Development finance institution (DFI) the African Development Bank (AfDB) has signed a $474.6-million loan agreement with South Africa to support the implementation of the country's Just Energy Transition (JET).

The loan will finance the infrastructure governance and green growth programme, the National Treasury says in a statement.

The loan agreement strengthens efforts to improve energy security measures, accelerate the decarbonisation of the economy, and enhance the socioeconomic benefits of the energy transition enabling inclusive economic growth and fostering job creation, it adds.

The loan offers favourable concessional financial terms, including maturity of 15 years with a three-year grace period, and at an interest rate of daily Secured Overnight Financing Rate plus 1.22%.

The loan is part of the third Development Policy Operation to support structural reforms to enhance the efficiency, resilience and sustainability of the country’s infrastructure services.

The third Development Policy Operation includes participation from DFIs the World Bank, KFW Development Bank, Japan International Cooperation Agency and the Organisation of the Petroleum Exporting Countries Fund for International Development, or OPEC Fund.

This new agreement highlights the importance of South Africa’s partnership with the AfDB in advancing South Africa’s development agenda. The first policy loan was concluded in 2023 to support South Africa's JET, Treasury says.

The AfDB supports South Africa’s development objectives, including efforts to implement critical reforms in the energy and transport sectors, while also advancing the country’s JET goals and meeting foreign currency commitments at lower interest rates, Treasury says.