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South Africa has just signed loan agreements with France and Germany worth R10.7 billion (€600 million) to assist South Africa in its efforts to move away from coal and increase its reliance on cleaner energy.
Each of the European nations have committed R5.4 billion (€300 million) in concessional financing through the French and German public development banks, the AFD and KfW, respectively. The loans have been provided directly through the National Treasury department.
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Mr Ismail Momoniat, acting director-general of the National Treasury welcomed the loans from AFD and KfW, citing that it will assist in addressing the challenges associated with financing the implementation of the country’s just energy transition to a low-carbon, climate resilient economy and society.
He said the loans, offered at below market rate, contribute to government’s efforts to mitigate rising government debt costs.
The loan agreement announcement comes days after President Cyril Ramaphosa handed down South Africa’s R1.5 trillion five year Just Energy Transition Investment Plan at the COP27 climate summit currently being held in Sharm El Sheik in Egypt.
Read: How South Africa plans to spend R152.15bn of climate funding
During last year’s COP26 meeting $8.5 billion, over two to three years, was pledged by European nations as part of the Just Energy Transition Partnership (JEPT) which includes the International Partners Group (IPG). IPG nations are made up of South Africa, France, Germany, the United Kingdom, the United States, and the European Union.
France and Germany’s loan agreement is significant for South Africa, which is one of the 15 top carbon-emitting countries in the world. The country remains largely reliant on coal to produce the bulk of its electricity supply.
Read: South Africa says it needs R1.5trn for energy transition in next 5 years
Speaking about the financing, Andreas Peschke, German ambassador to South Africa, said the agreements represent a ‘very concrete’ implementation of the JEPT.
Audrey Rojkoff, AFD regional director for Southern Africa and country director for South Africa, said continued research was essential in understanding potential climate risks and their impact on South Africa’s financial system, adding that the AFD loan will be accompanied by grant financings from France dedicated to policy development related to transitioning to cleaner energy.
Silke Stadtmann, KfW Development Bank’s country director for South Africa, welcomed South Africa’s commitment to reducing electricity generation from coal.
“This is an important step in achieving the country’s climate goals. As a long-term partner of South Africa, we support these efforts not only with concessional loans for necessary investments and grants for a just energy transition, but also with comprehensive studies on energy sector reform,” Stadtmann said.
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