South Africa

South Africa secures R10.7-billion loan from European nations for focus on cleaner energy sources

South Africa, on the sidelines of COP27 in Egypt, has signed a loan agreement with the governments of France and Germany as part of the Just Energy Transition Partnership. The money will be used to accelerate South Africa’s move from a carbon-intensive economy to a low-carbon economy.
South Africa, on the sidelines of COP27 in Egypt, has signed a loan agreement with the governments of France and Germany as part of the Just Energy Transition Partnership. The money will be used to accelerate South Africa’s move from a carbon-intensive economy to a low-carbon economy.

Wednesday 9 November is Finance Day at the 27th Conference of the Parties (COP27) being held in Sharm El-Sheikh, Egypt. South Africa marked the day with the news that they, along with France and Germany, have signed loan agreements for the European countries to extend €300-million each in concessional financing. 

It is expected that the money will be processed by National Treasury, from where it will be directed to projects that accord with the principles of the Just Energy Transition Partnership (JETP).

The signing brings to practical fruition a more than year-long process that was first formally cemented with the announcement of a political declaration at COP26 in Glasgow last year. 

Our Burning Planet reported at the time that the European Union (EU), Germany, France, the United Kingdom and the United States — the International Partners Group (IPG) — partnered to support South Africa’s climate action goals by helping finance the move from its heavy reliance on coal to cleaner and renewable energy sources. The collaboration was later formalised as the JETP.

In the time since, South Africa developed a Just Energy Transition Investment Plan (JET-IP) that will underpin and inform South Africa’s nascent energy transition. On Friday, President Cyril Ramaphosa unveiled the plan with its rollout targeted between 2023 and 2027. 

“This plan outlines the scale of need and the investments that will be required to achieve our decarbonisation commitments. And to do so while promoting sustainable development and ensuring a just transition for our country, and in particular for our people; as in workers, communities and vulnerable people who are going to be directly impacted as we execute this plan,” Ramaphosa said at the time. 

On Monday, South Africa formally handed over its R1.5-trillion investment plan to the International Partners Group at COP27 in Egypt.

Three priority sectors have been identified in the plan: electricity, new-energy vehicles and green hydrogen, with the goal of decarbonising the country’s economy within the Nationally Determined Contributions target range of 350-420 Mt CO2-eq (million tonnes of CO2 equivalent) by 2030.

Speaking at the South African Pavilion at the COP27 conference centre on Wednesday, Daniel Mminele, the head of the Presidential Climate Finance Task Force lauded the progress made.

“As you know, we have reached a significant milestone in terms of our JETP process with the release of the Investment Plan and with us then handing it over to our international partners a couple of days ago. A significant milestone based on a tall order and a real immense task that was given to us post-Cop26. I think it’s a real achievement given the complexity of the task, the time that was available to put the plan together.”

In a statement released on Wednesday, the National Treasury noted that “South Africa, France and Germany have signed loan agreements for the two European nations to each extend €300-million in concessional financing to South Africa to support the country’s efforts to reduce its reliance on coal through a just transition to cleaner energy sources. The French and German public development banks, AFD and KfW, have provided the loans directly to the South African government via National Treasury.” 

“The financing agreements were acknowledged and welcomed by Cyril Ramaphosa, President of the Republic of South Africa, Emmanuel Macron, President of the French Republic and Olaf Scholz, Federal Chancellor of the Federal Republic of Germany,” it continued.

Andreas Peschke, German Ambassador to South Africa, said “we are very happy about these agreements as they represent a very concrete implementation of our partnership.”

Arnaud Roux, Chargé d’affaires of the French Embassy said “one year ago, French president Emmanuel Macron pledged that France was ready to commit significant support for South Africa’s ambitious decarbonisation project for a just energy transition. We are now putting those words into actions with this important loan.” 

Silke Stadtmann, KfW Development Bank’s Country Director for South Africa, said “we expressly welcome South Africa’s commitment to reducing electricity generation from environmentally harmful 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.”

Ismail Momoniat, Acting Director-General of the National Treasury, in their statement, said that “while South Africa still requires more support for its Just Transition path considering the scale of the required transition in the context of the current socio-economic challenges of high unemployment, high level of poverty and inequality, this funding will assist in addressing the challenge of financing the critical adaptation and mitigation programmes and supporting a resilient, sustainable, and inclusive growth.”

This story was originally published on the Daily Maverick, with the support of Climate Tracker’s COP27 Climate Justice Journalism Fellowship.

Ethan Van Diemen
Ethan is a humane being on the apocalypse beat for the Daily Maverick. He’s also a Rhodes and University of the Witwatersrand alumnus and an Open Society Foundation for South Africa Investigative Journalism Fellow 2020. Ethan believes South Africa is already experiencing the impacts of climate change and faces multiple challenges in relation to climate change over the next decade.