Germany's special envoy for the Just Energy Transition Partnership with South Africa Rainer Baake says his country’s ongoing commitment to the initiative is reflected by the fact that Germany has more than doubled its original financial commitment to €2.68-billion, from the initial 2021 pledge of €986-million.

He also reported that more than €1.4-billion had already been disbursed under the programme, which is scheduled to run to 2027.

Speaking in Pretoria at the tail-end of a visit to South Africa, Baake said the increase was a direct response to the strong demand for both the grant and concessional finance set aside to support projects and policies being implemented in line with the investment programme developed by the South African government.

Having held more than 40 meetings during his visit – mostly with private companies but also with government officials – he reported “huge appetite” for the funding, particularly from the renewable-energy sector.

Refusing to be drawn on recent comments by Electricity and Energy Minister Dr Kgosientsho Ramokgopa that the price of the debt component was too high, Baake noted that the policy loans extended to government by KfW involved interest rates that were “considerably cheaper” than prevailing market rates.

Three such loans with a combined value of €1.3-billion had already been disbursed to the National Treasury upon the implementation of agreed energy sector reforms.

The first €300-million policy loan extended in November 2022, with a 20-year maturity and five-year grace period, carried a variable rate at the time of signing of 3%, which had since reduced to 2.8%; this against market rates of 8.9%.

The second €500-million loan approved in 2023 had a 15-year maturity and three-year grace period, and carried a fixed interest rate of 4.4%, which compared favourably to 12-year Eurobonds issued by the National Treasury in late 2023 that attracted rates of between 7.1% and 7.95%.

The third €500-million loan approved in July 2025, with a 13-year maturity and three-year grace period, had a 4.31% fixed interest rate, against dollar-denominated bonds issued by the National Treasury at the time bearing a 6.25% interest rate.

A similarly concessional €150-million loan had been approved in favour of the City of Cape Town in December 2024 for electricity infrastructure.

Baake reported that concessional loans worth €1.07-billion had also been approved for electricity, green hydrogen and skills-development projects, as well as to support municipalities, alongside grants totalling €125.6-million.

He acknowledged the headwinds that had developed internationally in relation to the energy transition, but said that Germany and the other remaining International Partner Group countries were committed to providing ongoing support to South Africa’s Just Energy Transition Investment Plan (JET-IP).

While the US had withdrawn, the remaining original partners France, Germany, the UK and the EU had since been joined by Denmark and the Netherlands in their support for the JET-IP.

He also acknowledged the challenge that loadshedding had posed to the implementation of the programme, as South Africa had not been able to retire coal plants in line with their original decommissioning schedule.

REFORM MOMENTUM

Nevertheless, for economic and commercial reasons, he said South Africa’s transition was poised to continue as there was no contradiction between climate and economic goals, with renewables being the cheapest source of new electricity.

He also applauded the reform progress being made in South Africa’s electricity sector to open it to private investment and competition, underlining the importance of the introduction later this year of a wholesale electricity market, which he hoped would form the precursor for retail competition in future.

“Where I live right now, in Berlin, you could choose between 180 retail companies, and if you go to the smallest town in Germany, you will still have at least 20 different retail companies competing to sell you electricity,” Baake said.

Given that South Africa’s reforms lagged those in the rest of the world, Baeke, who was a leading figure in Germany’s electricity restructuring, was equally optimistic that South Africa could avoid the mistakes made by Germany and others.

He said that when Germany implemented its reforms in the 1990s, it made a mistake at the beginning by not separating the grid from generation.

“There was a political battle in which I was very much involved in 2004 and 2005 and luckily, we won.

“Then there was non-discriminatory access to the grid, and the market developed,” Baake explained.