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BY
Jordy Leo
- November 22, 2023
Germany has committed EUR500m (USD547m) in climate financing for South Africa to aid its transition away from coal-fired electricity, as reported by Bloomberg on November 17. Germany’s government-backed KfW Development Bank will lend South Africa EUR500m at rates below the commercial market. The concessional finance is aimed at supporting the South African government in implementing reform measures to tackle its pressing energy crisis. In addition, it will contribute to a socially acceptable and ecologically sustainable restructuring of South Africa’s energy sector. As part of the commitment, the KfW Development Bank will provide EUR23.1m (USD25.3m) to South Africa’s state-owned Industrial Development Corporation, which will utilize the investment to finance projects that focus on the large-scale production and application of green hydrogen and its by-products.
The concessional loan adds to the EUR600m (USD657m) Germany and France provided to South Africa in November 2022. These loans are part of the USD8.5bn climate financing package extended to South Africa by some of the world’s richest nations through a 2021 agreement known as the Just Energy Transition Partnership (JETP). In October 2023, the Netherlands and Denmark also joined the JETP, committing an additional USD333m in climate finance for South Africa. While the financing pool has been expanded, it still falls short of covering the expenses associated with the development of new wind and solar projects in South Africa. According to a BloombergNEF study, the country may need to invest as much as USD136bn in building new power generation capacity over the next two decades to replace coal.
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