By Emma Rumney

JOHANNESBURG: South African banks have stated that they need to continue financing at least some coal projects, as an immediate halt could put immense political and economic pressures on a nation which relies heavily on fossil fuels.

The four largest banks have begun to withhold financing. FirstRand, Nedbank and FirstRand set 2025 and 2026 deadlines respectively for ending funding for new thermal coal mining. Both of them have stopped lending for new coal-fired electricity plants.

The banks finance the existing power stations and coal mines. Standard Bank and Absa are South Africa’s top lenders. They have opened the doors to new funding for power plants or mining.

Even though coal-related loans make up only a fraction of their loan portfolios they are vital to keep the lights on, and for the tens of thousand of Africans employed in Africa’s largest industrialized economy.

Eskom, the state-owned power utility in South Africa, relies heavily on failing coal-fired power plants to provide 90% of its electricity. Coal mines employed more than 90.000 people in 2020.

FirstRand CEO Alan Pullinger said that fossil fuels make little profit.

He said that it would be easiest to simply say “we’re out” but added that this would require the government, which is already in great debt to support the sector.

Prior to the U.N. Climate Conference in Glasgow (Scotland) in November, it is important that we end funding for coal.

This fuel is an important driver of climate-warming emission, and also provides a cheap source of power generation that many emerging countries rely on.

LOCAL CONTEXT

South African banks state that they will continue to support this industry due to local circumstances. However, they are under increasing pressure from foreign investors as they try to lower emissions. In addition to the fact that fewer insurance companies now accept the coal asset risks, they also face increased competition from other international investors.

South Africa, which was home to more than 40 percent of the world’s climate-warming emissions gases in 2019 (emissions) ranking 12th), was the largest global emitter.

Executives at top South African lenders claimed that Eskom was their main source of funding.

Exxaro is Eskom’s biggest coal supplier. Exxaro is Eskom’s largest coal suppler. The executive stated that Exxaro was economically important and cannot be shut down.

Nedbank stated that efforts to combat climate change must take into account the context of each location. Absa stated that coal finance will be decreased, but the bank must balance social and macroeconomic issues with climate change needs.

Standard Bank’s head of corporate citizenship, Wendy Dobson said that the bank would set limits for climate risk. This will limit the bank’s ability to lend for coal or other fossil fuels.

It could also be harmful to tread too close with fossil fuel-dependent governments, she said.

According to Emma Schuster of activist shareholder group JustShare, banks were unlikely to finance coal projects with new funding and they should make this clearer.