South Africa’s $8.5 billion climate deal is 97% loans

Less than 3% of an $8.5 billion climate finance deal being offered to South Africa by some of the world’s richest countries will come in the form of grants, Climate Home News reported, citing a copy of the financing provisions.

Of the rest of the money, 54% will come in the form of concessional loans and 43% will be commercial loans and investment guarantees, the UK-based publication said.

The proposed pact was announced at last year’s international climate summit in Glasgow as a package offered by Germany, France, the US, UK and the European Union to help South Africa transition away from coal.

Germany will provide $1.2 billion in concessional loans, money lent to South Africa at attractive rates, through its development finance institutions, while France will make $1 billion available, the publication said.

A further $2.6 billion will come from Climate Investment Funds, which offers concessional finance from six multilateral development banks, including the World Bank.

The US will pledge to lend South Africa $1 billion in commercial loans, as will the European Investment Bank, Climate Home News said. The UK will offer $1.7 billion in commercial loans and debt guarantees, and just $230 million will come in the form of grants, according to the publication.

Less than 1% of the total is earmarked for social investment meant to cushion communities dependent on the coal-fired power plants that will be closed, while 5% will go toward developing a green hydrogen industry, the publication said.

Progress on the pact is expected to be announced at the COP27 climate summit in Egypt next month. It is expected to serve as a prototype for similar deals with other coal-dependent developing nations such as Indonesia, Vietnam and India.