholders in the various sectors also provided valuable
information on current green economy initiatives that are being implemented in
various economic sectors.
3.3 Interviews with key stakeholders
Based on recommendations from the Green Fund, a list of key stakeholders were
identified and interviewed by meeting in person and through teleconference. The aim
of the stakeholder engagement was to a) provide information on green economy
initiatives that they are aware of and b) identify perceived green economy priorities
and the potential role of the Green Fund in supporting the transition to a low carbon
economy. The sectors from which stakeholders were interviewed included the
following:
National and Provincial government departments
Private sector organisations
Commercial banks
Development finance institutions (national, regional, international)
Academia
Civil Society
Each of the key stakeholders interviewed were requested to respond to a specific set
of questions that were formulated to respond to the objective of the interviews as
outlined above. Even though the sample size of the key stakeholders interviewed
was relatively small (15 interviews), the main objective was to get a broad overview
of stakeholder perception, as opposed to a comprehensive stakeholder mapping
process.
3.4 Reporting of results and guidelines for interpretation
The results of the green economy landscape were compiled and reported on as a
combination of the Green Fund portfolio analysis, stakeholder interviews and
literature review.
The results in this mapping were summarized into key themes of the green
economy, which include an analysis of the key sectors, financial mechanisms, and
private sector participation.
Supplementary information that is not contained in the results section is added as an
appendix to this report.
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4 THE GREEN FUND: VISION, OBJECTIVES AND OPERATING PRINCIPLES
The Green Fund was established by the Department of Environmental Affairs (DEA)
and is housed within the Development Bank of Southern Africa (DBSA), as a vehicle
to catalyze the transition to a green economy. Even though it was initiated by DEA, it
is a government wide-undertaking, and its management is overseen by a multi-
sectoral Government Advisory Panel (GAP) and Management Committee
(MANCOM).
4.1 Vision of the Green Fund
The Green Fund (GF) is a commitment by government to set practical steps in
achieving the transition to a low carbon, resource-efficient development trajectory.
The vision of the GF specifically states that it seeks “to support the transitioning of
the South African economy to a low carbon, resource efficient and climate resilient
growth path”.
Based on this vision, the stated objectives of the Green Fund are to:
Promote innovative high impact projects and programmes;
Reinforce climate policy and seek to achieve South Africa’s sustainable
development objectives;
Build an evidence base for the green economy;
Attract additional financial resources to support green economy initiatives.
These objectives should enable the Green Fund to support some core elements of a
sustainable future (Linkd 2012) which comprise:
The provision of basic services (e.g. water, energy, waste management and
transport) in a resource efficient and environmentally sustainable manner;
Reduce dependence on a carbon intensive growth path by activating new
sectors of the economy that generate new opportunities; and
Promote the sustainable management of natural resources.
In the course of providing these basic services, the Green Fund aims to catalyze
new economic activities through innovation, capacity building and research to enable
poverty alleviation.
4.2 Operating principles
The GF is tasked with a specific undertaking to provide financial support to green
economy initiatives in South Africa, based on very specific guiding principles (Green
Fund 2013):
Relevance: The Green Fund supports initiatives that demonstrate distinct
environmental, social and economic benefits.
Additionality: The Fund focuses on initiatives that would otherwise not receive
funding from conventional sources.
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Innovation: Innovative initiatives that are unique and new to the green
economy landscape in South Africa could be supported. This includes
initiatives which demonstrate innovation in technology, business model,
institutional arrangements and financial mechanisms.
Scale up and/or replicate: Initiatives should demonstrate the potential to be
rolled out to other sites or implemented at a large scale to ensure maximum
impact.
4.3 Funding windows
The Green Fund has 3 well defined thematic windows (Fig. 2), which were designed
to reflect national green economy priorities for South Africa as outlined in various
policy documents, including the National Development Plan (NDP), New Growth
Path (NGP) and the National Strategy for Sustainable Development (NSSD). The
funding windows, as described in the Green Fund Annual Report (GF 2014),
comprise the following:
Green Cities and Towns (GCT): The vision of this window is to ensure that South
African cities that are projected to host 80% of the population by 2050 are well-run,
compact and efficient. This is critical to ensure effective service delivery, while
utilizing existing resources in a sustainable manner.
Low Carbon Economy (LCE): South Africa, being a carbon intensive economy,
strives to decouple economic growth from the environment. This window therefore
aims to achieve a low carbon growth path in line with government policy by
supporting initiatives that focus on among other things, promoting resource
efficiency, alternative sources of energy and cleaner production.
Natural Resources Management (NRM): Natural capital is the backbone of South
Africa’s economy, it is therefore important to ensure that these resources are
harnessed for the benefit of the country, but in a more sustainable manner. This
window therefore strives to protect and conserve resources for sustained
development.
4.4 Financial instruments
Three financial instruments are used by the Green Fund, comprising of 1) Grants
(recoverable and non-recoverable, 2) Loans (at concessional rates and terms), and
3) Equity. These financial instruments are based on the principle of risk sharing by
encouraging co-investment and seeking maximum outcomes, including financial
returns.
The disbursement of the funds was allocated into three areas, i.e. project
development (75%), capacity building (20%) and research (5%). This disbursement
cuts across all the thematic windows outlined above.
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Green Fund
Portfolio split
Green Projects
(75%)
Capacity building
(20%)
Research and policy
development (5%)
Financial Instruments
• Recoverable Grants
• Non-recoverable Grant
• Concessional loans
Sources of funding
Fiscal budget Green Cities and
Towns
Low Carbon Economy
Environmental & Natural Resource
Management
Funding windows
Figure 2: Operating parameters of the Green Fund
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5 NATIONAL GREEN ECONOMY POLICY CONTEXT
The threat of climate change, biodiversity loss, and the lack of water and food
security have highlighted the failure of current economic models in addressing the
development challenges that the world faces. The concept of a green economy has
therefore been presented as the pathway to sustainable development, and has been
dominating global and regional discourses for a number of years now.
The concept of green economy derives from the Brundtland Report (UN 1987) that
defined sustainable development as ‘development that meets the needs of the
present without compromising the ability of future generations to meet their needs’.
This gave rise to the 3 pillars of economic, environmental and social dimensions of
sustainable development. The term green economy was then coined to give effect to
sustainable development, and was thus defined by UNEP (2011) as an economy that
‘results in improved human wellbeing and social equity, while significantly reducing
environmental risks and ecological scarcities’. In other words the goal of a green
economy is to transition to a low carbon, resource efficient economy that is socially
inclusive.
Green economy has emerged as an important concept for sustainable development,
and many developing countries have identified with the need to transform economies
to a cleaner and more sustainable path, formally undertaking scoping studies and in
some cases initiating national green economy policies. Some have also seized the
opportunity to invest in green technologies and other activities.
In South Africa, the signing of the Green Economy (GE) Accord by key sectors of the
economy, and the development of related policies, strategies and measures was a
clear recognition of the opportunities presented by the transition to a green economy.
5.1 The development challenge in South Africa
South Africa faces enormous development challenges associated with natural
resource constraints such as water and arable land. This has in turn resulted in high
levels of unemployment, poverty and inequality. The transition to a green economy is
therefore not only viewed as a pathway to a sustainable future, but also as the driver
to overcoming South Africa’s development challenges.
Climate change is going to pose a major threat to all sectors of South Africa’s
economy and will compound the current challenges associated with resource
scarcity, especially water, energy and food security. Managing the impact of climate
change and variability in South Africa is therefore as much a development challenge
as it is a climate change challenge. Many of South Africa’s people live in deep
poverty, already vulnerable to water-related risks, whether floods, droughts, poor
water quality or increasing water and energy scarcity. In recognizing the centrality of
climate change to development in South Africa, there are some key messages that
need to be highlighted:
There is need to build administrative, governance and institutional capacity.
Mapping the Green Economy Landscape in South Africa
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Better coordination of activities and resources between the development
sectors to build efficiency in the use of scarce resources.
Increased and improved finance and investment to promote the transition to a
green economy.
Improve information flows, management and dissemination.
Establish platforms for cross-sectoral dialogues to mainstream green economy
principles into development planning.
5.2 The green economy policy framework in South Africa
In response to the development challenges, the government of South Africa
developed various policies and strategies to promote the transition to a green
economy, with a strong emphasis on job creation. Several policies and strategies
have been developed ranging from the national to the local level that seek to reverse
the negative trends and build confidence in the South African economy (Table 1).
Table 1: Main green economy related policies and strategies in South Africa
(modified from Montmasson-Clair 2012).
Policies and measures Main goals
Framework for
Environmental fiscal
Reform (NT, 2006)
Provides principles and guidelines for fair and
effective environmental taxes.
10-Year Innovation Plan
(DST, 2006)
Includes safe, clean, affordable and reliable energy
supply and climate change as priorities.
Medium-Term Strategic
Framework (2009- 2014)
Notes the need for sustainable livelihoods and
sustainable resource management and relates this
to various other policies including energy, water,
housing, technology and competitiveness.
Industrial Policy Action
Plan (2014)
Specifically targets growth in green industries,
focusing on solar water heaters, solar and wind
energy, and organic farming.
New Growth Path (2010) Targets the growth of a green economy, resulting
in green jobs.
Integrated Resource Plan
2010- 2030 (DoE, 2011)
Limits emissions from electricity generation to 275
mt per year, expects renewable energy to make up
42%.
National Climate Change
Response (SA 2011)
Endorse and quantifies South Africa’s GHG’s
limits/commitments.
National Strategy for
Sustainable Development
A large variety of indicators and goals spanning
social, economic, environmental issues.
Mapping the Green Economy Landscape in South Africa
19
(DEA, 2011)
National Development
Plan (NPC, 2011).
This is a vision document for South Africa that sets
a long term development trajectory for South Africa
The various strategies and policies outlined above are a clear indication that South
Africa has made significant strides towards the transition to a green economy. Even
though the effective implementation of some of these strategies still remain a major
challenge, the intention of South Africa to follow a low carbon and resource efficient
pathway is very clear.
In addition to the broad policy frameworks outlined above, there are numerous
sectoral policies that complement each other. For example there are policies that
relate to biodiversity conservation, waste management, energy efficiency, water
conservation and demand management among others.
5.3 National priorities related to the green economy
Despite not having a clear policy document on the green economy, taken together,
the policies and strategies outlined in the previous section, help to define South
Africa’s green economy priorities.
Even though the NDP was developed after several of the green economy policies
were in place, it is undoubtedly the most important document that clearly outlines
South Africa’s vision of transitioning to a low carbon economy. The NDP is well
aligned to all the sectoral policies related to sustainable development, poverty
alleviation and the need to grow the economy.
In this policy context, the Green Fund and other related interventions are aligned to
ensure that South Africa attains its vision as outlined in the NDP. In addition to the
vision set in the NDP, in 2011 the Cabinet released the National Strategy for
Sustainable Development and Action Plan, in which 5 key priorities were identified as
follows:
1. Enhancing systems for integrated planning and implementation
2. Sustaining our ecosystems and using natural resources efficiently
3. Towards a green economy
4. Building sustainable communities
5. Responding effectively to climate change.
The third priority specifically addresses the need for a transition to a green economy,
to which the Green Fund is responding directly. The other priorities identified in the
NSSD are also directly related to green economy, as they speak of resource
efficiency, biodiversity conservation and building community resilience, which is key
for an inclusive green economy.
On the other hand the National Climate Change Response Strategy (NCCRS) also
identified various priorities, which among others call for reduction of greenhouse gas
Mapping the Green Economy Landscape in South Africa
20
emissions, reducing dependence on fossil fuels, building resilience community to
climate change and ensuring ecosystem resilience. The NCCRS priorities have
formed the basis for establishing the near term priority flagship programmes, which
comprise:
The climate change response public works flagship programme
The water conservation and demand management flagship programme
The renewable energy flagship programme
The energy efficiency and energy demand management flagship programme
The transport flagship programme
The waste management flagship programme
The carbon capture and sequestration flagship programme.
The Medium Term Strategic Framework (MTSF 2014- 2019) is a government
strategic plan that sets the framework for implementing government priorities over the
stated period. It sets out the actions government will take and targets that are set to
be achieved (MTSF 2014). The MTSF ensures that there is coherence in the
implementation of government policies and that effort by different arms of
governments are well coordinated. The current MTSF has identified 14 key priorities
that the government will focus on between 2014 - 2019, with 5 of those priorities
directly related to the green economy, and they include:
1. Decent employment through inclusive growth
2. A skilled and capable workforce to support an inclusive green growth
3. Vibrant, equitable, sustainable rural communities contributing towards food
security for all
4. Sustainable human settlements and improved quality of household life
5. Protect and enhance environmental assets and natural resources.
In mapping the green economy landscape, an important consideration is to assess to
what extent the green economy interventions reflect these national priorities. The
Green Fund in particular needs to ensure that projects that are funded reflect the
national priorities as defined in the various policy documents discussed above.
Mapping the Green Economy Landscape in South Africa
21
6 RESULTS ON MAPPING THE GREEN ECONOMY LANDSCAPE
This Chapter is a synthesis of the results from the GF porfolio analysis, stakeholder
interviews and stakeholder interviews. It’s important to note that the quantitative
analysis of the green economy landscape were based primarily on the responses to
Green Fund’s Request for Proposals (RFP), which comprised of 590 responses to
RFP1 and 155 for RFP2.
6.1 Geographic and applicant spread of green economy interventions
Projects were received from all provinces albeit with considerably varying numbers of
applications (Figure 3). Most applications were received from Gauteng, Western
Cape and KwaZulu Natal. Projects were also spread across various sectors.
Figure 3: Summary of projects by geographic location and sector of origin for RFP1
(a) and RFP2 (b)
Most applications emanated from the private sector. Local municipalities were fairly
represented in all provinces. The low applicant numbers in Northern Cape, North
West and Mpumalanga, where only private sector and municipal applications were
received, point towards the need for capacity development in those provinces. A lack
of projects from community based organizations (CBOs) in the same provinces
(Northern Cape, Free State and North West) and in Gauteng (despite strong
participation from other sectors) shows that grassroots awareness on what
constitutes a green economy and the opportunities it presents needs to be improved.
The Green Fund should identify an intermediary vehicle for CBO’s at the community
level to access requisite training in green economy and to also manage a small
grants facility for green economy projects.
6.2 Key sectors driving the green economy
The following key sectors of the green economy were identified based on a
comprehensive analysis of more than 700 applications and projects under the Green
Fund Portfolio (Fig 4). These key sectors comprise, 1) Energy, including renewable
and energy efficiency, 2) Sustainable waste management, 3) Biodiversity benefiting
business, and 4) Sustainable human settlements.
0102030405060708090
100
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. of
pro
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Universities
Research Institutes
NGOs
Public Sector
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020406080
100120140160180
No
. of
pro
ject
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Researchorganisations
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Mapping the Green Economy Landscape in South Africa
22
Figure 4: Key green economy sectors in the Green Fund Portfolio
The identification of key sectors was based on the assumption that the large number
of applications received is an indication of the level of maturity of the sector. These
findings are corroborated by the literature review and stakeholder perception for most
of these key sectors. For example the commencement of the renewable energy
independent power producer program (REIPPP) sparked a lot of interest in the
renewable energy sector in South Africa, and has attracted significant private sector
investments. Similarly the waste economy in South Africa is relatively well developed
- a strong policy signal has sparked a lot of activity in this sector, and it is probably
one of the most advanced sectors of the green economy. There is also wide
recognition that waste could become an important source of employment, hence the
level of activity. South Africa has several biodiversity hotspots; with this unique
natural capital there have been calls to protect this natural heritage. The role of
biodiversity in providing important ecosystem services is also important. More
detailed reviews of some of the key sectors is found below.
6.2.1 Renewable energy and energy efficiency
The energy sector emerged as one of the key sectors in the green economy as per
the project proposals submitted to the Green Fund. Within the energy sector, sub-
sectors included energy generation from renewable sources including mini and off-
grid sources, energy efficiency, biogas and biofuels, and rural energy (Figure 5).
The development of the renewable energy sector and the energy efficiency drive is
directly related to the government’s commitment to transition the economy to a low
carbon growth path. For example the White Paper on Renewable Energy (2004)
highlighted the central role that renewable energy could play in meeting South
Africa’s energy demand. A target of 10 000 GWh of renewable energy was set to be
achieved by 2013. Based on this policy, it was envisaged that renewable energy
would help to alleviate energy access to rural communities, reduce CO2 emissions,
diversify the energy mix and stimulate the development of SMMEs.
0 100 200 300
Biodiversity & ecosystem services
Renewable energy and energy efficiency
Industrial cleaner production and…
Land use management and models
Rural adaptation projects and plans
Sustainable human settlements, the…
Sustainable transport
Sustainable Waste management &…
Sustainable water management
RF2: Research focus
RFP1: Green Economyprojects
Mapping the Green Economy Landscape in South Africa
23
Figure 5: Energy related applications based on the RF1 (Projects) and RFP2
(Research)
In relation to energy efficiency, the applications also show a strong response to policy
signals, where the Department of Energy has set a national target of 12% for energy
efficiency improvement by 2014. During the first RFP, 22% of the proposals came
from energy efficiency projects, while 33% of proposed research was on energy
efficiency during RFP2.
In addition to the White Paper that set the target for energy efficiency, the National
Energy Act of 2008 has set a very clear regulatory framework that promotes a
diverse energy mix (Government Gazette 34, 2008). This Act has created a platform
for integrated energy planning, supply and optimization, which has enabled the
energy sector to play a critical role in the green economy transition (Kaggwa et al.
2013).
Results from the perception survey indicate that the energy sector is one of the most
critical sectors that require transformation, because of South Africa’s traditional
dependence on coal, which has amplified the need to cut carbon emissions.
Due to the significant participation of the private sector in renewable energy , opinion
was divided regarding the role that the Green Fund could play in this sector. Many
renewable energy projects could potentially receive funding from traditional
commercial banks, and it was argued that the Green Fund could risk denying funds
to other more needy sectors if it focuses on renewable energy. However, small-scale
renewable energy production such as biogas and biofuels, and rural renewable
13%
22%
55%
9%
19%
33% 36%
11%
Biogas and biofuels Energy efficiency &Demand side mgt
Renewable energy,including off grid and
mini grid
Rural energy includingoff grid and mini grid
Projects in the energy sector
RFP1 RFP2
Mapping the Green Economy Landscape in South Africa
24
energy generation still require further funding and development in order to meet
national priorities.
6.2.2 Sustainable waste management
Waste management is an issue of major concern in South Africa, where 90% of
waste ends up in landfills. Hence the current regulatory framework requires that
waste management moves higher up the hierarchy to recycling, reuse and reduction
to shift waste away from landfills. Even though landfills are still the lowest cost option
in waste management solutions, the environmental costs of poor waste management
are extremely high.
Figure 6: Vision of the Waste RDI Roadmap for South Africa (DST 2013)
The need to better manage waste is also in recognition of the fact that it has very
high job creation potential and resource efficiency. However, waste management is
increasingly becoming complex in terms of technological requirements and smaller
profit margins. As a result innovation is at the core of improving the performance of
this sector.
The perception survey also recognized the waste sector as key to the transition to a
green economy. To this end the government has developed a 10-year innovation
plan, with the aim to move the country to a knowledge-based economy, with the
waste sector playing a critical role. In recognition of this challenge, DST is in the
process of developing a waste roadmap, whose goal is to address the waste
management hierarchy of reduce, reuse and recycle, with a specific target of
reducing industrial waste in landfills by 20% and 60% reduction in the domestic
waste in landfills by 2022 (Figure 6).
The total value of waste in the South African economy is estimated to be at a
minimum of ZAR 25 billion, which still remains largely unexploited. Even though
South Africa has done quite well in promoting the waste economy, there is still
significant amount of work to be done (Table 2). The regulatory framework has
helped to incentive the sector.
Mapping the Green Economy Landscape in South Africa
25
As stated earlier, waste has a high job creation potential and although it can be
capital intensive, it’s less so compared to energy related projects, and as such offers
better prospects for job creation. This is because the value chain of waste
management, which ranges from the primary collectors to the large scale recycling
operations, affords various actors with varying skills sets and financial resources
opportunities to participate in sustainable waste management. The waste
management sector is therefore a sector that could address multiple outcomes
related to the environmental, social and economic aspects of a green economy.
6.2.3 Biodiversity and ecosystem services
Natural resources management is central to the concept of a green economy; it
forms the basis of any economy because of human dependency on natural
resources. Biodiversity conservation is critical for halting species loss and ecosystem
degradation. Ecosystems provide important services upon which humans rely. Such
ecosystem services may be categorized into four classes of a) provisioning services,
b) regulatory services, c) cultural services, and d) supporting services. Each of these
services is important for our sustenance, as a result recognition of the important
function that biodiversity plays and understanding how they can be conserved is key.
Biodiversity conservation offers vast opportunities for job creation, with estimates in
South Africa showing that the sector has the highest opportunity for job creation in
the green economy.
Stream Unit value (R/t) Current recycling (%)
Plastic 3119.54 18
Waste oils 2777.78 44
Metals 2270.00 80
WEEE 1000.00 11
Paper 744.47 57
Glass 490.00 32
Tyres 367.00 4
Municipal waste
(non-recyclable
portion) 367.00 0
Organic component
of municipal waste 188.63 35
Biomass waste
from industry 188.63 0
Slag 175.00 50
Construction and
demolition waste 87.50 16
Ash 3.00 6
Table 2: Estimated value of selected wastes in South Africa
(DST 2013)
Mapping the Green Economy Landscape in South Africa
26
An important aspect of biodiversity conservation is the need to value the important
services that nature provides and to strive for these services to be accounted for in
the cost of production and possibly pay for these services.
The South African National Biodiversity Institute (SANBI) and the Council for
Scientific Research (CSIR) have played an important role in advancing our
understanding of biodiversity conservation, especially ecosystem services (e.g.
Cowling et al 2008, Egoh et al 2008). To that end SANBI has recently developed a
framework for investing in ecological infrastructure (SANBI 2014). The aim of
developing the framework is to guide investments in supporting ecological
infrastructure.
The private sector has a major role to play in creating markets for ecosystem
services, due to the benefits to business that may result due to effective biodiversity
conservation. The private sector also has the capacity to invest their financial
resources in this sector, because it makes financial sense. The Department of
Environmental Affairs (DEA) has been exploring the prospects of introducing
biodiversity offsets as a scheme to encourage private sector participation, especially
for those companies whose activities have significant negative impact on biodiversity.
The biodiversity sector, and ecosystem services in particular has received significant
support from the key stakeholders that were interviewed. The support for this sector
emanates from the fact that it has a huge potential for job creation, in addition to the
fact that business depends on ecosystem services which, in many cases, is not
accounted for in their costs of production. The potential role for the Green Fund
should be to catalyze actual investments in ecosystem services, which until now
have not really taken off despite the significant amount of research that has been
carried out.
6.2.4 Sustainable human settlements
Sustainable human settlements is a major issue in South Africa, where on the one
hand a large number of the population still does not have access to decent housing,
and there is also a need to transform the sector to become more resource efficient to
reduce its impact on the environment. The mapping exercise found that that the
sustainable human settlements, or the built environment and green buildings, was a
major sector of the green economy. 12% of applications for projects (RFP1), and 5%
from the research phase (RFP2) were submitted in this category. This is directly
related to the significant role the sector is thought to play in the transition to a green
economy.
According to National Home Builders Registration Council (NHBRC 2014), the goal
of sustainable human settlements is focused on energy efficiency, affordability,
sustainable construction, and low maintenance among others.
Green economy considerations in the housing sector are related to resource
consumption and pollution emanating from housing facilities. During and after
construction there is significant soil degradation due to the changes in the land use,
Mapping the Green Economy Landscape in South Africa
27
which may impact biodiversity and other life support systems like the water cycle and
air quality.
Energy efficient design is therefore critical for the contribution of the sector on the
transition to a green economy, with the following considerations being key (NHBRC
2014):
Buildings need to be planned and designed in terms of energy efficient
principles
The size of the building should be commensurate with demand, to
minimise unnecessary use of resources
Design focuses on maximising the advantages of correct orientation,
prevailing wind directions, and lastly aesthetic and natural features
Using low, embodied and alternative building materials
Large windows on the northern side, to maximize natural light
High and sloping ceilings allows ventilation during evening hours
Floors comprise of high thermal mass materials to retain heat during winter
Painting using light colours to maximize light and heat
Rainwater harvesting, promotes sustainable water use.
Several initiatives in sustainable human settlements have been undertaken in South
Africa, including those by the NHBRC. Current activities of the NHBRC include
promoting foundational innovation in construction, use of recycled concrete blocks,
use of lightweight energy panels and steel frames. The NHBRC also runs housing
innovation hubs, in various parts of the country to promote and showcase sustainable
housing innovations and technologies in South Africa.
Other government programmes related to sustainable human settlements include the
Department of Energy’s Solar Water Heating programme (SWH), which is a national
energy efficiency flagship programme. The Sustainable Settlements Facility (SSF)
focuses on the low-income housing sector, with the goal of meeting the government’s
target for supplying low-cost housing.
There are key challenges in the sustainable housing sector, which, if addressed,
could play a significant role in the transition to a green economy. These include
unlocking capital for the green housing sector, particularly where commercial banks
have been reluctant to offer loans. There is a need to increase levels of awareness
around costs of the construction, and life cycle costing that takes into consideration
the initial design, construction, maintenance, operation and decommissioning
(NHBRC 2014). Full cost accounting is critical to ensure that sustainability principles
are adhered to.
Key recommendations emerging from this sector include the need to establish more
private-public partnership to promote alternative building technologies. There is a
need to conduct detailed feasibility studies for better understanding of alternative
building technologies, and scale up the concept of housing innovation hubs to the
rest of the country.
Mapping the Green Economy Landscape in South Africa
28
6.3 Potential for job creation and costs of projects
Results from the analysis suggest that job creation is driven by biodiversity
benefitting businesses; rural adaptation projects and sustainable human settlement
projects (Fig 7). The project investment costs of these projects are fair (Fig 7).
Biodiversity benefiting businesses and rural adaptation projects are vital for
biodiversity conservation and building ecosystem resilience (water, soil, vegetation
etc.) and have potential to create long-term employment. The Green Fund has an
opportunity to catalyze job creation in the environment and natural resource sector at
a lower cost compared to other sectors.
Figure 7: Average number of potential jobs to be created per sub-theme
Energy projects generally demand large capital investments. Renewable energy
projects received by the Green Fund averaged a cost of over R70 million each (Fig
8). The country’s current economic growth model is heavily energy-intensive, and
has aggrevated pressures on the environment. The country has a high dependency
on coal-fired power, where 90% of energy used comes from coal-fired power
stations. This has resulted in a yearly per capita emission rate of about 10 tons of
carbon dioxide, 43% higher than the global average (Oxfam, 2009). There is no
doubt that sustainable green growth in South Africa cannot be attained without
significant changes in the energy sector. As demonstrated by the large response for
renewable energy projects (Figure 3), there is an interest and a realisation within the
country towards such change.
0 500 1000 1500
Ecosystem services
Energy Efficiency & Demand Side Management
Renewable energy, including off grid and mini grid
Sustainable human settlements, the built environment and…
Sustainable Waste management & recycling
Sustainable water management
Biogas and biofuels
Energy efficiency
Industrial cleaner production and consumption projects
Renewable energy
Rural energy including off grid and mini grid
Sustainable transport
Biodiversity Benefiting businesses, including sustainable…
Land use management and models
PES projects
Rural adaptation projects and plans
Number of people
Mapping the Green Economy Landscape in South Africa
29
Figure 8: Average project cost of project per sub-theme
6.4 Financing the green economy
In mapping the green economy institutional architecture, it is important to give special
consideration to how the green economy is financed in South Africa. This is critical
because without sustainable finance it will be impossible to transition to a low carbon
economy. It is not possible here to provide the full structure of climate finance flows
that support the transition. However, key aspects of the green economy financing
architecture can be discussed briefly. Several studies have been conducted in South
Africa to build understanding on the financial aspects of the green economy,
especially climate change finance.
One of the most recent studies is the Green Economy Modeling Report (UNEP
2013), which assessed the impact of green economy investments in the natural
resources, agriculture, transport and energy sectors. The modeling exercise used
four scenarios to assess the impact of investing in these sectors, and found some
interesting results. For example, for the natural resources sector, under one of the
scenarios it was found that additional land of up to 46.4% would be restored by 2030.
For the energy sector, a 2% of GDP investments would result in significant reduction
in energy demand. While for the transport sector, it was found that investments in
transport efficiency are not enough to reduce the energy demand by 9% by 2015, as
outlined in the energy efficiency strategy of 2005 (UNEP 2013). Agriculture on the
other hand is projected to increase yields by between 5.5% and 23% by 2030.
Other studies have attempted to document South Africa’s strategy on climate
finance, but Montmasson-Clair (2013) for instance found out that South Africa lacks a
strategy and institutional framework for climate finance. Some of the shortfalls for
example include the fact that “no funding gap has been determined and no official
estimates of the expected or required contribution of public, private and donor
finance is available”.
0 20 40 60 80 100
Biodiversity Benefiting businesses, including sustainable…
Biogas and biofuels
Ecosystem services
Energy efficiency
Energy Efficiency & Demand Side Management
Industrial cleaner production and consumption projects
Land use management and models
PES projects
Renewable energy
Renewable energy, including off grid and mini grid
Rural adaptation projects and plans
Rural energy including off grid and mini grid
Sustainable human settlements, the built environment and…
Sustainable transport
Sustainable Waste management & recycling
Sustainable water management
Million (R)
Mapping the Green Economy Landscape in South Africa
30
This lack of systems to track climate finance has major implications on coordinating
action for the transition to a green economy, because it presents major constraints in
aligning national priorities to available financial resources and needs. The proposed
implementation of a national climate change monitoring and evaluation system and
the compilation of a national climate finance report by the National Treasury and DEA
would go some way in consolidating understanding on climate finance flows in the
country. Currently though, there is no overarching framework in South Africa to track
climate finance, there is a relatively good understanding of the potential sources of
finance for the green economy, as broadly outlined in the following section.
Green economy finance can be categorized into national, donor funds, and private
sector investments.
6.4.1 Unpacking the role of the Green Fund
The Green Fund was set up as a transition fund, as such it must make careful
consideration of the role it plays in the green economy, which will in turn define the
funding instruments that help to best optimize its role. For transition funds to be
effective they also need to be flexible and highly responsive. For the Green Fund that
means understanding its position in the broader green economy finance landscape.
Figure 8: A schematic representation of the strategic position of the Green Fund
International climate
finance
Public
sector
Private
Sector Donors
GREEN
FUND
Base of the pyramid
(BOP) models
Intermediary
entities
Sustainable green
enterprises
Conventional
funding instruments
Mapping the Green Economy Landscape in South Africa
31
The Green Fund sits at the nexus of various sources of funding. Even though the
Fund has been mainly supported through public funds, there is potential to tap into
other sources of funding, either from international climate finance, innovative private
sector finance or donors and philanthropy. The main challenge is how the Green
Fund can channel these resources, to the level where it can make significant impact
on the ground, and this is where innovative financing mechanisms need to come into
play.
The two main dimensions of the green economy in the context of South Africa are
related to the need to promote inclusiveness and to adopt a low carbon development
trajectory. The role that the Green Fund can play in promoting a low carbon transition
is relatively straight forward, since the issues are relatively high level, which makes it
easier to identify the leverage points.
However in relation to inclusiveness there is a real challenge of channeling support to
those levels where meaningful change can take place. This is because interventions
at the bottom of the pyramid do not lend themselves to traditional business models,
and are generally high risk – and are thus not able to access resources such as the
Green Fund.
In thinking about the funding mechanisms for the Green Fund, the two issues that
need to be taken into consideration therefore are creating an appropriate balance
between supporting base of the pyramid models (BOP) that promote inclusiveness
and interventions that promote low carbon development. To address the issue of
base of the pyramid challenge, it might help if the Green Fund considers the use of
intermediary funding entities, like green business incubation hubs as a conduit for
channeling support. Under this arrangement, focus would be on projects at an early
developmental phase, with more emphasis on grants.
6.4.2 National public finance
National public finance has so far played a key role in funding South Africa’s
transition to a green economy, with several financing mechanisms dedicated by the
public sector. The financial goal of the public sector is to mainstream climate change
response into the fiscal and budgetary process to enable the integration of climate
change programs at the national, provincial and local levels of government. Through
the medium term strategic framework (MTSF), priority programs have been identified
to achieve this goal. In addition special purpose vehicles/funds and other funding
mechanisms have been established (Table 3).
Mapping the Green Economy Landscape in South Africa
32
Table 3: Climate change and environmentally related funding programs from the
public sector
Sector Initiative
Energy Renewable energy Independent Power Producers Programme
Integrated national electrification programme
Energy Efficiency and Demand Side Management Programme- mainly Solar water Geysers
Designated National Authority- Clean Development Mechanism
Manufacturing Competitiveness Enhancement Programme- grant for upgrading projects to encourage energy efficiency and cleaner production practices
Industrial Development Corporation: ZAR 25 billion earmarked for the development of green industries
Transport Public transport infrastructure and systems grant- Bus rapid Transit Systems
Environment- natural
resource
management
Working for Water- clearing alien invasive species
Working for coasts- Promotes clean–up, rehabilitation and security of coastal environments and ecosystems
LandCare- Community based programme focusing on conservation and rehabilitation of soil, water and vegetation
Working on Fire- focuses on integrated fire management of veld and wildfires
Green Fund- supporting innovative green economy initiatives
Biodiversity Biodiversity conservation and management (South African
National Parks, South African National Biodiversity Institute
and Isimangaliso Wetland Park Authority)
Disaster
Management
Municipal disaster grant
Provincial disaster grant (includes allocations from Department of Transport, Human settlements, COGTA)
6.4.3 Donor funding
Most of the finances that have been injected into the green economy in South Africa
have emanated from multilateral funding agencies such as the Global Environmental
Facility (GEF), with the Department of Environmental Affairs acting as the focal point.
Between 2010-2013 the GEF allocated USD 52.6 million to fund projects on
biodiversity, climate change and land degradation. Funds that have been allocated
through the GEF are channeled through the respective department, which has to
inform National Treasury about such funds. To ensure that the National Treasury
Mapping the Green Economy Landscape in South Africa
33
tracks flows in climate finance, the Medium Term Expenditure Framework (MTEF)
requires that departments disclose all donor funding to enable the National Treasury
to keep track.
The GEF is probably one of the very few sources of international funds that can be
easily tracked in South Africa. As of 2014, the DBSA has been appointed as the
national project agency of the GEF, which should hopefully unlock more financial
resources into South Africa’s economy.
The Adaptation Fund is another international source of funding established under the
Kyoto Protocol, which receives its funds from Certified Emission Reductions (CER),
to support climate change adaptation projects. In South Africa, the National
Biodiversity Institute (SANBI) is the designated National Implementing Entity (NIE).
In general there is significant amount of funding flowing into South Africa from
international donors, but it is extremely difficult to quantify the amounts in question.
International funds are generally used to fund projects directly, but in some case can
be used to leverage additional resources. For example during the Renewable Energy
Independent Power Producer (REIPP) implementation, European donors availed
ZAR 30 million, to support a team of transaction advisors (Montmasson-Clair 2013).
6.4.4 Private sector funding
South Africa has a stable and well-regulated financial sector, with many of these
institutions including banks, insurers, venture capital and hedge funds very active in
supporting low carbon projects (Montmasson-Claire 2013). The key motivation for the
increased level of involvement by the private sector could be attributed to the
emerging opportunities in the green economy especially in relation to renewable
energy and energy efficiency. The strong policy signals in terms of promoting
renewable energy has also incentivized many private sector players to take
advantages of the opportunities.
Some private sector players, especially the multi-national companies have also been
influenced by the global discourse on climate change and the increasing interest from
institutional investors to address their environmental risks. As a result many
companies have been forced to develop better understanding of their environmental
footprint, but also to report against those risks and to develop mitigation strategies.
Private sector finance flows into the green economy are mainly through investments
in low carbon technologies that have potential benefit to developers. The financial
sector in South Africa is well established, with significant resources available through
banking institutions, insurance, venture capital, private equity and hedge funds. Many
of these financial resources are starting to flow into the green economy sector to
support low carbon technologies especially in renewable energy and energy
efficiency. During the recently completed procurement of renewable energy by the
Department of Energy, it was estimated that more than R 40 billion would be invested
in the energy sector, representing a significant investment by the private sector.
During the second phase of the IPP (Independent Power Producers) programme,
Mapping the Green Economy Landscape in South Africa
34
Standard Bank, approved loans for Photovoltaic and wind energy to the tune of 1454
MW of power generating capacity (Cooke 2012, cited from Montmasson-Claire
2013). No information is available on whether all those projects were funded by the
bank.
Some companies are also starting to invest in green technologies because climate
change poses a major risk to their operations and they therefore need to put
measures in place to address these risks. There are numerous examples of such
interventions in South Africa through which private sector finance is flowing indirectly
to the green economy sector.
The Nedbank Green Savings Bond is dedicated to mobilizing financial
resources for financial energy projects, specifically renewable energy projects
and thus contributes towards the transition to a green economy.
The City of Johannesburg in partnership with the private sector, has issued
South Africa’s first green bond, worth 1.46 Billion which is listed on the
Johannesburg Stock Exchange (JSE). The funding generated from this bond
will be used exclusively to fund green projects in the City, representing a
significant intervention by the City1.
The German Development Bank (KFW), has set up a ZAR 500 million fund to
support energy efficiency and renewable energy projects in South Africa2. This
fund is currently being implemented by ABSA and IDC, and is dedicated to
small and medium enterprises with a turnover of not more than ZAR 53 million.
The Carbon Disclosure Project (CDP) implemented by the National Business
Initiative (NBI) is the most important intervention that allows companies to
disclose their resource use trends, specifically water and carbon emissions.
Even though the CDP is not a funding mechanism, it encourages companies
to adopt a green agenda and thus invest in the green economy. In their 2013
report, 83% of the 100 listed companies in the JSE reported on their water use
and carbon emissions. The CDP also requests companies to disclose
information on measures that they are taking to address their carbon footprint.
In effect, the CDP encourages companies to invest in a green economy
through resource efficiency and cleaner industrial production. Even though
most of financial investments are directed to specific interventions with the
operations of such companies, they also represent investments in the green
economy. The recommendation for the Green Fund here is that the increasing
involvement of private sector players represent opportunities for collaboration
and match funding initiatives that could help to deploy technologies and other
interventions that help companies address their risks but that yield broader
landscape outcomes from which the environment could benefit.
1 https://www.jse.co.za/news/the-johannesburg-stock-exchange-lists-its-first-green-bond 2 http://www.moneyweb.co.za/moneyweb-south-africa/idc-germanys-kfw-start-renewableenergy-fund
Mapping the Green Economy Landscape in South Africa
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Other examples of projects involving private sector in the management of natural
resources include:
The Water Futures Partnership, between SAB Miller, WWF, GIZ and other
companies. The goal of this intervention is to improve water management in
the supply chains of companies facing physical water risk.
SASOL and Emfuleni Municipality. This partnership is focused on reducing
water leakages as a result of poor infrastructure in the Municipality3, which
would in turn provide SASOL with an assurance of supply in case of future
water shortages in the Municipality.
It is extremely difficult to track private sector finance in South Africa, because there is
currently no system for tracking (Montmasson-Clair 2013). An attempt by the DBSA
to collate private sector finance from publically available information, found that
climate finance in South Africa is estimated at between ZAR 2-5 billion.
Due to the difficulty of tracking climate finance this study could not establish
accurately how much financial resources from the private sector is flowing into the
green economy. This has been corroborated by the interviews with stakeholders,
where there is general agreement that understanding green economy, especially
tracking financial flows, is a major challenge in South Africa, and could potentially
undermine the transition. It is important to understand how much resources are
committed to the green economy transition to enable effective implementation of key
initiatives and for prioritization of interventions. In relation to climate finance
readiness, the perception survey found that there is an urgent need to build capacity
to promote better understanding if global climate finance resources are to be
harnessed by the country.
6.4.5 Proposed funding mechanisms in the Green Fund portfolio
Under RFP1 (Projects), most of the applications (85%) were for non-recoverable
grants (capital and project development). 46% of project applicants made no financial
contributions towards projects. A further 23% only contributed less than (23%) to the
project costs. As a transitional catalytic fund, it is important for the Green Fund to
keep funds revolving. As such, receiving so many projects for non-recoverable
funding with few contributing partially to the project funding is not viable. However,
the Fund did well to grant a fair amount of the project funds to those requesting
recoverable grants and concessional loans (see section on funded projects), these
only came from a total of 15% of the proposed projects.
6.5 Key trends in the projects that were funded
This section briefly outlines some key trends emerging out of the projects that were
funded, from the total pool of more than 700 applications. As stated earlier in this
report, funds were disbursed following a widely publicized Request for Proposals
3 http://www.emfuleni.gov.za/index.php?option=com_content&view=article&id=480:development-partnership-between-sasol-the-emfuleni-local-municipality-and-giz-commences&catid=1:emfuleni-news&Itemid=2
Mapping the Green Economy Landscape in South Africa
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(RFP), of which the first (RFP1), focused specifically on green economy projects, the
second call (RFP2) was specifically for research in the green economy. Projects for
the third phase of the funding, which focused on capacity building, were identified
through a process of active origination and stakeholder engagement.
6.5.1 RFP1: Projects funded
Despite the fact that the proposals in RFP1 were dominated by projects from the
Green Cities and Towns funding window (Fig. 9a), funded projects were fairly
balanced across funding windows. Funded projects came mostly from KwaZulu Natal,
Gauteng and Western Cape. A fair amount of sub sectors were funded, with the most
funded subsector being sustainable waste management (5 projects) and a balance
between renewable energy, biodiversity benefiting businesses, sustainable land use
management and payment for ecosystem services (3 projects each). Funded sub-
sectors do not necessarily represent the proportion of received applications
(especially for Payment for Ecosystems services sub-sector which comprised only 2%
of the applications), but do reflect sectors that have been prioritized by the South
African government. For example, the need to adopt sustainable waste management
practices is well articulated in the NSSD. This sector along with renewable energy
could be supported through public private partnerships (PPPs) at local government-
level to encourage private sector engagement with local government; especially since
renewable energy and waste management is capital intensive (see Figure 7).
Figure 9: Summary of funded projects by funding window (a) and by region and sub-sector (b).
Most of the projects funded consisted of recoverable grants (58%) making
recoverable funds worth R472 390 722. Non- recoverable grants can find better use
when targeted as small grants for concept development, pre-feasibility studies,
feasibility studies and business plan development. Small grants can also target
research, capacity development, awareness raising and skills training for government
and CBOs. On the other hand, strict criteria should be applied to well-developed
sectors and for engagement with established private sector players. Only 4% of
51%
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Mapping the Green Economy Landscape in South Africa
37
received projects provided >50% of project funding. The Green Fund should stipulate
that for established private sector players, as well as those in well-established and
well-funded sectors (energy and waste management for instance), at least a 50-50
matching of funds will be accepted. Projects which provide matching funds should be
given preference.
Figure 10: Project innovation type by region (a), subsector (b) and funding window (c).
Innovation is a vital component for the green economy and is therefore discussed
explicitly here. Figure 10 shows that innovations for a green economy were mostly
dominated by proposals for technical innovations and business models, with
considerable contributions related to institutional innovation. Very few innovations
targeted financial instruments for transitioning to a green economy. Renewable
energy, rural energy, sustainable water management, sustainable transport and
industrial cleaner production sub-sectors had more projects oriented towards
technical innovation, while rural adaptation projects and biodiversity benefitting
businesses were mostly addressing business models.
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Mapping the Green Economy Landscape in South Africa
38
6.5.2 RFP2: Research in the green economy
With the exception of a few (6 %), research projects on average received less than
R5 million each. These costs were commensurate with the nature of the call. Figure
12b shows that the projects granted were in line with the received projects, with
technology development (4 projects), sustainable land use management (3 projects),
renewable energy (3 projects) and sustainable waste management (2 projects)
receiving most of the grants. Similarly, the approved research projects show that
while Gauteng province dominated the grant allocations (11 projects), the focus of
most of these research projects is national.
Figure 11: Funded projects by funding window (a) and region and sub-sector (b).
Research and innovation are key elements in the transition to a green economy.
During the design of RFP 2, a special innovation window was incorporated.
Response to the call for innovation was good, as demonstrated by the amount of
projects funded (38%) under the funding window, Innovation for Green Economy
(Figure 11a). However, innovation should form a strong component across all call
themes and subsectors. For example, innovation is required for sustainable waste
management and to generate businesses that sustainably benefit the environment.
As such, the Green Fund should make innovation for the green economy a cross
cutting criteria for small grants in research and capacity building. The fund should
aim to support projects within each of the 3 windows that show the most innovative
promise by setting aside a portion of the small grant for R&D for innovative project
ideas across all themes and subsectors. At least 10% of all funds should be set aside
for this. Innovations in transport, clean industrial production, and payment for
ecosystems services will require special attention for research and capacity
development given their importance in the long term priorities of government, yet
poor representation and interest is shown by the received project proposals (Figure
10).
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Mapping the Green Economy Landscape in South Africa
39
6.5.3 Capacity building in the green economy
Very limited analysis was carried out under the capacity building theme, largely
because the approach adopted here differed slightly from the other two phases of the
funding. The projects funded under the capacity building theme were sourced largely
through active origination, as a result of extensive stakeholder engagement. Some of
the projects that were selected under the capacity building theme were from
applications received in the RFP1.
The total cost of projects that were awarded funding for capacity building was ZAR
59 Million, with a 50% split between project and program funding.
The focus of the capacity building work was broader than skills development and
included the development of sector wide strategies and well as strengthening
planning capabilities for the transition to a green economy. This vision was clearly
reflected in the funding trends, where funding was widely distributed across a range
of interventions including SMME development, green jobs training and the
development of green economy research capacity.
Specific recommendations related to capacity building are found in the following
section, in general there was a strong sense of support from the perception survey by
key stakeholders. It was pointed out that significant capacity constraints still exist in
various sectors, especially at the local government level, which needs to be
prioritized moving forward.
Mapping the Green Economy Landscape in South Africa
40
7 KEY RECOMMENDATIONS AND CONCLUSIONS
The recommendations outlined below are based on a comprehensive analysis of the
Green Fund portfolio of projects, green economy priorities as defined by various
government documents, and interviews with key stakeholders. The aim of the
recommendations is to document the emerging lessons from the portfolio so as to
inform the next funding phase of the Green Fund. Our recommendations are based
on the understanding that they should help the Green Fund achieve its stated
objectives of:
o Promoting high impact green programmes and objectives
o Reinforcing climate policy and sustainable development objectives through
green interventions
o Building an evidence base for the expansion of the green economy and
o Attracting additional resources to support South Africa’s green economy
development.
Taking these objectives into cognizance, it is important for the Green Fund to play a
catalytic role as stated in its vision, in order to leverage support from other sectors of
the economy. As a result the Fund should continue to provide support to those
projects that could otherwise not be able to secure support from conventional
sources due to their high risk and early phase of development.
The structure of the recommendations outlined below is based on the Green Fund’s
operating principles and functional areas as defined in its guiding document (DBSA
2012).
7.1 Funding windows
The review found that the 3 funding windows are still relevant, and reflect the national
green economy priorities as outlined in various government policies and strategies
such as the NDP, the New Growth Path and the NSSD. Although the funding
windows were found to be useful for articulating the vision of the Fund, they were
impractical for decision-making due to their close overlap. For example many sub-
themes under the Low Carbon window were also listed under the Green Cities and
Towns window, but the Environmental and Natural Resources window was relatively
unique with few overlaps with the other two windows.
Many of the stakeholders that were surveyed also expressed reservations with the
categorization of the funding windows, expressing the view that it was superficial and
in many cases most of the issues were crossing cutting. For example one
stakeholder expressed the view that distinguishing between urban and rural areas
does not make sense, because many of the urban communities living in informal
settlements live in conditions that are very similar to rural communities.
Based on the above limitation to distinguish the funding windows, it is more useful to
use sub-themes in prioritizing sectors that the Green Fund could focus on, while
recognizing the respective windows.
Mapping the Green Economy Landscape in South Africa
41
7.2 Emerging sectors
The following sectors have been identified as potential key sectors that the Green
Fund could focus on. This is based mostly on analysis of the portfolio, and national
green economy priorities, as the other green economy stakeholders generally follow
government’s lead in the identification of the priority sectors in South Africa. The
perception survey did not yield strong preference for specific sectors for the Green
Fund to prioritize. Most of the stakeholders were more concerned about the
functional areas under which the Green Fund should operate.
Key principles from the mapping exercise that informed the recommendations for the
key sectors include:
o Sectors that received very few applications and are a national priority should
receive more support because such sectors are still nascent and therefore the
Green Fund could play a critical role in catalysing action, beyond the current
policy signals.
o Sectors that received overwhelming number of applications such as the waste
management sector and renewable energy should be viewed as having
matured due to the high level of activities. What is emerging is that such
sectors could potentially generate support from other sources.
o Trends were compared in the applications that were submitted relative to
funding trends. In this case for example, sectors that were deemed as
requiring development, based on the number of submissions, but were
allocated significant funding, were not prioritised. By allocating significant
support to these sectors, despite the relative low level of activity, the Green
Fund is deemed to have played its catalytic role in supporting such a sector.
o For well-established sectors, any potential interventions should be based on
supporting high impact projects and the use of more sophisticated funding
mechanisms (e.g. loans or match funding).
o Potential priority sectors were crosschecked against national priorities and
other support mechanisms, such the NCCR flagship programmes, to ensure
that such sectors are regarded as key for the transition and have not been
prioritised elsewhere.
o Sectors that are critical but unlikely to produce bankable projects to enable
them to leverage conventional finance, but which have the potential for
implementing high impact projects, were recommended as warranting some
support. A good example of such a sector is the ecosystem services sector,
including payments for ecosystem services (PES).
Government’s clear identification of South Africa’s priority green economy sectors,
although not articulated in a specific green economy policy, but encapsulated in key
government policy documents, sends a clear message to investors wanting to invest
in South Africa’s green economy.
7.2.1 Rural energy including mini-grid and off-grid (Low Carbon Economy)
Given the robust and favourable policy environment surrounding renewable energy,
the high investment costs and the fact that renewable energy projects are largely
Mapping the Green Economy Landscape in South Africa
42
targeted for the medium to long term (New Growth Path), the Green Fund may not be
in the best position to finance such change. However, the Green Fund can catalyse
more investment from the private sector in renewable energy through supporting
municipalities in Public Private Partnerships (PPPs). Furthermore, support for
municipal leadership in renewable energy can help increase local participation
through encouraging local innovation and entrepreneurship and soliciting local
manufacturing.
Support could also be directed towards other renewable energy projects that require
less catalytic funding but can have a large impact e.g. rural off grid and mini grid
energy and the development of biogas and biofuels. Energy access is an issue of
major concern in South Africa, where most of the rural population still remains very
vulnerable, with very low level of access to basic services such as water and
sanitation, employment opportunities and food security. It is on this basis that the
various government policies have made pronouncements on the need to build
inclusive societies (NDP) and build sustainable communities (NSSD). The Medium
Term Strategic Framework (MTSF) specifically states that there is a need to build
“vibrant, equitable, sustainable rural communities contributing towards food security
for all”.
Sustainable energy solutions for rural communities is at the nexus of building
inclusive societies, and considering that extending the grid to rural communities may
not be cost effective in the short- to medium-term, promoting energy solutions such
as solar PV, wind power and bio-digesters may help to improve energy access in
rural communities in the interim.
This sub-theme is also directly linked to the development of rural adaptation plans
that is critical for building rural community resilience and for harnessing ecosystems
services. The rural adaptation plans sub-theme also received very few applications,
despite it being critical for activating local economies and testing models that help to
promote grassroots interventions and solutions.
7.2.2 Biogas and biofuels (Low Carbon Economy)
We recommend this sub-theme because it is the only aspect of renewable energy
that has still not gained sufficient traction in South Africa, compared to other
renewable energy sources like solar and wind power. There is still considerable
debate around biofuels, regarding their efficacy as a source of clean energy, due to
questions that have been raised around the choice of feedstock, land use
degradation and CO2 emissions from biofuels. The Green Fund could play a
significant role in clarifying some of the outstanding controversies, specifically in
relation to research and feasibility studies
The Department of Energy has been trying to push the activation of this sector, and
some of the activities thus far include the establishment of a national biogas platform
that was designed to document lessons from existing projects and to identify the
potential regulatory and funding requirements for the sector.
Mapping the Green Economy Landscape in South Africa
43
The Biofuels Industry Strategy stipulates that biofuels should comprise 4.5% of the
energy pool of South Africa by 2013. That target has not been achieved because the
biofuels sector has been bogged down by regulatory challenges and other
constraints including funding. The pricing regulations for biofuels were only published
in January 2014 for public comment and it was envisaged that by October 2015, local
refineries will meet the requirement of blending 2% of locally refined oil with bio-
ethanol.
The significance of the biofuels and biogas sector is that it is closely linked to building
resilience in rural communities, as it will encourage smallholder agriculture. For
example biogas generation could utilize manure from animals such as cows, pigs,
goats and poultry, which is linked directly to agricultural production. Considering the
need for sustainable farming practices, generating energy from biogas could
contribute to cutting emissions from the agricultural sector in South Africa.
By the time the pricing regulations were published in January, only 4 biofuels and
biodiesel companies were licensed. It was difficult to ascertain from current available
information, how many companies are active in the bio-energy sector in South Africa,
and the amount of financial resources invested. The Southern Africa Bio-energy
Association (SABA), which purports to promote the establishment of a biofuels
industry in South Africa, has a membership of close to 50 companies, which is a
good indication of interest in the sector.
7.2.3 Sustainable water management (Green Cities and Towns)
South Africa is a water-stressed country, with many of its economic hubs located in
water stressed regions that are projected to suffer from severe water shortages with
major implications on the economy. Effective implementation of water conservation
and demand management measures will be critical in ensuring that cities adapt to the
potential risks posed by lack of water availability and poor quality. At present a
significant amount of water is lost as a result of poor water infrastructure, and
opportunities exist for innovative partnerships between the private and public sector
to address this challenge. The push for water demand management by local
authorities may also stipulate the installation of water saving devices, which could
potentially stimulate a potential manufacturing of such devices, which however
requires incentives for such initiatives to take off.
Based on the water challenges that the country faces, and potential risk water
scarcity poses to various sectors including the private sector, there is an opportunity
for the Green Fund to catalyze projects that promote green innovations in the water
sector in South Africa. Such innovations should not only be limited to technologies,
but also include green business model innovations (GBMI), that help companies to
manage their water-related risks but with significant impacts at the landscape level.
7.2.4 Sustainable human settlements, the built environment and green
buildings (Green Cities and Towns)
The sustainable human settlement sub-theme is a crosscutting sub-theme both
under the Green Cities and Towns and Low Carbon windows. The significance of this
Mapping the Green Economy Landscape in South Africa
44
window is linked to the fact that by 2050 close to 80% of South Africans will be living
in cities, which presents a major challenge for service delivery in cities. Cities are
already burdened by the large informal sector, and the need to provide basic services
including housing, water and sanitation. Most of these responsibilities lie with local
government authorities that are poorly capacitated to deal with these challenges. The
Green Fund could play a key role in stimulating this sector by promoting private
sector participation, testing new models for sustainable housing and building local
government capacity.
7.2.5 Industrial cleaner production and consumption (Low Carbon Economy)
The manufacturing sector is important for South Africa’s economy, because of its role
in sustainable job creation. However the sector is also responsible for significant CO2
emissions and pollution. As a result there is need for the manufacturing sector to
adopt cleaner production measures that are more resource efficient and reduce
waste discharge into the system.
The South African government recognized the importance of this sector and
established the National Cleaner Production Centre (NCPC). The goal of NCPC is to
enhance the competitiveness of the manufacturing sector by promoting energy
efficiency and waste minimization. The Centre aims achieve this through:
Awareness creation of the benefits of optimising resources;
Technical interventions via in-plant assessments to highlight resource
efficiency opportunities;
Advising on the best practice methodologies, technologies and incentives;
Building local expertise and green skills sets across the supply and value
delivery chain; and
Demonstrating sustainable successes and outcomes to accelerate and
increase the penetration of resource efficiency and cleaner production (RECP)
and industrial energy efficiency (IEE) services and offering. (NCPC 2014)
The NCPC is playing a critical role in promoting sustainable practices within the
manufacturing sector, but unfortunately this effort is not adequate. It was therefore
recommended the Green Fund, through its capacity building interventions and
research, explore measures of bolstering the activities of entities such as the NCPC.
This would be achieved through a process of effective engagement between the
Green Fund and other players such as the NCPC, to explore modalities for
collaboration.
7.2.6 Ecosystem services
A significant amount of research on ecosystem services has been conducted in
South Africa, including ecosystems valuation and ecological infrastructure mapping
techniques. However, very limited actual ecosystem services that promote actual
investments have been conducted in South Africa. The Green Fund has provided
funding for two such projects during the research window (RFP2). However, there is
a need to support more of such projects, but under project finance instead of the
research window, since significant research work has already been carried out on
Mapping the Green Economy Landscape in South Africa
45
ecosystem services research in the country. It would be useful if the Green Fund
could pilot actual payment for ecosystem services, preferably linked to water. In this
case this theme would be linked to that of sustainable water management.
7.3 High impact projects vs Programmatic Support
Due to the nature of the Green Fund as a catalytic finance mechanism, it needs to
maintain its principle of supporting high impact projects. The term ‘high impact’ is
used loosely to refer to initiatives that are capable of delivering significant
breakthrough either through the introduction of game-changing new technologies, or
significant job creation potential etc. This is because the limited resources at the
disposal of the Green Fund do not enable the Fund to support large numbers of high
impact projects. It is proposed that 80% of available resources should be dedicated
to such high impact projects, with the remaining 20% dedicated to other types of
projects. The Green Fund has an opportunity now to expand this notion to a more
programmatic support as opposed to funding stand-alone projects, but in partnership
with entities that are already funding these emerging sectors and using its catalytic
nature to upscale or replicate initiatives.
7.4 Capacity development and research
There is urgent need to build public sector capacity to effectively participate in the
green economy transition, especially local government which is responsible for
ensuring effective implementation of green economy programmes on the ground. As
it stands now, capacity challenges are still prevalent which presents a major barrier
to unlocking opportunities at the local level.
In view of the global financial resources that are currently being considered, it would
be useful if the capacity building element focuses specifically on climate finance
readiness of South African public, private and civil society institutions.
In relation to research, there was a call on the Green Fund to support innovative
programmes that help to unlock systemic barriers in the transition to a green and
inclusive economy. The perception survey found a strong call for the Green Fund to
support innovative research programmes that look at bottom of the pyramid (BOP)
models as key for sustainable job creation and the activation of local economies in
the country.
7.5 Financing mechanisms
This section of the report explores some of the funding considerations that the Green
Fund should address, for the fund to be sustainable and to leverage on other funding
sources. Considering the long recovery periods, of about 14 years the Green Fund
needs to urgently address the sustainability issues that will arise. Leveraging
additional funding resources and the use of innovative funding mechanisms are the
two main strategies for addressing the sustainability issue.
7.5.1 Additional funding sources
There are three main sources of potential funding for the green economy in South
Africa, i.e. international climate and donor funding, public sector and private sector
Mapping the Green Economy Landscape in South Africa
46
financial resources. The Green Fund is a public entity, and there are currently various
government initiatives that are funded using the same pool of resources. Even
though there is relatively good understanding by the Green Fund of these different
initiatives within government, there is need for better coordination to ensure that the
limited public resources are optimally used. The Green Fund is however limited by its
mandate, and therefore needs to reflect critically on its role in helping to coordinate
current initiatives being implemented by other government departments.
Donor support accounts for a significant amount of funding for climate change related
initiatives in South Africa. In a review of climate finance, Faure (2009) found that at
least ZAR 12 billion was raised for climate change projects in South Africa, with main
contributors being France, Germany and Australia. Multilateral funds such as the
Clean Technology Fund (CTF), and the Global Environment Facility (GEF), were also
found to be significant contributors. It is therefore recommended that if the Green
Fund is to leverage additional support, engagement with some of these key players
will be critical. Even though some of these engagements have already started to take
place, such as the appointment of the Green Fund as the GEF Implementing Entity,
and the ongoing engagement with KfW (German Development Bank), a more
proactive strategy would help to leverage additional support.
7.5.2 Innovative funding mechanisms
In considering the funding mechanism that the Green Fund should use moving
forward, it’s important to consider the catalytic role of the fund and the need for
sustainability. Most of the applications that were received thus far were for non-
recoverable grants, even though the funding was well distributed under various
funding mechanisms. At the moment the Fund is operating between the Pilot and
demonstration phase and Project Development Phase (Fig 12). This means that
significant amount of funding will be invested in high risk projects, through grants and
concessional loans. To address the potential risks involved, it’s recommended that
partnership with the private sector through co-financing should be prioritized, with the
grants prioritized for civil society and actors at the community level.
Mapping the Green Economy Landscape in South Africa
47
Figure 12: Funding mechanisms in relation to the phase of projects (Adopted
from NBI 2013).
The Green Fund should view its role as that of a facilitator that supports initiatives to
overcome the barriers of transitioning to the next phase of project cycle (Fig 12).
From a sustainability perspective, projects between the ‘Pilot’ phase and the
‘Development phase’ are generally high risk, whereas those moving into the
implementation phase are more sustainable. As a result the Green Fund might need
to make a conscious decision on how to balance their allocation, so as not to stifle
innovation on the one hand and to ensure that the Fund is sustainable on the other.
The review of the Green Fund portfolio found that guidance is required on how much
can be allocated per project. The request for funding was very wide ranging, which
made it impossible to ascertain if the amount of funding requested was realistic or
merely a thumb suck. It would be useful if guidance is given regarding the total
amount available per window, this would give applicants some insights regarding
how much funding they could realistically apply for through the Green Fund, and if
any the shortfalls they have to raise from elsewhere.
Mapping the Green Economy Landscape in South Africa
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8 REFERENCES
Cloete B, Y Ramgowlan, E Tyler (2011). Synthesis of Climate Finance Literature Report to the DBSA, Pretoria: Department of Environmental Affairs.
Cooke C (2012). Standard Bank Underwrites $3.5 Billion South African Renewable Power Bids. Bloomberg. Available at: http://www.bloomberg.com/news/2012-03-06/standard-bank-underwrites-2-5-billion-in-south-african-renewable-bidding.html [Accessed February 18, 2013].
Cowling RM, B Egoh, AT Knight, PJ O'Farrell, B Reyers, M Rouget, (2008). An
operational model for mainstreaming ecosystem services for implementation.
Proceedings of the National Academy of Sciences 105 (28), 9483-9488.
DEA (Department of Environmental Affairs), 2011. National Strategy for Sustainable Development and Action Plan (NSSD1) 2011-2014. Pretoria: Department of Environmental Affairs.
Development Bank of Southern Africa (2011). Financing Climate Change. A
synthesis report compiling evidence from three independent research reports
commissioned by the DBSA (Imbewu, Business Innovations Group and Development
Network Africa) and prepared for the Department of Environmental Affairs‟ (DEA) in
support of the Climate Change Response Policy.
DoE (Department of Energy), 2011. Integrated Resource Plan for Electricity 2010-2030. Pretoria: Department of Energy.
DST (Department of Science and Technology), 2008. Ten-Year Innovation Plan. Pretoria: Department of Science and Technology.
DTI 2012. Industrial Policy Action Plan 2012/13 – 2014/15. Pretoria: Department of Trade and Industry.
Egoh B, B Reyers B, M Rouget, DM Richardson, DC Le Maitre, (2008). Mapping ecosystem services for planning and management. Agriculture, Ecosystems & Environment 127 (1), 135-140
Faure A (2009). Climate change: Who’s doing what in South Africa?
Green Fund (2014). Green Fund Annual Report. Development Bank of Southern Africa. Pretoria, South Africa.
Kaggwa M, SS Mutanga, G Nhamo, T Simelane (2013). South Africa’s Green
Economy Transition: Implications for re-orientating the economy towards a low
carbon Growth Trajectory.
Linkd Environmental Services (2012). Landscape report on priorities and
opportunities for the Green Fund Windows. Johannesburg, South Africa
Montmasson-Clair G (2013). Tracking climate finance inflows to South Africa. Climate
Change Expert Group (CCXG) Global Forum, Paris.
National Business Initiative (NBI) 2013. A private sector view of enhancing private
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sector access to climate finance. National Business Initiative, Johannesburg, South Africa.
NPC (National Planning Commission), 2009. Together Doing More and Better. Medium Term Strategic Framework. A Framework to Guide Government’s Programme in the Electoral Mandate Period (2009 – 2014). Pretoria: The Presidency of the Republic of South Africa.
NPC, 2011b. National Development Plan – Vision for 2030. Pretoria: The Presidency of the Republic of South Africa.
NT (National Treasury), 2006. Draft Policy Paper. A Framework for Considering Market-Based Instruments to Support Environmental Fiscal Reform in South Africa. Pretoria: National Treasury.
Republic of South Africa, 2011. National Climate Change Response White Paper.
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United Nations (1987). Our Common Future: Report on World Commission on Environment and Development. United Nations, New York, USA.
United Nations Enviroment Programme (2011). Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication - A Synthesis for Policy Makers, www.unep.org/greeneconomy
United Nations Enviroment Programme (2013). Green Economy Scoping Study: South African Green Economy Modelling Report (SAGEM) – Focus on Natural Resource Management, Agriculture, Transport and Energy Sectors. Nairobi, Kenya.
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9 APPENDIX 1: SUMMARY OF INTERVIEWS WITH KEY STAKEHOLDERS This section contains a summary of the key issues that arose from the interviews with
selected stakeholders. As stated earlier various stakeholders were interviewed to get
their perspective on the green economy landscape in South Africa. The aim of the
interviews was to serve as a validation exercise and to get stakeholder perspective
on perceived key priorities on the green economy and current activities.
In total 15 key green economy actors were interviewed, comprising of participants
from the private, public and civil society. The following institutions, participated in the
interviews.
Department of Environmental Affairs
Department of Science and Technology
The National Treasury
The Council for Scientific and Industrial Research (CSIR)
The Climate Innovation Centre
World Wide Fund for Nature
Standard Bank
Industrial Development Corporation
South Africa Local Government Association (SALGA)
Trade and Industrial Policy Strategies (TIPS)
Sustainability Institute (SI)
National Business Initiative (NBI)
University of South Africa (UNISA)
For each of the participants, a specific set of questions was asked and they were
interviewed either in person or through teleconference. Below is a general summary
of the responses received from the respondents.
1. What specific role is your organisation/department playing in the green
economy landscape?
The responses to this question were mostly informed by the respective mandates of
the organizations that were interviewed. For example commercial banks viewed their
role distinctly as that of providing finance in the green economy from a commercial
perspective, as opposed to a catalytic role. Institutions such as universities viewed
their role specifically as that of providing thought leadership, research and capacity
building for advancing the green economy. The key insight from this question was
that none of the interviewees business models or strategies have specifically been
designed for operationalizing the transition to a green economy. In most cases the
stated roles are those that have traditionally been performed by such institutions.
2. What policy framework/announcement has informed the work
undertaken by your organisation?
Most of the organizations interviewed, derived their theory of change from either
government policies that they have to respond to or from their own internal business
strategy. Some private sector players for example recognize both the risks of climate
Mapping the Green Economy Landscape in South Africa
51
change and the opportunities that it provides. As a result their theory of change is
informed to some extent by the need to adapt on the one hand and to capitalize on
the opportunities that arise, specifically in terms of investments in renewable energy
and associated technologies.
For public sector organizations, government policies were the key instruments that
informed the work of such organizations, where most of them act as an implementing
arm of government. From a specific green economy perspective, the National
Development Plan (NDP) was seen as the guiding document that outlines South
Africa’s proposed development trajectory, while strategies such as the National
Strategy for Sustainable Development (NSSD, the Industrial Policy Action Plan
(IPAP), were seen as key in informing their operations. This is in addition to the
sector specific strategies for energy, biodiversity and transport among others.
3. How much financial resources have been dedicated to this stream of
work by your organisation?
The responses to this question varied widely, depending on the interviewee, however
in general there seems to be relatively poor understanding of how much financial
resources have been dedicated for this kind of work by each organization. There
seems to also be a poor understanding of green economy financial flows in general.
It was extremely difficult to estimate how much financial resources are flowing into
the sector, even though there was a relatively good understanding of the potential
sources of funding both internationally and locally. The challenge of tracking climate
finance in South Africa is an issue that has been recognized for some time now and
proposals have been made for government to implement a climate finance tracking
system.
4. How is progress in implementing of your green economy programmes
monitored?
Monitoring of green economy programmes is done at various levels by the
organisations interviewed, depending on the nature of their operations. Organisations
that support active green economy projects on the ground reported challenges with
the implementation of effective monitoring systems, especially for small projects
compared to large projects.
On the other hand green economy programmes that focus on issues such as
research and capacity building have their internal mechanisms for monitoring
progress, such as independent steering committees and strategies that are informed
by measureable outcomes.
For government entities there are various reporting frameworks that they report
against and a good example is the outcomes approach that has been adopted by the
Presidency. The government of South Africa identified 12 outcomes against which
ministers have signed performance agreements, and each ministry has established
an implementation forum, to ensure that these outcomes are achieved. The
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outcomes approach is therefore a key framework that various government
departments are using to monitor progress in the implementation of associated green
economy programmes.
5. Which other sectors in South Africa are supportive of a low
carbon/resource efficient development trajectory, and are playing a
major role in the transition?
The key sectors that were identified by stakeholders as playing a leading role in the
transition to a green economy include:
- Renewable energy and energy efficiency
- Waste management
- Sustainable transport
- Biodiversity management and ecosystem services
In relation to the identification of sectors, some stakeholders were of the view that the
green economy is not about sectors and that it might be misleading to identify some
specific sectors as being the drivers of the transition. This argument was based on
the premise that the green economy should be viewed as a broad framework which
all sectors of the economy should respond to, as such it means that there is a role
that each sector should play depending on the nature of the transition that needs to
be implemented in that sector.
6. Do you know of any major green economy initiatives or programmes that
are being implemented or planned in South Africa including funding
support?
The intention of this question was not to compile a comprehensive database of
existing green economy initiatives, but to just get some insights into any ‘game-
changing’ projects that the stakeholders might be aware of and would like to bring to
the attention of the researchers. Most of the respondents to this question identified
initiatives that are associated with the renewable energy, such as the REIPP
programme, waste management initiatives and projects in the natural resources
management sectors, such as Working for Water (WFW).
7. What in your opinion are the major barriers in the transition to a green
economy?
Numerous barriers were identified by the stakeholders, that if addressed could
potentially unlock key challenges that are currently being faced in the transition
towards a green economy in South Africa
Most stakeholders expressed the opinion that there no consistent national
narrative of the green economy. Different sectors and players have their own
interpretation of the green economy, even “different government departments
interpret the green economy differently”. This perceived lack of a national
narrative and a clear green economy policy were seen as a major barrier in
the implementation of green economy initiatives.
Lack of capacity, specifically at local government level was consistently
identified as a barrier. This lack of capacity is making it extremely difficult to
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implement green economy initiatives at the local level, which in turn has
impeded service delivery.
The discourse around the green economy was perceived to be using complex
‘language’ and terminologies that do not resonate with many people as a
result it has made it difficult to mainstream the green economy agenda into
society.
Lack of effective coordination, especially between the different government
departments could potentially lead to duplication of effort and waste of scarce
resources.
Other barriers that were identified include issues to do with intellectual property (IP),
procurement challenges and choice of technologies to be adopted. Many key players
also view green economy initiatives as ‘nice to have’, and they are therefore not
prioritized and given the urgency they deserve. Regulatory hurdles in some cases
disincentivise the uptake of green innovations, which became apparent in the
implementation of solar water heaters for example.
8. In your opinion how effective has the green economy been
mainstreamed in South Africa?
Overall there was acknowledgement that some progress has been achieved in
advancing the green economy agenda in South Africa, but more could be done. The
challenges associated with mainstreaming the green economy are closely related to
the barriers that have been outlined above. More specifically the lack of a consistent
national narrative was seen as the key constraint to mainstreaming the green
economy.
9. How effective are current mechanisms for coordinating green economy
initiatives in South Africa?
Coordination mechanisms between green economy initiatives were viewed as being
extremely poor, leading to inefficiency in the delivery of government programs. This
was exemplified by the fact there is no one-stop system to access information on the
different green economy initiatives being implemented by government. The same
challenges in the public sector are also found in the private and civil society, with
minimum coordination taking place. However, the private sector seems to be leading
in terms of setting up of associations to protect their interests, for example there are
industry associations for most renewable energy streams in South Africa, such as
wind, biogas and photovoltaic associations.