South Africa: Standard Bank, Liberty, Old Mutual’s AIIM to lift renewable investments

Standard Bank, Liberty Holdings and Stanlib are planning to launch a renewable energy fund to catalyze investor appetite for South Africa’s energy transition, Kenny Fihle, CEO of the Standard Bank’s corporate and investment bank, told a media briefing on 30 May. The bank is exploring “all possible alternatives” for the fund, which may be open to retail as well as institutional investors, he says.

Increased coal demand from Europe as a result of the Russia-Ukraine war is having the counter-intuitive effect of accelerating interest in South African renewables projects, Fihle says. Higher prices are giving coal producers more financial scope to diversify, he says, pointing to renewables projects being rolled out by Seriti, one of Eskom’s main coal suppliers.

The bank says its current new financing for renewable power generation exceeds its non-renewable funding by a ratio of more than 4.39 to one, which it claims is far ahead of peers. Global financial institutions belonging to the Net-Zero Banking Alliance have an average ratio of 0.92 to one ratio, Standard Bank says.

Kenny argues that measuring new business is a more realistic measure than overall exposure to fossil fuels. No country has been drop fossil fuels overnight, he says. “You bank and support what the economy prefers to use.” The bank aims to achieve net zero carbon emissions from its own operations by 2040 and from its portfolio of financed emissions by 2050.

Meanwhile, Old Mutual Alternative Investments (AIIM) managing director Olusola Lawson has told The Africa Report that AIIM plans to invest $350m in South African renewables over the next three to four years. The AIIM investments will be across solar, wind and battery storage and will be part of a strategy of building an “integrated generation fleet” for South Africa, Lawson says.

The grid problems in South Africa are a “massive opportunity” for AIIM, Lawson says. A key bottleneck in some parts of the country, he says, is grid access for renewable projects. He sees a possible role for the private sector in addressing the problem. AIIM is already investing in a project to help Eskom improve transmission capacity, and one possibility would be to move co-operation from specific projects to a “programmatic” level through a public-private partnership, Lawson says.

A consortium led by AIIM on 30 May reached financial close on the 89MW Castle wind farm in the Northern Cape province. The farm will supply renewable energy to Sibanye-Stillwater’s South African mining operations via an Eskom wheeling agreement.

Just transition?

There’s no way that Standard Bank can simply withdraw its credit lines to Eskom, Kenny says, if only because Eskom has no way to repay the bank. With load shedding an established part of South African life, “no reasonable person would expect us to do so.” New financing  for Eskom will concentrate on strengthening the grid to improve its capacity to take energy from renewable projects, Fihle says. The bank is exploring avenues in other African markets where it operates to do the same, he adds.

Fihle sees no quick jump in South Africa to the “utopia” of renewable energy. Most people can’t afford electric vehicles and energy transition in long-haul transportation is likely to be slow with hydrogen still at an experimental stage, he says.

Africa has made the lowest historical contribution to fossil fuels emissions, Fihle says, and it’s “a joke” to expect the continent to be able to solve the problem in a context of high unemployment and lack of access for many to any kind of electricity. It’s “undue and unfair” for Africa to be singled out by environmental campaigners, he says. “Put the pressure where it is due.”