Industrialization, decarbonization, and sustainability: The role of development finance and implications for inequality

Post-apartheid, the South African economy remains characterised by persistent unemployment and world-leading inequality. Transitioning towards more equal and inclusive economic outcomes is hampered by an industrial base concentrated in powerful firms in upstream resource-based carbon-intensive sectors. Pursuing industrialisation in the context of the push towards decarbonisation and sustainability by significant trading partners depends on a massive investment programme in renewable energy and specific high-emitting sectors and developing linkages between sectors to target a just, equitable, and inclusive transition that tackles the country’s deep-rooted inequalities. This paper evaluates South Africa’s main development finance institution, the Industrial Development Corporation’s role in green industrialisation in South Africa. It investigates whether the investments made and the orientation of the IDC positively impacts the structural transformation of the economy, using disclosed and publicly available data. It suggests a set of criteria with which the IDC can assess the transformational impacts of its climate change funding.