Germany has approved a €500 million ($582 million) loan to help South Africa move away from fossil fuels, strengthening its financial commitment under the Just Energy Transition Partnership (JETP).
The 13-year loan, offered through Germany’s state-owned development bank KfW and implemented by the German Society for International Cooperation (GIZ), includes a three-year grace period and carries a fixed interest rate of 4.31%, according to the South African National Treasury, Bloomberg reported.
This latest funding builds on two earlier agreements made in 2022 and 2023, bringing Germany’s total concessional loan support to South Africa through KfW to €1.3 billion. The loan is part of Germany’s share of the $8.3 billion JETP package launched at COP26, which includes contributions from France, the UK, the US, and the EU.
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According to Finance Minister Enoch Godongwana, the loan will help improve South Africa’s short- and medium-term energy security while supporting its decarbonization efforts.
South Africa currently generates about 80% of its electricity from coal, making it the most carbon-intensive economy in the G20. Its ageing coal-fired plants have also led to ongoing power shortages, driving urgent calls for investment in renewable energy.
In addition to German support, other JETP financiers taking part in the latest round of funding include the World Bank, African Development Bank, Japan International Cooperation Agency (JICA), and the OPEC Fund for International Development.
In 2023 alone, South Africa received $676 million in grants from developed countries to support its clean energy transition.
Still, the South African government estimates it will need around 1.5 trillion rand ($78.4 billion) to fully shift away from fossil fuels like coal, which not only powers most of its electricity but also accounts for a third of its liquid fuel supply.
In a notable shift, South Africa overtook Nigeria in May to become Africa’s largest importer of petrol, highlighting the urgency of accelerating its energy transition.
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Image Credit: Business Insider Africa
