• A $1 billion loan has been greenlight by the African Development Bank towards supporting South Africa’s Just Energy Transition (JET) plans.
• South Africa is actively looking to replace its mostly fossil fuel power generation with greener alternatives, but the transition is set to cost trillions.
• This latest loan guarantee with support from the UK Foreign Commonwealth and Development Office, joins other pledges of support from Western powers in order for SA to enact its plans.

In a bid to support South Africa’s green energy plans, in line with the government’s much-detailed Just Energy Transition (JET), which includes improving electricity transmission, grid-balancing storage, renewable energy generation, energy efficiency, rehabilitation of municipal electricity delivery, green hydrogen, and producing new electric vehicles, the African Development Bank has approved a $1 billion guarantee program in partnership with the UK Foreign Commonwealth and Development Office (FCDO).

Approving the guarantee now increases the African Development Bank Group’s capacity to support South Africa with lending opportunities to finance these green energy initiatives. Estimates place the total amount necessary for the country to enact the transition at around R1.5 trillion or $78 billion.

“This guarantee will unlock funds for projects within the remit of South Africa’s recently released Just Energy Transition implementation plan. 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,” said Melinda Bohannon, Foreign Commonwealth and Development Office Director General of Humanitarian and Development, in a press release sent to Hypertext.

“By enabling the Bank to increase its lending capacity, this landmark guarantee agreement will greatly support South Africa’s Just Energy Transition,” noted African Development Bank Director General for Southern Africa, Leila Mokaddem.

“The African Development Bank remains committed to accompanying South Africa on this important journey,” Mokaddem added.

This guarantee from the African Development Bank comes as South Africa is in the active planning stage for its Just Energy Transition, which promises sweeping changes to the country’s energy sector.

In November, the South African government signed loan agreements with three international banks, including the African Development Bank, as well as the World Bank, and the German-owned Kreditanstalt für Wiederaufbau. The agreements are for a total amount of $2 billion from the three institutions, and can be repaid over a period of 12 to 15 years depending on the agreements with different banks.

South Africa also earlier this year approved its plan to begin the commercialisation of green hydrogen, a clean if expensive alternative to coal-fired power generation. According to the government, the cost to implement the plan will be around $1 billion, but could add 370 000 jobs to the economy, as well as a 3.6 percent increase to the GDP by 2050.

The loan from the UK FCDO joins other promises made to the South African government by western mega powers since 2022 to aid in the country’s transition to green energy. A host of European nations pledged technical support as well as “highly concessional loans” to the country in order to implement the energy action plan.

There is no set date for the JET to begin in earnest, and work seems to be moving through the regulatory phase right now. Most of the plans South Africa’s government has to replace the country’s fossil fuel-powered systems are aimed for the next two decades.

[Image – Photo by Appolinary Kalashnikova on Unsplash]