The UK and the African Development Bank extended a climate-linked $1-billion debt guarantee to South Africa, saving a $400-million municipal funding deal that was in jeopardy if it had expired.

The guarantee, part of a $10-billion climate-finance pact between South Africa and some of the world’s richest nations, was due to expire at the end of last year. The pact is known as the Just Energy Transition Partnership.

Its extension comes as South Africa negotiates with the AfDB over a $400-million loan for municipal energy and water services, to be guaranteed by the UK under that arrangement.

The British High Commission said in a response to queries that the guarantee has been extended “to enable the government of South Africa to deliver the Municipal Utility Reform Project and to develop other low-carbon infrastructure projects this year.”

The JETP programme, a landmark climate finance deal that’s paved the way for similar agreements with Vietnam and Indonesia, has been criticised for the slow pace at which South Africa has taken up funding. About $3.8-billion of the $10-billion has been deployed so far in an arrangement that was agreed in late 2021.

South Africa’s National Treasury previously said the extension was still to be negotiated.

The municipal loan, once agreed, will be used to reduce water and electricity losses and boost infrastructure in four municipal areas in the eastern province of Mpumalanga, the Treasury said. Mpumalanga is where most of South Africa’s coal mines and coal-fired power plants are located.

While South African municipalities have traditionally provided most services without the help of the private sector, the loan will be used to encourage the inclusion of private companies in providing water and power.