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Counting (on) the labour market to secure a just transition

The climate stabilization imperative emerging from the Paris Agreement is, in so many ways, absolutely critical to securing the planet’s future for all. The Agreement necessitates a transition away from fossil fuel-based economic production, particularly the use of coal as a source of energy. In 2021, coal constituted 36% of global primary energy supply, while accounting for 40.3% of global CO₂ emissions.

Whilst the use of coal as a primary energy source varies across countries, South Africa is an economy highly dependent on this fossil fuel. Given the abundance of this mineral in the South African context, coal’s footprint on the South African economy is disproportionately larger than the global average. In 2021, coal accounted for 86% of South Africa’s energy supply and 85% of its CO₂ emissions. As such, and in line with its Paris Agreement commitments and the climate imperative of reducing carbon emissions, the South African economy finds itself at the initial stages of an energy transition away from coal.

However, South Africa remains one of the most unequal countries in the world. A transition that ignores the potentially negative implications for workers in affected sectors risks exacerbating existing inequalities. According to the World Income Inequality Database (WIID), South Africa’s Gini coefficient stands at 0.67 in 2020—the second highest in the world behind only Burkina Faso. The corresponding estimate for the Mpumalanga province, where much of South Africa’s coal sector is concentrated, is 0.62. Indeed, the country’s high income inequality is driven primarily by extreme differentials in the labour market, where over 30% of the labour force is unemployed and earns zero income.

Reducing unemployment—or, of course, ensuring minimal job losses to the domestic economy—is therefore at the heart of South Africa’s social and economic challenges and key to constraining any increases in national income inequality levels. In this regard, the potential of negative employment impacts from a transition away from coal, and toward low-carbon energy production, presents a significant socio-economic challenge. It is thus critical that the risks associated with these potential adverse employment effects be managed to ensure that inequality in mining areas is not deepened by an unplanned transition.

Just transition policy tailored to the workforce

A key input to informing a just transition plan is an in-depth understanding of the size and shape of the coal sector’s labour market. In a recent paper by Bhorat, Kupeta, Martin, and Steenkamp (2024), we provide a robust quantitative estimate of jobs associated with the South African coal sector, and in so doing, we generate a detailed labour market profile of the individuals and households linked to the sector. Such information is critical to begin the practical process of crafting a quantifiable just transition plan.

In examining the characteristics of coal mining industry workers, we identify different worker cohorts, where each group requires different policy interventions to ameliorate the adverse impacts of the transition. In Table 1 we show the distribution of the coal mining industry workforce, which numbers 76,000.

Across all occupation categories, we observe a cohort of older workers (dark blue rectangle) who are between 55 and 65 years old (representing 5.5% of the workforce and numbering 4,200 workers). These workers are nearing retirement in the short-term, and depending on the speed at which the transition unfolds, may naturally exit the workforce upon retirement. Alternatively, part of a just transition plan could be to provide early retirement packages for this cohort.

Three-quarters of the coal mining industry is concentrated in five mining companies, which means that much of the funding required for early retirement packages is positioned in existing provident funds managed by these mining companies. Early retirement packages may also be a good medium-term policy option for the next oldest cohort, aged between 45 and 54 years (20.03% or 15,300 workers).

Table 1: Coal mining industry employment in South Africa, age-occupation cells, percentage share: 2021

Source: Authors’ calculations using Labour Market Dynamics (Statistics South Africa, 2021b)

Note: Percentages in the cells represent the share of coal mining industry workers within each occupation-age category.

For the remaining workforce falling within the younger age categories, an alternative set of just transition policy interventions can be structured according to their characteristics. The orange rectangle, accounting for the medium-skill workforce, represents the rump of the just transition challenge (58.4% or 44,300 workers). This cohort in our just transition policy lens would require a broad set of policy interventions, including, for example, relocation subsidies, education and retraining programmes, entrepreneurial support, job counselling and job placement services.

The green rectangle are those workers falling within high-skill occupations (8.82% or 6,700 workers), who, by virtue of their skill levels, are the most likely to find alternative employment opportunities. As such, a less costly set of interventions, in the form of job placement services and relocation subsidies, may be the most efficient policy offering for this cohort. Finally, the low-skilled cohort in the red rectangle (5.23% or 4,000 workers), represents those with the lowest probability of finding alternative employment opportunities. These individuals may require a more costly intervention in the form of an income support grant.

Providing a robust quantification and profiling of the coal sector workforce enables the policymaker to position the workforce within policy baskets that are tailored according to the characteristics of the workforce within each basket. It is critical to note however that a key financial anchor exists in the provident funds under the jurisdiction of the coal employer and those within the Unemployment Insurance Fund. Both funds have resources directly linked to worker contributions made throughout their working lives. These funds provide a key financial starting point for formulating a more coherent and sustainable resource base for the just transition in South Africa.

Haroon Bhorat is a professor of economics and director at the Development Policy Research Unit, School of Economics, University of Cape Town, South Africa.

François Steenkamp is a Senior Research Officer at the Development Policy Research Unit (DPRU) at the University of Cape Town.

The views expressed in this piece are those of the authors, and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.