How the Climate Response Fund can drive fiscal reform and climate action
Blessing Manale
The experience of extreme weather events in South Africa has demonstrated that we are not adequately prepared to respond to the increasing number of climate-related disasters.
As a direct response to and in recognition of the increasing vulnerability to climate risks, President Cyril Ramaphosa, in the February 2024 State of the Nation Address announced the establishment of Climate Change Response Fund. South Africa has identified the need for the deliberate allocation of finance to strategic climate adaptation and mitigation interventions to limit exposure to climate impacts and improve the country’s overall resilience.
The establishment of the Fund complements the Just Transition Funding Mechanism (JTFM), the Just Energy Transition Investment Plan (JET-IP), and together with the Loss and Damage mechanism and new Disaster Risk Financing arrangements form part of the evolving foundational pillars for a coherent climate financing framework.
Further, the CCRF will be catalytic in the implementation of the Climate Change Act (Act 22 of 2024), pursuant to Section 18 of the Act, which requires the Minister of Forestry, Fisheries and the Environment to prescribe a mechanism to support and finance the country’s climate change response, planning and implementation through the different tiers of local government in consultation with the Minister of Finance.
It is clear that the CCRF must be aligned to the Nationally Determined Contributions (NDCs) and respond to the needs of the forthcoming National Adaptation Strategy and Plan. It must also as facilitate the response outcomes of the implementation plans which will be informed by the prerequisite climate change needs and response assessments as developed by the municipalities.
Despite South Africa’s significant progress in climate finance, reaching R131 billion annually between 2019 and 2021, this falls far short of the estimated R 334bn to R535bn needed each year to meet climate goals. The current investment landscape is heavily skewed towards mitigation (81% of funds), while adaptation—receives only 12%. Meanwhile, 7% is categorised as dual benefits financing, which includes projects that provide both mitigation and adaptation benefits.
Response to disasters is often financed through re-prioritisation of money from essential services such as education, health and safety along with international emergency loans from Multilateral Development Banks (MDB) or development finance institutions (such as the International Monetary Fund, African Development Bank and Development Bank of Southern Africa), public assets insurance from municipal pools and solidarity funds from public and private sources (such as Covid-19 response).
The CCRF should contribute to the fiscal reform processes led by the National Treasury, intended to simultaneously achieve higher levels of funding and investment for Climate Action, while increasing the efficient use of the National Revenue Fund with streamlined and integrity-driven grant flow mechanisms.
In advancing the President's call for the establishment of a fund, engagements with key stakeholders namely the Department of Forestry, Fisheries and the Environment as well as National Treasury are essential to ensure alignment with national climate objectives and secure broad stakeholder engagement to foster support for the initiative.
The Presidential Climate Commission (PCC) will soon make recommendations on the overall framework of the CCRF as a mechanism to prioritise climate adaptation in South Africa, addressing critical financing gaps for a low-carbon, climate-resilient transition. Such a framework should be based on a balanced, equitable approach to climate action and further its rationale, financial strategy, governance model, and implementation plan
As the PCC we believe that such a fund should be grounded in the principles that promote transparency, equity, efficiency, and sustainability, while fostering collaboration among stakeholders, ensuring alignment with national priorities and aligned with our global commitments.
The CCRF should prioritise high-impact sectors like water, agriculture, health, ecological infrastructure and disaster preparedness. It must catalyse partnerships to support small and medium enterprises (SMMEs), local governments and should be used as a tool to finance climate resilient infrastructure, particularly those that offer higher adaptation capacity while enabling rapid and sustainable decarbonisation.
The investment objective of the fund must be to achieve long-term resilience by investing in a programmatic approach to climate adaptation, through a diverse portfolio of projects and innovative financing instruments and take a strategic long-term view on improving the resilience to climate change in high-risk areas and associated vulnerable populations.
Further to this, it is necessary for a detailed mapping of the global and local climate financing landscape including consideration of the Loss and Damage Fund and public and private sector initiatives currently underway aligning with the proposed CCRF.
Collaboration with the Global Loss and Damage Fund and other global climate finance initiatives will further enhance the fund’s capacity to access and mobilise resources quickly.
In recognition that the one fund cannot plan, coordinate, fund and support all just transition projects and programmes, and achieving net zero and climate-resilient futures, realisation of the fund will require collaboration and a coordinated, systemic approach with the active participation and buy-in from both the public and private sectors.
Blessing Manale is the head: Communications and Outreach, Presidential Climate Commission
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