MA: One hopes that it isn't then a Faustian pact to build on your analogy there, Mark.
I want to come back to the eight and a half-billion-dollar transaction and what Gaylor said is 100% correct in terms of the publicity it's received following COP.
It's being held up as the one real, tangible example of a deal that wasn't signed amongst all attending countries.
It was a much smaller, more multilateral type of pledge agreement, call it what you will.
And I know you've been working behind the scenes on this, give us some more insight into what this effectively means for South Africa, in terms of helping us transition away from fossil fuels.
GMC: I think it's a critical move and again the rules are important. The pledges are important but what really is going to matter now is the financial investment in making it happen.
But more importantly is the alternative. Because if we don't, there's a massive withdrawal of finance from fossil fuel, in particular coal.
There's a build-up of cash in energy funds but there are not enough projects.
So we're not really locked in the alternative and if that continues.
You're going to have the refrain that we've been hearing recently in South Africa.
The Europeans are going back to coal. So those are the kinds of things I think we really need to put greater focus on, which is the financing of the alternatives to make happen, what we're talking about.
MA: And you know one needs to understand that and just to come back to the eight and a half-billion-dollar agreement.
Where do you see those funds being deployed? Because it's quite clear it's not there to take off debt or to repay debt from Eskom's balance sheet.
It's not there as an Eskom balance sheet issue. It's a sovereign- Just Transition pledge. So where do you see these funds being deployed?
MS: Hopefully, they will be mainly deployed in extending and strengthening the grid.
The biggest obstacle to loading new renewable energy onto the grid at the moment especially the 100-megawatt concession type framework of implementation is the weakness of the grid.
The best solar is in the Northern Cape. The maximum you can put onto the grid in the Northern Cape is 100 megs, so we need a massive expansion and transfer of capacity from northeast to the southwest, which is where our renewables read off the power.
So hopefully the majority of that funding goes into the enabling framework of grid extension.
But obviously Eskom would like to repower a couple of its own power stations that it's closing down. But that funding shouldn't be used to do what private sector investments could do in renewables.
So, the real issue here is Eskom is presenting this as a commitment by funders to Eskom. But the government is presenting it as a sovereign level transaction with a foreign government. So I think there's quite a lot of detail to work out.
MA: And that is going to happen over the next six to 12 months as we got the workstreams that have been formed. And I'm sure that detail will become clearer as we move on.
And obviously, there has to be a lot of transparency given the years of state capture and as to how those funds are going to be deployed.
I think that's going to be an important component of this.
And we've seen through the REIPPPP Bid Window 5 that these projects are already coming through with IRRs that are around 10, 11%.
You're not profiteering off these projects. It's very difficult to really motivate even at those levels. One wonders where some narratives are coming from that you are seeing in the press here. Tim Cohen, I have to call him out here, one questions the article he wrote in Daily Maverick the other day.
MS: That was a very unfortunate article. There are 11% IRRs on average, this is a real disincentive, for in particular, South African investors to get involved.
So I think and the small number of BEE players some of whom are a little suspect, are is really an indicator because the real losers are the BEE investors.
When those kinds of margins are in place. But it also disincentivizes manufacturing.
Because the only way you can deliver renewables with those levels of return is by importing the equipment from China.
Whereas what we really want is for renewables to drive upstream industrialization, i.e. manufacturing the stuff that we need in order to build our renewables infrastructure.
So I really think celebrating the low level of prices is actually celebrating importing all the equipment we need, with DTI kind of being a bit soft and allowing exemption from local content requirements.
That's not the future we want. That's not a Just Transition.