South Africa gets R10.4 billion loan from Germany

South Africa received a €500 million (approximately R10.4 billion) loan from Germany to help fund its transition away from reliance on fossil fuels.

The German Society for International Cooperation known as GIZ — through state owned lender KfW — will provide the 13-year facility with a three-year grace period at a fixed rate of 4.31%, South Africa’s National Treasury said in a statement Monday.

The agreement builds on two other loans concluded in 2022 and 2023 and forms part of Germany’s pledge at COP26 to support South Africa’s move.

It brings Berlin’s loans to Pretoria implemented by KfW to €1.3 billion and forms part of a larger package of projects for the so-called Just Energy Transition Partnership, an $8.3 billion climate-finance pact signed in 2021 with some of the world’s richest nations including France and Germany.

South Africa relies on coal for about four-fifths of its electricity generation and thus has the most carbon-intensive economy among the Group of 20 major economies.

Participants in the latest loan include the World Bank, African Development Bank, Japan International Cooperation Agency, and the OPEC Fund, the Treasury said.

The move strengthens South Africa’s short- and medium-term energy-security measures and promotes decarbonization, Finance Minister Enoch Godongwana said.