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Solar panels are shown as part of a solar energy project at the Komati power plant in Mpumalanga. Picture: JAN BORMAN
Solar panels are shown as part of a solar energy project at the Komati power plant in Mpumalanga. Picture: JAN BORMAN

National Treasury said on Tuesday that it has signed loan agreements totalling about R33.5bn with the World Bank, Germany’s development bank KfW and the African Development Bank for concessional financing to support SA’s just energy transition.

The World Bank loan for $1bn will have to be repaid over 15 years, with a five-year grace period at an interest equal to the dollar-dominated six-month secured overnight financing rate (SOFR) plus 0.95%. The KfW loan for €500m at a fixed interest rate of 4.4% will have to be paid back over 12 years with a three-year grace period.

The African Development Bank will provide a $300m loan at the six-month SOFR plus 1.22% to be repaid over 12 years with a two-year grace period.

“These are sovereign loans provided directly to the National Treasury for general budget expenditure purposes. The [loans] are in line with [our] funding strategy to diversify [our] funding mix for international borrowing,” Treasury said.

The money will be used to support the government’s key reforms under climate change and the electricity sector.

In November 2022 SA signed loan agreements with KfW and the French development bank AFD for two €300m (about R12bn) under the Just Energy Transition Partnership (JETP) to support SA’s efforts to reduce its reliance on coal in the energy sector.

Rich countries that pledged financial support for SA’s just energy transition at the UN climate conference COP26 in Glasgow two years ago said on Monday the country’s move to clean energy sources was progressing.

The JETP international partners group (IPG) which initially consisted of France, Germany, the EU, the UK and the US has since grown to include Denmark and the Netherlands. New finance pledges from the new and the original partner countries increased the total support package from $8.5bn to $9.3bn (from about R157bn-R171bn) which is to be disbursed over five years from 2022.

On Monday the partner countries said the grant financing component of the finance package has increased 116% to $713m (about R13bn) or 7.6% of the total package — the rest of the funding will consist primarily of concessional loans.

Grant money, said the IPG, has already started flowing to support just energy transition projects in Mpumalanga — one of the provinces that will be most affected as SA gradually moves away from coal-fired energy to renewables.

“SA’s transition to renewable energy and focus on a just transition will shift the dial on the global energy transformation. It will attract investment, create jobs and help grow SA’s economy. IPG partners remain committed to reduce inequality and ensure the energy transition leaves no-one behind,” the partners group said.

About half the pledged grant funding has already been committed, with a significant proportion of these funds now being spent on economic diversification, training and re-skilling projects in Mpumalanga, where more than 85% of coal-related jobs are based.

IPG grants have supported sustainable agriculture projects around Eskom’s Grootvlei power plant, skills development programmes on renewable energy, the facilitation of sustainable start-up projects in Mpumalanga and larger-scale economic development projects.

The IPG welcomed the work done on the Just Energy Transition Implementation Plan by SA. The plan was adopted by cabinet last week and is expected to be published this week.

The plan will guide implementation of the R1.5-trillion Just Energy Transition Investment Plan that SA presented at COP27 in Egypt in 2022. The plan focuses predominantly on investment in the electricity value chain, green hydrogen and new-energy vehicles.

The partners group commended SA for the introduction of vital energy policy reforms — such as lifting the 100MW licences threshold for private generation projects in 2022, saying this has led to rapid private sector development of electricity generation from renewable sources.

The IPG referenced a report published earlier in 2023 by renewable energy industry associations that showed that more than 66GW of private renewable projects were already at various stages of development. However, most of these projects will take significant time to be connected to the grid and the delivery of many of the projects would depend on expanding SA’s constrained transmission grid.

“The IPG stands ready to support grid upgrades and expansion, via both sovereign concessional loans and financing private sector solutions,” the group said.

erasmusd@businesslive.co.za

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