South Africa gets R8.4 billion loan to help fix and improve its energy sector

South Africa has secured a $474.6 million (approximately R8.4 billion) loan from the African Development Bank (AfDB) to support the country’s energy sector transition efforts.

The National Treasury stated on Thursday that the money will be used to support the implementation of the Just Energy Transition (JET).

JET is a strategic shift towards a low-carbon economy, specifically focusing on reducing reliance on fossil fuels, particularly coal, while ensuring a fair and equitable transition for those affected by the change.

ALSO READ: SA’s just energy transition: Why investing in gas is a bad idea

Second loan with AfDB

This is the second loan that the Treasury gets from the AfDB. This first one was concluded in 2023.

“This new agreement highlights the importance of South Africa’s partnership with the AfDB in advancing South Africa’s development agenda.”

Treasury believes that this loan will strengthen efforts to improve energy security measures, accelerate the decarbonisation of the economy, and enhance socio-economic benefits of the energy transition, thereby enabling inclusive economic growth and fostering job creation.

Loan is part of third Development Policy

“The loan is part of the third Development Policy Operation which includes participation from the World Bank, KFW Development Bank, Japan International Cooperation Agency, and the Organization of the Petroleum Exporting Countries Fund for International Development (OPEC Fund) to support structural reforms to enhance the efficiency, resilience, and sustainability of the country’s infrastructure services,” read the statement.

One of the JET’s key aspects is transitioning away from fossil fuels, especially coal, towards renewable energy sources such as solar and wind, and exploring other low-carbon technologies. 

ALSO READ: ‘There is hope’ for SA’s Just Energy Transition despite concerns about funding gap

US withdraws from JET Partnership

In March, the US withdrew from the Just Energy Transition Partnership (JETP), leaving SA in need of about $1.56 billion (about R28 billion) for its JETP financing.

The United States government had pledged $1.56 billion for the country’s decarbonisation during the Joe Biden presidency.

“This funding either needs to be found elsewhere or SA’s climate change programme will need to be reprioritised,” said Professor Raymond Parsons from the North-West University Business School.

NOW READ: SA’s R1.5 trillion Just Energy Transition Investment Plan unpacked