South African opportunities for junior miners

South African opportunities for junior miners

South Africa’s Just Energy Transition Implementation Plan (JETP) offers opportunities.

By Lili Nupen and Trevana Moodley

South Africa’s Just Energy Transition Implementation Plan (JETP) came into effect in 2023.

The JETP promises a carbon-less future for the country and provides a comprehensive framework for the implementation of the just transition away from coal, in fulfilment of the country’s obligations under the Paris Agreement.

The JETP addresses various issues relating to the just energy transition and provides a detailed plan as to how these issues will be navigated within the South African context. It also provides the scale and size of investment required to enable the requisite just transition to occur smoothly.

Although this plan may not be in favour of coal and the coal mining sector, opportunities can be found for miners and junior miners in the renewable and alternative energies sectors, specifically in light of the recent international race for critical minerals required for the manufacturing of renewable energy technologies – such as solar panels and wind turbines.

The basis for the publication of the JETP

The JETP was constructed in an effort to provide a plan for South Africa to reduce its carbon emissions and meet its obligations under the Paris Agreement.

The Paris Agreement, considered as a treaty, obligates all party states to reduce their carbon emissions through a mechanism called Nationally Determined Contributions or NDCs.

NDCs are contributions determined nationally by party states, specifically developing nations, towards the reduction of its carbon emissions. South Africa, as a developing country, is obligated to determine its contributions in this regard, and has further committed to reach net zero emissions by 2050 in its Low Emission Development Strategy.

South Africa, as a country which is currently heavily reliant on coal to sustain its electricity supply and economy, is forced to implement processes in an effort to curb the resultant carbon emissions from its coal reliance in order to meet its NDC obligations contemplated in the Paris Agreement.

The JETP in a nutshell

Various aspects of the JETP include electricity, the Just Transition in Mpumalanga, new energy vehicles, green hydrogen and skills development. Selected aspects are explored below.

Electricity

The JETP emphasises the importance of moving away from coal and the decommissioning of the various coal-fired power stations in South Africa and moving to cleaner power sources.

The JETP notes that electricity generation accounts for 45% of the country’s greenhouse gas emissions, with the majority of these being from coal fired power stations.

However, it is recognised that such decommissioning can cause significant adverse effects on employment and surrounding communities, which is an area South Africa cannot afford to negatively impact.

In this regard, it is going to be vital for alternative renewable energy and community development plans to be implemented before a power plant is officially decommissioned.

The Just Energy Transition in Mpumalanga

Importantly, the JETP recognises the importance of Mpumalanga to the country’s coal supply and electricity, citing that Mpumalanga contains a large proportion of the country’s coal mines and coal-fired power stations.

Furthermore, that a large quotient of the communities in these areas are employed in these sectors. Although, the effect of coal mining and the coal-fired power plants in Mpumalanga on the surrounding people and environment is also noted in the JETP, adversely affecting the health of people and contaminating water sources – therefore highlighting the balance of constitutional rights.

There is a widespread recognised acceptance that greenhouse gases must be reduced, but many communities lack a total understanding of the just transition and the effects thereof on their employment and economic status, rendering them unwelcoming to the idea.

While communities may be supportive of the idea, many demand meaningful economic benefits as a result of the implementation of the just energy transition. As such, it is going to be essential for communities to be considered and provided with alternative employment opportunities and economic benefits arising from the transition.

A comprehensive skills development initiative will need to be implemented in order to prepare communities for the transition. Communities must further be involved in planning and implementation in areas where power plants are to be decommissioned. The decommissioned power plants must also be repurposed and repowered, enabling economic diversification for these areas.

New Energy Vehicles

Investment must be implemented in respect of clean energy vehicles, in order to reduce emissions from vehicles through the development of batteries. This will be achieved through projects such as the implementation of electric public transportation, including EV buses and trains. These measures are in an effort to reduce the carbon emissions generated from vehicles and improve general air quality.

The JETP also emphasises the need for battery manufacturing and supply in South Africa in order to facilitate these new energy vehicles, recognising the global demand for such batteries and as such, battery minerals – often termed as critical minerals necessary for the facilitation of renewable energy technologies.

Opportunities for mining in South Africa

We are of the view that the just energy transition, as well as the JETP, provides ample opportunities for the mining sector in South Africa. Proposals for a just energy transition funding mechanism have been submitted and put forward by the Presidential Climate Commission.

While stakeholders (in particular, our Minister of Mineral Resources and Energy) within the sector may be unwelcoming to the JETP due to its adverse implications on coal mining, the JETP compensates for this by providing opportunities in the critical minerals space.

Critical minerals, in the context of the advent of the Paris Agreement as well as South Africa’s resultant just transition, are increasingly in international demand as state parties scramble to comply with their NDC’s in an effort to reduce emissions.

The manufacturing and installation of renewable energy technologies such as batteries for new energy vehicles and wind energy or solar energy require minerals such as lithium, nickel, cobalt, manganese, tin and graphite as well as Rare Earth Minerals (REEs).

The JETP also suggests opportunities in the form of the manufacturing and supply of batteries for these renewable energy technologies to satisfy the international demand, and in turn uplift the country’s economy as a substitution for coal mining.

The critical minerals space also presents valuable opportunities for junior miners in respect of the exploration for such minerals, promoting the growth of the junior mining sector and providing opportunities for investment therein.

Being flexible in nature, junior miners are able to play a significant role in initiating the sourcing and supply of critical minerals, paving the way for the development of the critical mineral mining space in South Africa in place of coal.

The international hunt for critical minerals may certainly prove as more profitable in South Africa’s context and thus in the junior mining context, as while not every country relies on coal for its power, many more countries will or are in the process of transitioning to various forms of renewable energy and thus require the supply of critical minerals to facilitate this transition.

The development of the JETP demonstrates South Africa’s commitment to the implementation of the just transition away from coal and towards renewable and alternative sources of energy for the majority of the country’s power generation and supply in the context of its obligations under the Paris Agreement. The JETP effectively recognises the various stakeholders and aspects in the electricity sector, and provides for these aspects as well as the scale and size of investment needed in order to facilitate such just energy transition.

While the JETP importantly emphasises the need to move away from coal in electricity supply, it provides potential for opportunities within the critical minerals space as part of the broader transition to renewable energy, and further provides ample opportunity for junior miners to take advantage of.

As such, although stakeholders in the coal sector are generally apprehensive about the just energy transition, opportunity certainly exists within a rapidly growing and international sector.

Lili Nupen is Director Mining & Environmental Law at NSDV and Trevana Moodley
is a Candidate Attorney at NSDV

The article was edited and published online by Leon Louw founder of WhyAfrica and editor of the WhyAfrica magazine