The International Partners Group (IPG) has increased its funding for South Africa’s just energy transition from $8.5 billion to $9.3 billion.
The agreements involve concessional financing from the World Bank, Germany and the African Development Bank (AfDB) which proposed €500 million.
The treasury on Tuesday said the financing facilities from the three institutions are in line with its strategy to diversify its funding mix.
The treasury added that the funding helps to support the government’s key reforms under climate change and the electricity sector. “These facilities also enable the national treasury to raise funding at very affordable rates which help to reduce the government public debt,” it said in a statement.
But, there is concern about whether the country can afford these loans.
Economist Lungile Mashele said that despite the international partners showing continued commitment to South Africa, the government needed to show the country how it was going to pay back the money it was borrowing.
“We are a country that has for the last two, three months been saying that we’ve got a debt crisis, we’ve got a financial crisis, and that we do not have money,” she said. “That’s not necessarily a country that should be going around getting additional loans, especially foreign-denominated loans.”
Mashele said the concern is that the energy transition has been largely led by Eskom and that the debt burden would fall on citizens.
The scepticism about taking on more debt, even under concessional terms, is heightened by a debt-relief bailout for Eskom from the treasury in which the power utility agreed to not incur debt for three years.
The $8.5 billion package was announced at the United Nations climate change conference, COP26, in Scotland in 2021. The IPG comprises France, Germany, the United States and the European Union. The grouping was expanded earlier this year to include Denmark and the Netherlands.
The funds, as outlined in the investment plan, play a pivotal role in economic diversification, with a focus on training and reskilling projects in Mpumalanga, where more than 85% of coal-related jobs are concentrated.
The Just Energy Transition Investment Plan (JET-IP) outlines investments in electricity, new energy vehicles and green hydrogen to meet decarbonisation targets
Part of the money from the IPG has been earmarked for Eskom, which will prioritise expanding the transmission grid to help stop load-shedding.
On Sunday, Electricity Minister Kgosientsho Ramokgopa said expanding the grid would be crucial to bringing renewable projects online. “We know now that the transmission capacity has been exhausted in those areas”.
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