South Africa’s just energy transition (JET) programme has received a major boost following the approval of a $1bn (about R18.69bn) loan guarantee facility by the African Development Bank (ADB) in collaboration with the UK’s foreign, commonwealth & development office.
The National Treasury told Business Times the approval was signed on December 9. “This will allow us to borrow more from the ADB than we otherwise could if there was no such a guarantee in place.”
South Africa’s JET programme will fund projects such as transmission and grid-balancing storage, renewable energy generation, energy efficiency, rehabilitation of municipal distribution networks, green hydrogen and electric vehicles.
Approval of the guarantee facility came shortly before the close of COP28 in Dubai on December 13. A number of global financial institutions came on board at the climate conference to finance developing nations, which, although not the heaviest emitters of greenhouse gases, face the brunt of climate change disasters.
It marks an important partnership between our government, the UK and the ADB to enhance our ability to implement South Africa’s energy transition in a way that is just and socially responsible
— Mmakgoshi Lekhethe
The Treasury said the ADB’s approval of the guarantee facility followed conclusion of a development policy loan of $300m (R5.6bn), which would also be used to support the JET.
“The loan and its repayment terms will be finalised between the South African government and the [bank]. The government will work closely with the [bank] and other stakeholders on the preparation and financing of a pipeline of programmes and projects, including those identified in the JET implementation plan,” the Treasury said.
Mmakgoshi Lekhethe, deputy director-general for asset & liability management at the Treasury, said the guarantee facility “marks an important partnership between our government, the UK and the ADB to enhance our ability to implement South Africa’s energy transition in a way that is just and socially responsible”.
“We look forward to closely working with the bank on the preparation and financing of a pipeline of programmes and projects under the JET.”
The ADB said the approval of the loan facility was timely and topical. “This is another innovative operation that reaffirms the bank’s leadership in crafting financial solutions to increase access to climate finance for Africa’s low-carbon development and net-zero ambitions,” the bank’s vice-president for power, energy, climate & green growth, Kevin Kariuki, was quoted as saying.
Melinda Bohannon, DG for humanitarian & development at the foreign, commonwealth & development office, said the office was committed to the JET partnership with South Africa, which will help the country achieve its carbon reduction ambitions. “This comes alongside the recently significantly increased grant offer from the international partners group, and we are using some of those grants to help develop an investment project pipeline,” she said.
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