AFD Sees Other Banks Joining €400 Million South Africa Climate Loan

The head of France’s state development bank, Agence Française de Développement (AFD), expects other development finance institutions to add to a €400 million ($432 million) climate loan for South Africa, according to a Bloombergreport.

This loan is part of a broader $9.3 billion climate-finance pact between South Africa and several wealthy nations, initially agreed in 2021. The partnership aims to help South Africa reduce its reliance on coal, which currently accounts for 80% of its electricity generation.

France Leads with Climate Loan for South Africa

The loan, which is expected to be finalized within days, is a significant step forward for South Africa’s Just Energy Transition Partnership (JETP). This agreement is part of a plan to shift away from coal to cleaner energy sources. France’s Agence Française de Développement made a similar commitment in 2022 with a €300 million loan. Germany’s KfW development bank matched this loan with an additional €300 million.

Broadening Financial Support

Remy Rioux, the CEO of AFD, suggested that the current loan is only the beginning. He explained that the goal was not to have a purely France-South Africa partnership and emphasized that the initiative is open to other public development banks.

While he did not specify which banks would join, his comments indicated that there is an expectation of broader international participation in funding South Africa’s energy transition.

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While the loan marks a positive development, the Just Energy Transition Partnership has faced criticism for its slow implementation. South Africa's energy transition is seen as a crucial test for future partnerships with other nations like Indonesia, Vietnam, and Senegal. So far, aside from grants, the only funding South Africa has received through the pact includes the previous loans from AFD and €800 million from Germany.

Focus on Affected Communities and Infrastructure

The new loan will help cushion the communities most impacted by the transition away from coal. Rioux also discussed future investment opportunities in South Africa’s energy infrastructure.

AFD is considering financing transmission projects once the government decides how to finance the grid’s expansion. Strengthening South Africa’s grid is essential to connecting renewable energy sources to the national power network.

Looking Ahead

As the global community pushes for faster action on climate change, the South Africa partnership could set an important precedent. The success of this first-of-its-kind partnership could influence future climate financing strategies in other countries undergoing similar energy transitions.