South Africa receives $300m loan from AfDB for energy transition, climate resilience programme

The Board of Directors of the African Development Bank (AfDB) has approved a $300 million loan to South Africa to implement its Energy Governance and Climate Resilience Programme.

With support from development partners, the programme will help advance South Africa’s energy transition.

In addition to the African Development Bank’s loan, the World Bank is contributing $1 billion while Germany and Canada have earmarked $551 million and $91 million, respectively.

The programme will advance economic growth by furthering structural reforms to restore energy security, promote private sector participation in the electricity market and enhance the operational efficiency of the national power utility Eskom in line with South Africa’s Energy Action Plan and the Just Energy Transition Investment Plan (JET IP) 2023–2027.

It will accelerate mitigation and adaptation efforts by promoting renewable energy generation and shifting businesses to low-carbon activities, resulting in lowering the carbon footprint of the South African economy and improving financing for green projects.

These expected outcomes align with South Africa’s updated Nationally Determined Contribution and the country’s Long-term Low-Emissions Development Strategy.

The programme will ensure the security and affordability of energy for families and small businesses.

It will enable the government to increase budget allocations to connect electricity to poor households and establish a mechanism to encourage families and micro- and medium-sized businesses to invest in renewable energy.

The reform priorities discussed with the Government are designed to complement and create synergies with existing support from the African Development Bank and other multilateral development financiers for the Just Energy Transition.

Through a $629 800 (470 000 UA) grant with co-financing from the Climate Insurance Fund, the Bank will provide support to ensure affected communities are not left behind, crowd in more women as decision-makers and support young entrepreneurs, especially women, to build skills and create jobs for the green economy.

South Africa’s country’s Energy Governance and Climate Resilience Programme aligns with the African Development Bank’s ‘High 5’ strategic priorities, especially “Light up and Power Africa”, “Industrialise Africa”, and “Improve the quality of life for the people of Africa”.

Welcoming the operation, Mrs Leila Mokaddem, Director General for Southern Africa, noted the Bank’s long-term support to South Africa’s energy sector. Energy has the largest share of the Bank’s portfolio at 43.4%.

The programme complements this support and aligns with the recently approved new CSP for South Africa, which recognizes the centrality of Energy reforms to achieve economic growth and improve business confidence.