The African Development Bank (AfDB) has approved a $474.6-million loan for South Africa's Infrastructure Governance and Green Growth Programme (IGGGP).

This IGGGP is the second phase of the bank's strategic support for South Africa's just energy transition (JET). It builds on the previous $300-million Energy Governance and Climate Resilience Programme, approved in 2023, which delivered key reforms that bolstered financial stability and increased renewable-energy capacity.

The IGGGP is designed to accelerate South Africa’s green transformation and promote inclusive and resilient growth. It is structured around three interconnected pillars:

• enhancing energy security through power sector restructuring;
• supporting a low-carbon and just transition; and
• improving transport efficiency.

“Our country faces the significant challenge of energy shortages, leading to loadshedding, as well as significant transport bottlenecks, which have been detrimental to growing our economy and achieving our developmental aspirations.

“With [the AfDB’s] partnership, our government has committed itself to stay the course and implement these critical reforms in the energy and transport sectors, while endeavouring to achieve our international commitments on climate change and our JET objectives,” Finance Minister Enoch Godongwana said.

The IGGGP also places strong emphasis on green industrialisation, skills development, and job creation, including support for electric vehicle manufacturing and green hydrogen production. Recent estimates from the International Monetary Fund show that South Africa’s JET could boost the country’s GDP growth by 0.2 to 0.4 percentage points a year between 2025 and 2030.

“This approval represents more than financing. It's a blueprint for Africa's energy future. South Africa's success in building a just, green and inclusive energy system demonstrates that sustainable development and economic growth can go hand in hand,” AfDB group director-general for Southern Africa Kennedy Mbekeani said.

This financing includes targeted grant components to promote energy efficiency initiatives and advance rail sector reforms. Key priorities include accelerating vertical separation and establishing an investment framework to revitalise South Africa’s freight and logistics systems.

These efforts are expected to strengthen competitiveness of the transport sector and contribute to regional integration and economic growth across the Southern African Development Community region.

As an advanced economy in Africa and a regional power hub, South Africa's success in its energy transition could catalyse similar transformations across the continent. Its experience integrating renewable energy, modernising its grid, and implementing just transition policies could provide valuable lessons for other African nations pursuing [UN] Sustainable Development Goals (SDGs), the AfDB said.

The initiative incorporates comprehensive environmental and social safeguards, with a particular focus on gender and youth empowerment. Women will constitute 70% of the beneficiaries of the expanded social employment fund and dedicated youth skills programmes will equip the next generation for emerging opportunities in the green economy.

The success of the IGGGP will contribute to several SDGs, including affordable and clean energy (SDG 7), decent work and economic growth (SDG 8), industry, innovation, and infrastructure (SDG 9) and climate action (SDG 13).

The AfDB’s support forms part of a $2.78-billion international financing package that includes $1.5-billion from the World Bank, €500-million from Germany’s Credit Institute for Reconstruction, up to $200-million from the Japan International Cooperation Agency and an expected $150-million from the Organization of the Petroleum Exporting Countries Fund.

This coordinated financing pointed to the global significance of South Africa's energy transition, particularly under its G20 presidency, the AfDB said.

The programme aligns with South Africa's updated Nationally Determined Contribution under the Paris Agreement, which targets reducing greenhouse-gas emissions to between 398-million and 510-million tonnes of CO₂ equivalent by 2025 and 350-million to 420-million tonnes of CO₂ equivalent by 2030.