Billions pledged, no playbook: South Africa’s climate finance problem

South Africa has become very good at announcing climate money.

There’s the Just Energy Transition Partnership, the World Bank’s $1.5bn policy loan, Japanese funding via the Development Bank of Southern Africa, and a growing alphabet soup of green facilities orbiting the phrase “just transition”. On paper, it looks impressive. But underneath the pledges sits a harder question: how exactly will South Africa pay for this transition – and what, precisely, is it promising to do with the money?

Right now, the answer is still too vague for a country asking its citizens, its lenders and its partners to finance a multitrillion-rand rewiring of the economy.

A vague funding plan

In its updated climate pledge – the second Nationally Determined Contribution (NDC) – South Africa finally put hard numbers to the transition. Between 2026 and 2035, it estimates it will need about R3.47-trillion for mitigation and R250bn for adaptation. Business Day has pegged that total at roughly 4.5% of GDP a year when averaged over the decade.

That’s not a “nice to have” list of green projects. It includes power, grid and storage investments; industrial decarbonisation; cleaner transport; and the infrastructure needed to survive droughts, floods and heatwaves.

The Presidential Climate Commission has since done the uncomfortable follow-through and measured what’s actually flowing. Current climate finance sits at about R188bn a year. Estimated needs are closer to R500bn. The gap is about R300bn a year – and the shortfall is most severe in adaptation and the “just” parts of the just transition.

The money is skewed. Roughly three-quarters goes into energy. Adaptation – the thing that keeps farms viable, cities above water and roads passable – gets barely more than a tenth. For a water-stressed, flood-prone country, that’s not a funding pattern; it’s a risk signal.

So, we know how big the hole is, and we know where it lies. What we don’t have is a convincing blueprint for filling it.

The blended target problem

In climate finance circles, the split between “unconditional” and “conditional” commitments has become standard.

Unconditional is what a country will do with its own resources. Conditional is what it will do with meaningful international funding. Kenya and Nigeria both follow that logic in their NDCs. They publish emissions targets and investment needs with clear domestic and international components. It signals seriousness: here is our minimum; here is what more we could do with your help.

South Africa has taken a different route. Its second NDC presents a single blended target and price tag – and then promises that a comprehensive financing strategy will be developed in due course.

Critics like climate finance specialist Malango Mughogho – speaking recently to Business Day – point out that even South Africa’s first NDC had an implied conditional range: everyone understood that the more ambitious end of the emissions target depended on foreign support. But Pretoria has now removed a layer of clarity just as it tightens its ambition and increases its funding request.

For bankers, pension fund trustees and development financiers, a blended number is funding fog. They want to know how much government is definitively putting in, where external support is expected, and what happens if that support doesn’t materialise. Right now, the authorities do not spell out any of that in a way markets can easily price.

What a grown-up climate finance plan would do

South Africa doesn’t need another pledge or another glossy strategy document. It needs a financing plan with three basic features: a split between domestic and foreign-funded actions; space for climate research and biodiversity; and transparency about how money moves.

First, the country should publish a simple unconditional/conditional split for its NDC. Start with the existing numbers (roughly R372bn a year over 2026-2035) and state how much will be funded domestically and how much will only happen if international support arrives on reasonable terms. It doesn’t have to be precise to the last rand; a band is enough. The point is to show domestic skin in the game, while quantifying the ask from partners.

Second, Treasury, the Presidential Climate Commission and the environment department should turn the existing analysis into a straightforward overview of who is expected to fund what, by sector. What investors need is a readable narrative: this is how much we expect from the fiscus, from state-owned entities, from local capital markets and from development partners in power, transport, industry and water. At the moment, that picture exists in fragments; it needs to be pulled into one place and owned politically.

Third, the plan should ring-fence a small but reliable slice of finance for research, data and innovation. The decisions about where to build, what to prioritise and how to protect communities rely on scientific and social knowledge that is chronically underfunded.

A credible blueprint would allocate, say, 2%-3% of climate spending – roughly R7.5bn-R11bn a year – to climate research and innovation. That would cover energy, water and land-use modelling; industrial decarbonisation; R&D in export-facing sectors; social science on what the transition is doing to jobs and towns in coal regions; and better climate observation networks. The money is modest in fiscal terms. The cost of flying blind is not.

Finally, biodiversity and nature need to stop living in the footnotes. South Africa leans heavily on its ecological richness. The budget should reflect that. Nature-based solutions – restoring wetlands, clearing invasive species, protecting catchments, greening cities – are often the cheapest ways to manage climate risk while preserving jobs in farming and tourism.

Here, the government should earmark a defined share of adaptation finance, and a smaller but explicit share of mitigation finance, for nature-linked projects. A dedicated “climate and nature” window in the planned Climate Change Response Fund could prioritise catchment restoration, conservation landscapes with real tourism potential, and urban green infrastructure. These are the kinds of projects that qualify for grants and cheap money from global climate and biodiversity funds, but they are rarely visible in the big-ticket deals.

Transparency and pragmatism are cheap and easy wins

None of this requires South Africa to wait for the next COP, or the next change of minister. It’s primarily a question of political will and administrative discipline.

Attaching an annual climate finance overview to the Budget Review, publishing a basic unconditional/conditional split for the NDC, and making climate projects and funders visible on a public dashboard would not cost much. But it would send a strong signal to investors, ratings agencies and multilateral lenders that South Africa is moving from climate rhetoric to climate accounting.

The country has three things going for it: large and genuine investment needs, significant technical capacity and a long list of potential funders. What it lacks is a clear plan that shows how the billions already pledged plug into an economy-wide transition – and how that transition will, in turn, support research, protect biodiversity and create something investable out of the climate chaos.

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