DBSA CEO Patrick Dlamini. Picture: FINANCIAL MAIL
DBSA CEO Patrick Dlamini. Picture: FINANCIAL MAIL

SA’s drive to boost the renewable energy sector has received a boost following the signing of a $300m loan agreement between the New Development Bank (NDB) and Development Bank of Southern Africa (DBSA) designed to support the sector.

The NDB and Eskom also formally signed the loan agreement for the renewable energy integration and transmission project which was agreed on in 2018. The project is expected to be implemented over 15 years from 2018 to 2033.

Under the Eskom agreement, the NDB will provide a loan with sovereign guarantee to Eskom for $180m. It will be used to support the development of grid connection infrastructure, which is vital for the development of renewable energy projects.  

The $300m loan agreement is for greenhouse gas emissions reduction and the energy sector development project. It was signed by NDB vice-president and COO Xian Zhu and Patrick Dlamini, DBSA CEO at the fourth annual meeting of the NDB in Cape Town on Monday.

The loan facilities come as the government is scrambling for solutions to address the Eskom crisis.

The power utility, which supplies virtually all of SA’s energy, has also struggled with maintenance issues and design flaws at its new coal-fired power stations Medupi and Kusile. It had to resort to stage four load-shedding in March as it could not meet demand, a move which hurt large sectors of SA’s struggling economy. 

Credit-rating agencies view Eskom, which has a debt of more R400bn and is struggling to service it, as a major risk to the economy.

Recent statistics compiled by the Council for Scientific and Industrial Research (CSIR) Energy Centre show that without renewables, SA would have experienced higher stages of load- shedding more frequently in 2018.

Last week, energy minister Jeff Radebe said the renewable energy sector had a large role to play in addressing the energy crisis.  

“The objective of the greenhouse gas emissions reduction and energy sector development project is to facilitate investments in renewable energy that will contribute to the power generation mix and reduction in carbon dioxide emissions in SA, in line with the South African government’s Integrated Resource Plan 2010 and its target of reducing greenhouse gas emissions as articulated in the National Development Plan 2030,” the bank said.

It said the loan will be in the form of a two-step loan of up to $300m to DBSA, which in turn will be loaned to the DBSA’s identified sub-projects, in the wind, solar, and biomass energy sectors.

“The project will bring significant developmental impacts through the sub-projects, particularly related to environmental and social benefits from the reduction in carbon dioxide emissions, increase in generation capacity from renewable energy sources, and increase in the efficiency of the energy sector in SA. The project is also expected to contribute to unlocking private sector investment, and increasing the availability of long-term funds for projects in the energy sector in the country,” the bank said.

Said Zhu: “We are happy to support this important project that will contribute to the development of grid connection infrastructure in SA and support the shift to a more sustainable energy path in the country. The project is coherent with the bank’s focus on projects that incorporate sustainability from their inception. Moreover, we believe that supporting SA’s energy sector is fully in line with the bank’s mandate and our role as a reliable development partner.”

The NDB was established by Brazil, Russia, India, China and SA to mobilise resources for infrastructure and sustainable development projects in Brics member countries and other emerging economies and developing countries.