Background on the Climate Finance Package
The $2.6 billion in question was part of the Just Energy Transition Partnership (JETP), a collaborative initiative launched at the 2021 United Nations Climate Change Conference (COP26). The JETP aimed to assist developing countries like South Africa in moving away from coal-based energy to more sustainable alternatives. The partnership included commitments from several developed nations, with the United States pledging significant financial support. South Africa, heavily reliant on coal for its electricity—accounting for over 80% of its energy needs—was a primary beneficiary of this initiative. ​

Reasons for the U.S. decision
The U.S. delay in disbursing the funds aligns with a broader shift in its climate policy under President Donald Trump's administration. In recent weeks, the U.S. has withdrawn from several international climate agreements, including the International Partners Group (IPG), which was established to support developing nations in their energy transitions. This withdrawal resulted in South Africa losing over $1 billion in U.S. investment for its energy transition, leading to the cancellation of various projects.

The Trump administration's stance reflects a broader scepticism towards multilateral climate initiatives, focusing instead on domestic energy policies that prioritize fossil fuel development. This pivot has led to reduced foreign aid for climate-related projects, affecting commitments like the JETP. ​

South Africa's role and response
South Africa has been proactive in seeking international support for its energy transition. The country developed the Just Energy Transition Investment Plan (JET-IP), aiming to decarbonize its economy with the help of international partnerships. Despite the U.S. withdrawal, South Africa remains committed to its energy transition goals. The government is exploring alternative funding sources and strengthening ties with other international partners to fill the financial gap left by the U.S. ​

Impact of recent EU investments
In contrast to the U.S. stance, the European Union has reaffirmed its commitment to supporting South Africa's energy transition. Recently, the EU announced a €4.7 billion (approximately $5.1 billion) investment package in South Africa, targeting clean energy projects, vaccine production, and infrastructure development. This investment is part of the EU's Global Gateway initiative, which aims to mobilize investments for accelerating renewable energy projects in Africa. ​

European Commission President Ursula von der Leyen emphasized that the majority of this investment—€4.4 billion—will support South Africa's just energy transition. The funds are earmarked for renewable energy projects, green hydrogen production, and related industries. This substantial commitment underscores the EU's strategic focus on clean energy transition and strengthening local supply chains in Africa. ​

Implications for South Africa's energy transition
The U.S. decision to delay the climate finance package presents challenges for South Africa's energy transition plans. The anticipated funds were expected to facilitate the decommissioning of coal-fired power stations and the development of renewable energy infrastructure. Without this support, South Africa may face delays in its transition timeline, potentially prolonging its reliance on coal and hindering efforts to reduce greenhouse gas emissions.​

Eskom, responsible for generating approximately 90% of South Africa's electricity, predominantly from coal-fired power plants, has been mired in financial and operational crises for over a decade. The utility's aging infrastructure has led to frequent breakdowns, resulting in rolling blackouts which have severely disrupted daily life and economic activities. In 2023, South Africans endured power outages equivalent to 289 days, a sharp increase from previous years. ​

Eskom's financial woes are equally concerning. As of 2022, the utility's debt stood at a staggering 8.6% of South Africa's GDP. This debt burden hampers Eskom's ability to maintain existing infrastructure and invest in new capacity. The situation has been exacerbated by allegations of corruption, procurement fraud, and mismanagement, further eroding public trust and investor confidence. ​The challenges faced by Eskom highlight the critical need for South Africa to diversify its energy mix and reduce reliance on coal.