The German Society for Cooperation, or GIZ, has, through KFW Development Bank, concluded a €500-million loan for the implementation of South Africa’s Just Energy Transition (JET).

The loan will span 13 years, with a three-year grace period, and accumulate interest at 4.31% a year.

This loan is part of South Africa’s third Development Policy Operation and participants included the World Bank, the African Development Bank and the Organization of the Petroleum Exporting Countries Fund.

It supports structural reforms to enhance the efficiency, resilience and sustainability of the country’s infrastructure services, with a specific focus on the energy sector and climate mitigation.

This loan agreement builds on the two policy loans concluded in 2022 and 2023 and forms part of Germany’s pledge at COP26 to support South Africa's Just Energy Transition Partnership (JETP).  

Germany’s three policy loans, implemented by KFW, total €1.3-billion and comprise a segment of a larger package of JETP projects supported by the German government through loans, technical assistance and grants.

Finance Minister Enoch Godongwana has highlighted the significance of South Africa’s partnership with Germany and KFW, saying it remains critical to South Africa’s development agenda.

He adds that the loan marks a significant step towards strengthening South Africa’s short- and medium-term energy security measures and promoting decarbonisation and enhancing the socioeconomic benefits of the energy transition for disadvantaged communities, thereby enabling inclusive economic growth and fostering job creation.

The Minister also emphasises the need for further policy and institutional reforms in the energy sector to create an enabling environment for the investment required for a JET.

KFW country director for South Africa Cornelia Tittmann says the loan seeks to support the South African government’s continued commitment to reforms in the energy sector, that give effect to the country’s climate commitments and enable the private sector to participate.

It also opens new avenues to strengthen economic cooperation between Germany and South Africa, she points out.