JET Issues in Public Finance

This is the third paper in our series looking at scaling financing to support the just energy transition in South Africa, in partnership with Krutham (formerly Intellidex).

While the first two – on capital markets developments required to achieve scale and the particular challenges of financing the social or “just” projects in the transition at scale looked mainly at markets or private sector led funding solutions, they exposed particular issues about de-risking and blended finance, as well as the role of subnational government in the transition – for solving location-based problems, just and social project financing problems and generally in terms of delivery of complex programmes.

Subnational government’s role – by which we mean provinces and municipalities in an appropriate solution set within the transition from a financing angle – has in general been seldom recognised and poorly understood, in particular when it comes to achieving scale.

Indeed, we think this paper is one of the first to look at it in much detail – taking forward the issues raised in our first two papers, as well as the broader context arising from our scene setting that we lay out at the start of this paper.

Overall, the aim is similar to the first two papers –how to mobilise funding at scale and over long periods in this transition, though the lens is lower down the “pyramid” of public finance below national level, where deep problems arise in terms of bankability, balance sheets and service delivery that must also be solved. Another key issue is information asymmetry, which becomes acute at the lower levels of municipal government. For example, provincial governments were for a long time completely unaware of what the government was up to on JETP, regardless of Mpumalanga being a supposedly key “beneficiary” of the funding earmarked in the JETP.