Dependence on private funding will not guarantee sustainability…



Recent scientist proof published by the Intergovernmental Panel on Climate Change (IPCC) on climate change mitigation has further reinforced the need for urgent and ambitious climate action. In Africa, we are projected to see a future with many more droughts, heat waves and extreme rainfall events, with warming occurring at about twice the rate of global warming, unless international mitigation efforts are significantly intensified.

At the same time, while it is essential to limit further warming, there is also an urgent need to prepare for the inevitable by adapting to climate change, underlined by the IPCC in its report on adaptation to climate change and vulnerability released in February 2022. This report highlighted the importance of investing in sustainable infrastructure, both for climate adaptation and for safeguarding economic development. The focus on private finance that underpins South Africa’s current infrastructure plans, particularly the recent published in the Gazette The National Infrastructure Plan 2050 is misguided because it will limit the urgency and effectiveness of providing sustainable infrastructure to support adaptation efforts and development goals in a way that supports tangible climate justice.

the Community Research Connections defines sustainable infrastructure as “the design, construction and operation of structural elements that support daily function and influence the direction of human society in a way that does not diminish necessary social, economic and ecological processes to maintain human equity, diversity, and the functionality of natural systems In addition to climate change adaptation, the provision of accessible sustainable infrastructure is necessary to achieve key development goals, such as the integration of sustainable local economies in a way that facilitates the creation of decent jobs and the reduction of poverty. To research has also shown that accessible public infrastructure, particularly in the care economy – such as health care and childcare – promotes gender equity by disproportionately reducing the care work done by women .

Despite the importance of sustainable infrastructure, the current implementation and formulation of infrastructure development plans has been lackluster at best. For example, in August 2021, the Ministry of Public Works published a draft National infrastructure plan 2050 (PIN) for public comment, focusing on four areas of network infrastructure: energy, water, transport and digital communications. It effectively cements the infrastructure plans outlined in the National Development Plan (PND) and the Economic Reconstruction and Recovery Plan (ERRP).

The central problem with the proposed NIP is that it continues South Africa’s trajectory down a potentially climate-destroying path that centers the unregulated provision of public goods by the private sector, at the expense of accessible and affordable sustainable infrastructure. . In the water sector, for example, public-private partnerships (PPP) are strongly encouraged, ignoring major international failures in its implementation. PPPs in the UK, for example, were officially removed from fiscal policy due to the resulting high fiscal risks due to exorbitant costs and heightened political risks. An official audit of the Private Finance Initiative, carried out in 2018, found that the cost of PPPs was at least 40% higher than using public financing.

Despite the positive rhetoric prevalent in the South African media about the potential of “innovative” financing arrangements, such as PPPs, which combine public and private financing, they are totally inadequate financing vehicles for public goods like water and electricity.

Commercially viable investments generally serve areas and communities that are more likely to be able to pay for these services. While user affordability is key in assessing development impacts, getting the price right for the majority, especially low-income households, is simply not an incentive for the private investor if the alternative (high prices for a smaller population with wage capacity) is more lucrative.

Load shedding is here to stay for (at least) another year, while the government dithers on policy

Some PPP projects in the government’s new Infrastructure Fund portfolio are already mired in environmental concerns. The Mokolo Crocodile Water Augmentation Project, another mega-project estimated to cost R12.4 billion, has ceased construction due to calls made by civil society organisations, Earthlife Africa and Groundwork, on the adverse environmental impacts on local communities and the surrounding environment. The project also aims to supply water to a local coal-fired power plant, thereby increasing dependency on coal, which ultimately reduces access to water for local communities.

This private sector-driven infrastructure plan raises important concerns about climate justice, the need for sweeping economic and institutional change, and the role of the private and public sectors in providing sustainable infrastructure.

Indeed, there are two fundamentally different approaches to investing in sustainable infrastructure and, more broadly, in a climate-just economy. The first is to “green” the current system, leaving the economy basically the same, but with new incentives and regulations, increased private investment, and carbon pricing based on continued skepticism about the role of the state. The other vision of a green economy is a much more radical plan to restructure the economy along fundamentally different lines that incorporates resilience and is not just “greening” the failing system that we currently have. It is a strategy that completely shifts our economic priorities while taking into account the state’s ability to plan and finance at the scale and pace required today.

South Africa is well on its way to entrenching the first approach. Climate finance (“green finance”) has become an increasingly lucrative opportunity for greater private investment, particularly in infrastructure. At the same time, the role of the state, as defined in the NIP, is minimal. He expects public investment to make up a dismal third of total infrastructure investment by 2030.

Public infrastructure has taken a back seat, while new modes and models of private financing are favoured. This ‘big finance approach sees the public sector as merely a coordinator of private investment, effectively expecting private investors to achieve a just transition, which in the process diminishes the duty of the state to people living in Africa from South.

This approach is deeply flawed; the economic fallout from the Covid-19 pandemic has shown that the State is an essential player in providing a response to economic crises. It also reflects a stubborn commitment to fiscal consolidation (or “austerity”) by any means necessary, and reinforces the idea that there are not enough public resources for climate investment and that we should instead count on the private sector to provide the sustainable infrastructure that we so badly need.

If adopted in its current form, the NIP 2050 will usher in a new era of privatization of key public assets. It will guarantee huge returns to private investors through the transition through “risk reduction” mechanisms that shift all forms of infrastructure development risk onto the fiscus, all in the name of development and climate resilience. These risks include guarantee revenue to private participants, whether they generate it or not, and offer government subsidies to reduce costs for private participants.

Crucially, the government and other relevant decision-makers must maintain a just transition as the main goal of their sustainable infrastructure campaign, including through its Just Transition Framework. This involves filling critical gaps in the provision of social and economic infrastructure to ensure their accessibility. This role should not be relegated to the whims of private finance, which has no incentive to achieve development goals.

Worryingly, the NIP 2050 offers a superficial view of sustainable infrastructure in the just transition, referring only to energy infrastructure, without addressing the issue of access. A truly just transition not only requires a carefully managed shift away from fossil fuels and extractive industries, but it also requires a diversification of the economy into industries that create jobs, such as investments in healthcare infrastructure, and which, ultimately achieve key development goals.

In addition, policy makers must seriously consider and implement local resource mobilization to ensure that the government has a real choice in finding the best financing mechanism for infrastructure investments. Infrastructure finance donors should support the prioritization of progressive taxation at the national and international levels, curb illicit international flows, and provide grants, long-term concessional finance and loans from development finance institutions.

The stakes are too high to rely solely on the private sector to provide sustainable infrastructure. We need sustainable structural change and a macroeconomic framework that explicitly supports a state approach to structural transformation through just transition. The government’s accountability to uphold its obligations for human rights, poverty reduction and climate justice more broadly is an essential part of achieving a just transition. SM/MC

Sonia Phalatse is a climate economics researcher and feminist at the Institute of Economic Justice (IEJ). She is writing this piece as a member of Climate ambition towards responsibility project — a joint project of the World Wide Fund for Nature (WWF), the SA Climate Action Network (SAcan) and the Institute for Economic Justice (IEJ). The objective of the project is to achieve the effective participation of South African organizations in climate change governance to ensure increased climate policy ambition, implementation and accountability. The project is co-financed by the European Union. This article is the sole responsibility of the project team and does not necessarily reflect the views of the European Union.

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