South Africa requires significant investment to transition to a low-carbon economy and resilient infrastructure, especially in energy and water sectors. Heavily reliant on coal and facing increasing water scarcity due to climate change, South Africa’s shift towards sustainability is crucial for long-term environmental and economic stability.

With the support of AFD, the University of Cape Town (UCT), Development Bank of Southern Africa (DBSA), Presidential Climate Commission (PCC), National Treasury, and the Centre for Sustainability Transitions of Stellenbosch University are developing a model that evaluates the macroeconomic impacts and various policy options and financing mechanisms for transitioning South Africa's water, energy, and food (WEF) systems in response to climate challenges. 

This project falls under the “South Africa – Towards Inclusive Economic Development” (SA-TIED) initiative, a research and policy programme aimed at fostering inclusive economic growth in South Africa.

The GEMMES programme is developing a general theoretical model on the one hand, and national models applied to concrete cases and adapted to the characteristics of each country on the other, including the GEMMES South Africa model. 

The GEMMES South Africa project aims to:

• Analyze the macro-financial impacts of transitioning to renewable energy, ensuring water security, and maintaining food sustainability;
• Provide policymakers with insights and forecasts to inform decision-making and long-term planning for economic growth, employment, and climate resilience and more specifically provide insights into the macroeconomic effects of climate-resilient investments up to 2050;
• Enhance understanding of the vulnerabilities and opportunities in South Africa’s transition by integrating macro-financial feedback loops into structural change analysis;
• Foster sustainable development and mitigate environmental risks, contributing to long-term economic stability and improved quality of life;
• Promoting public policy dialogue on South Africa's low carbon transition.

In addition to its specific transdisciplinary approach, which makes this project one of the few to integrate the notion of strong sustainability, the originality of GEMMES lies in its consideration of macro-financial imbalances and the impact of the low-carbon transition on all elements of the balance of payments.

GEMMES South Africa builds on UCT’s SATIM-GE energy transition model incorporating macro-financial feedback loops, which provide critical insights into the country's economic vulnerabilities and investment opportunities during this transition.

GEMMES South Africa is built in partnership with local authorities and research institutes to guarantee that the tool is coherent with the country's needs and to assure that the partners are capable of using and improving independently. It will account for:

• the dynamics of interest and exchange rates and their impact on private investment and employment;
• the fiscal and macro-financial constraints;
• different dynamics between banks and non-bank financial institutions;
• the capacity of public investments in green infrastructure to drive a new ecological transformation plan;
• and, the impacts of climate changes. 

The GEMMES South Africa project anticipates several key publications, including:

• A presentation of the specificities of GEMMES-South Africa and its baseline simulations;
• The macro-financial implications of infrastructures investments;
• The macro-financial implications of climate change impacts.

These papers will provide valuable insights into the project's findings and contribute to ongoing discussions in the field.

At this stage, while the project is still in its early phases, it is expected that integrating macro-financial feedback loops will play a significant role in shaping effective policies and investment strategies. As the project progresses, ongoing stakeholder dialogue will be crucial in refining these concepts and addressing future challenges in the transition process.

Download the publications related to other South Africa modelling projects:

• Socio-economic and spatially-explicit assessment nature-related risks: The case of South Africa (December 2023)
• Demand-induced transition risks in South Africa (December 2023)

Many of the measures on quantifying progress by countries towards reducing income inequality have focused on indices that measure trends in inequality over time (Gini coefficient for example) and compare countries without considering the differences between their socioeconomic structures.

However, these indices do not paint the complete picture about how countries are performing, especially when compared to one other in achieving Sustainable Development Goals and what policies and investments may be needed to support them. This research project will provide an alternative measurement of income inequality by taking into account the developing countries’ structural or predetermined conditions (mineral assets, type of institutions etc.) in assessing their progress towards reducing inequality and the impacts of climate change. 

The project focuses on the following objectives: 

1. Firstly, it will compare each country with its potential to reduce income inequalities by measuring the scope for improvement for each country at every year. This will allow a better understanding of the key factors that hinder a country’s effort and performance in reducing inequalities and of the policy and investments that are needed to tackle inequalities more efficiently.
2. Secondly, it will investigate how climate – temperature, precipitation and extreme weather events– influence the efficiency of countries in combining inputs to reduce inequality.
3. Thirdly, it will look at adaptation or intensification effects across regions, particularly in LDCs and SIDS and will identify the needed scale of investments.

Building on a panel database on 145 countries, including countries from Least Developed Countries (LDCs) and Small Island Developing States (SIDS) from 2000-2020, the project will use a stochastic frontier approach, an economic modelling technique, to estimate feasible frontiers for income inequality for each country and year.

You will find below the research paper related to this project:

• Reducing Inequalities Despite Climate change? Rethinking Progress Towards Reducing Income Inequalities and the Impact of Climate Change in Developing Countries