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Mapping the green economy landscape

in South Africa

- Final Report -

Mapping the Green Economy Landscape in South Africa

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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

[email protected]

www.africege.org

mailto:[email protected]

mailto:[email protected]

http://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.


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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.


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(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


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.


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

Eas

tern

Cap

e

Fre

e St

ate

Gau

ten

g

Kw

aZu

lu N

atal

Lim

po

po

Mp

um

alan

ga

No

rth

ern

Cap

e

Wes

tern

Cap

e

No

. of

pro

ject

s

Universities

Research Institutes

NGOs

Public Sector

Private Sector

020406080

100120140160180

No

. of

pro

ject

s

Researchorganisations

Private Sector

Public Sector


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


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


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.


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)


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,


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.


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


Biogas and biofuels

Energy efficiency

Industrial cleaner production and consumption projects

Renewable energy

Rural energy including off grid and mini grid


Biodiversity Benefiting businesses, including sustainable…


PES projects


Number of people


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


PES projects

Renewable energy

Renewable energy, including off grid and mini grid


Rural energy including off grid and mini grid

Sustainable human settlements, the built environment and…


Sustainable Waste management & recycling


Million (R)


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


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).


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


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,


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


35

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


36

(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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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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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).

25%

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Green Cities andTowns

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0

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. of

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Financial instruments


Biodiversity benefitingbusinessesRenewable energy

Sustainable wastemanagement & recyclingSustainable land usemanagement and models


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.


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.


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


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.


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


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


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


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.


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.


48

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http://www.unep.org/greeneconomy


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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


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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.

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