SA has signed its second climate finance loan agreement in a week to support the country’s efforts to shift to a low-carbon economy — this time from the Germans.
The concessional loan of €500m (R10.4bn) from Germany’s KfW Development Bank is the third extended under its public policy support for SA’s just energy transition, bringing total German lending through the programme to €1.3bn (R27bn).
This follows a concessional loan agreement with the African Development Bank (AfDB), announced on Thursday, totalling $474.6m (R8.4bn).
The just energy transition is the government’s plan to transition the economy from fossil fuels to cleaner energy and accelerate the decarbonisation of key economic sectors. It is underpinned by SA’s commitment to reduce carbon emissions to 350-420 MtCO₂-eq by 2030, as outlined in its 2021 nationally determined contribution under the Paris Agreement.
The latest loan agreement, the National Treasury said, forms part of SA’s third development policy operation, which also includes support from the World Bank, AfDB, Japan International Cooperation Agency and the Opec Fund for International Development.
The Treasury said the funding supports structural reforms to enhance the resilience, efficiency and sustainability of SA’s infrastructure services, with a particular focus on the energy sector and climate mitigation.
The €500m loan carries a fixed interest rate of 4.31%, a 13-year maturity, and a three-year grace period — terms described as favourable concessional financing.
Finance minister Enoch Godongwana said the partnership with Germany was a key element of SA’s development agenda and “marks a significant step towards strengthening SA’s short- and medium-term energy security measures and promoting decarbonisation and enhancing the socioeconomic benefits of the energy transition for disadvantaged communities”.
He also emphasised the importance of further policy and institutional reforms in the energy sector to create an enabling environment for investment into the just energy transition.
The loan supports SA’s broader just energy transition investment plan. The Treasury estimates the plan will require R1.5-trillion over five years, to be funded through a mix of international aid, development finance and private sector capital.
KfW country director for SA Cornelia Tittmann said the loan reflects Germany’s support for SA’s commitment to climate reforms and the opening of energy markets to private sector participation.
A group of G7 members — including the UK, Germany, France, the EU, Denmark and the Netherlands — have formed the International Partner Group (IPG) to support SA’s transition to a low carbon economy and address the social and economic consequences of this transition.
The US was an initial participant in the IPG but withdrew its commitments under the Trump administration, which has also cut back on other forms of international aid.
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