The French and German development banks, AFD and KfW, have signed agreements with the South African government to each extend €300-million in concessional financing to support the country’s transition to a cleaner energy system that is less reliant on coal.

The €600-million is the first to be confirmed under the $8.5-billion Just Energy Transition Partnership (JETP) announced at COP26 in November 2021, and follows the publication by South Africa of the Just Energy Transition Investment Plan (JET-IP) ahead of COP27, which is currently under way in Sharm El Sheikh, Egypt.

The JET-IP was officially endorsed by the JETP international partnership group of France, Germany, the UK, the US and the European Union (EU) on November 7, opening the way for the flow of funds under the $8.5-billion funding package, comprising: $2.6-billion from the Climate Investment Funds Accelerating Coal Transition Investment Plan; $1-billion from France; $1-billion from Germany; $1.8-billion from the UK; $1-billion from the US; and $1-billion from the EU.

The funding package will be disbursed through various mechanisms over a five-year period including grants, concessional loans and investments and risk sharing instruments and will be directed towards projects outlined in the JET-IP.

The AFD and KfW financing agreements were signed at a ceremony held on the side-lines of COP27 and attended by President Cyril Ramaphosa, President Emmanuel Macron and Chancellor Olaf Scholz.

The funds will flow directly to South Africa’s National Treasury, whose acting director-general Ismail Momoniat immediately welcomed the concessional funding from AFD and KfW.

While South Africa still required more support for its R1.5-trillion ($99-billion) five-year JET-IP, Momoniat said the funding would play a catalytic role and would contribute to government’s efforts to mitigate rising government debt costs.

In a joint statement, the French and German governments said the signing represented a significant milestone in the implementation of the JETP and the mobilisation of the initial $8.5-billion over the next three to five years.

German Ambassador to South Africa Andreas Peschke said the agreements represented a “concrete implementation of our partnership”, while French Embassy Chargé d’affaires Arnaud Roux said the loan translated Macron’s words of support for South Africa's decarbonisation programme “into actions”.

Ahead of COP27, the World Bank Group approved a $497-million financing package for the ‘Komati Just Energy Transition Project’ to be financed jointly through a $439.5-million World Bank loan, a $47.5-million concessional loan from the Canadian Clean Energy and Forest Climate Facility, and a $10-million grant from the Energy Sector Management Assistance Program.