South Africa Spent ZAR 112.65 billion in 2020-21 on subsidies and bailouts to fossil fuels

The inventory in South Africa shows a total of ZAR 172 billion (USD 10.4 billion) of energy subsidies in 2020/21 see table below. The subsidies include fossil fuels, electricity, hydroelectricity, and nuclear, as well as carbon tax exemptions and bailouts for several carbon-intensive industries. About 77% of the subsidies are delivered as transfers of funds and liabilities (notably the bailouts) or foregone revenue (such as the carbon and VAT tax exemptions). About 16% comprises income or price support, and 7% is the provision of goods or services below market value.

A total of ZAR 112.65 billion in 2020-21 was put aside by the government either as a subsidy or inform of bailouts to fossil fuels, especially coal, oil, and gas. About 77% of electricity generation In South Africa is based on coal.  About 49.6% was put as a bailout to Eskom, and 10.6% and 4% in 2020-21 were made towards Free Basic Electricity access program and the national electrification, respectively. Any of these subsidies or bailouts towards electricity promotes the use of coal. This shows that about 64.2% of the total subsidies comprise fossil fuel subsidies. This shows that about ZAR 72.32 billion was directed to fossil fuel energy in 2020-21.

The remaining 35.8% (ZAR 40.33 billion) of the subsidies are comprised of subsidies towards oil and gas. The government also has bailouts to South African Airways and South African Express of about 4.8% and 0.3%, respectively, in 2020/21. These aviation companies use fossil fuels such the jet fuel and aviation gasoline. By bailing them up, the government is promoting the use of fossil fuels. The other oil and gas subsidy is in the form of value-added tax (VAT) exemptions provided for the sale of gasoline, diesel, and illuminating paraffin. This subsidy was about 30.7% in 2019-20.

The diagram below shows a summary of all subsidies and bailouts that were placed toward coal, oil, and gas.

This Post was submitted by Climate Scorecard South Africa Country Manager Rugare Zhou


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