South Africa Secures $1.9 Billion from World Bank, Germany, and African Development Bank

In a collaborative effort, the World Bank, Germany, and the African Development Bank have committed $1.9 billion to support South Africa's Just Energy Transition plan.

The funding comes at a crucial time for the country, which has been grappling with power shortages, hampering economic growth over the past two years.

South Africa's National Treasury revealed that the concessional loans would not only facilitate raising additional funds at favorable rates but also contribute to financing essential reforms.

The World Bank leads the financial support with $1 billion, followed by $300 million from the African Development Bank and $547 million from Germany's KfW bank.

These concessional loans align with the National Treasury's strategy to diversify its funding sources for international borrowing.

They also leverage concessional financing instruments provided by development partners, supporting key government reforms in response to climate change and the electricity sector.

The government emphasized in a statement that such facilities enable the National Treasury to secure funding at highly affordable rates, thereby reducing public debt.

South Africa is currently grappling with its most severe power shortages this year, primarily due to challenges faced by power utility Eskom in maintaining its aging coal-fired power stations.

In response, the government has negotiated an $8.5 billion energy transition plan with donors, which is now undergoing refinements.

Recently, South Africa announced the approval of an implementation plan for the program, outlining the country's shift towards a low-carbon economy by expanding renewable energy sources.

Minister in The Presidency, Khumbudzo Ntshavheni, highlighted that the plan encompasses reforms in the energy sector, including the Mpumalanga Just Transition, new energy vehicles, and green hydrogen initiatives.

The loans from the World Bank, Germany, and the African Development Bank come with grace periods ranging from two to five years, and repayment terms extend from 12 to 15 years.

The National Treasury expressed its satisfaction with the agreements, emphasizing the collaborative efforts between the government of Germany, the World Bank, and the African Development Bank in successfully concluding these loans.

Godfrey Mutizwa / CNBC Africa