SA has signed a $474.6m (R8.4bn) loan agreement with the African Development Bank (AfDB) to support the country’s efforts to shift to a low-carbon economy.
This shift requires investment in new economic sectors as well as managing the consequences for workers and communities of moving out of those sectors that are heavy emitters of greenhouse gases, such as coal.
The National Treasury said on Thursday that the loan offered favourable concessional financial terms with a 15-year maturity and a three-year grace period. The interest rate is the daily secured overnight financing rate plus 1.22%.
The Treasury said the loan agreement was aimed at supporting the implementation of the just energy transition (JET) and was part of the third development policy operation to support structural reforms to enhance the efficiency, resilience and sustainability of the country’s infrastructure services.
The operation includes the participation of the World Bank, KFW Development Bank, Japan International Co-operation Agency, and the Opec Fund for International Development.
“The loan agreement with the AfDB follows the first policy loan concluded in 2023 to support SA’s JET,” the Treasury said, adding that the new agreement “highlights the importance of SA’s partnership with the AfDB in advancing the country’s development agenda”.
“It strengthens efforts to improve energy security measures, accelerate the decarbonisation of the economy and enhance the socioeconomic benefits of the energy transition enabling inclusive economic growth and fostering job creation.”
Treasury noted the AfDB’s support for other development projects such as efforts to implement critical reforms in the energy and transport sectors and meeting foreign currency commitments at lower interest rates.
The JET 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 (NDC) under the Paris Agreement.
The government estimates that achieving this goal will require an estimated R1.5-trillion in investments over five years, supported by international financial aid, private investors and development institutions.
The plan also includes developing green hydrogen, electric vehicles and other initiatives for a low-carbon economic future.
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.
The US contribution was $56m in grant funds and $1bn in commercial debt/equity from the US International Development Finance Corporation (DFC).
Overall international pledges from the IPG in the form of grants, concessional loans, and commercial debt and equity totalled $12.8bn by March.
The JET project management unit that oversees the JET investment plan is located in the presidency.
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