SA aligns with global trends, backs away from $8.5bn COP loan requiring closure of coal-fired power stations

Key topics:South Africa hesitates to use $10bn climate funds over costs, conditions.Delays in coal-plant closures risk missing 2030 emission targets.France, Germany, and other partners have provided partial loans, grants..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Antony Sguazzin.South Africa is reluctant to tap billions of dollars in climate finance offered by some of the world’s richest nations because of the cost and strings attached, Electricity Minister Kgosientsho Ramokgopa said. South Africa clinched a deal, known as the Just Energy Transition Partnership and initially worth $8.5 billion, at the COP climate summit in Glasgow in 2021. Under the accord, the country would receive funding in exchange for cutting coal-fired power generation in one of the world’s most carbon-intensive economies. .The funds were set to come in the form of grants, loans and guarantees from France, Germany, the US, UK and the European Union. Finance from the World Bank and other development finance institutions was also on offer.Since then, South Africa has said it will miss deadlines to close coal-powered plants as it’s concerned about energy security. Politicians including Ramokgopa have repeatedly expressed concern about the conditions under which funds will be disbursed..Read more:.SA risks $9.3bn climate finance over coal plant delays.“South Africa will determine the pace and scale of that transition” and will pick the projects to benefit from the funds, the minister said in an interview with Johannesburg’s 702 Talk Radio from Davos, Switzerland.“You juxtapose going out into the debt capital market and raising a similar amount of capital, and then you do a comparison of which money is cheaper,” he said. “And at this stage, as I speak to you, it doesn’t appear to be competitive.”It’s unclear what finance Ramokgopa was referring to. US ExitWhile Denmark and the Netherlands joined the agreement later, the US last year withdrew its offer of $1 billion in funding on commercial terms and canceled $56 million in promised grants. Pledges from the so-called International Partners Group now total $10 billion, with an additional $3.7 billion available from other bilateral agreements and multi-lateral development banks.Still, hundreds of millions of dollars have been disbursed in the form of grants and France and Germany have together loaned South Africa’s National Treasury about €2 billion ($2.34 billion) under the program.The last German loan, through its development bank KfW, was a €500 million, 13-year facility with a three-year grace period and a fixed interest rate of 4.31%. South African rand-denominated, 10-year government bonds currently trade at a yield of 8.43%.“These loans are concessional and contribute to government’s efforts to mitigate rising government debt costs,” Ismail Momoniat, the then-acting director general of the National Treasury, said in 2022 when France and Germany made their first loans.The UK offered a $1 billion guarantee for African Development Bank debt that South Africa largely hasn’t taken up and the EU, through the European Investment Bank, has lent €350 million to the state ports and rail company to help it decarbonize its operations.More than $3.8 billion has now been committed in formal agreements, according to the partners group.In June, South Africa cleared a hurdle to access $2.6 billion in funds from the World Bank and other institutions under a pact with the Climate Investment Funds, an international climate-finance facility. That pact had been delayed by South Africa, postponing power-plant closures until after 2030. While the interest rate on that finance has yet to be determined, it would be at concessional rates. Nevertheless, the delays have caused some irritation among members of the partners group..Read more:.Delays in closing SA’s coal plants could threaten lives and cost billions, warns agency.In June, South Africa cleared a hurdle to access $2.6 billion in funds from the World Bank and other institutions under a pact with the Climate Investment Funds, an international climate-finance facility. That pact had been delayed by South Africa, postponing power-plant closures until after 2030. While the interest rate on that finance has yet to be determined, it would be at concessional rates. Nevertheless, the delays have caused some irritation among members of the partners group.“It is now clear that South Africa will not meet the high ambition target of its 2030” emissions reduction pledge, they said in a December statement. There remains a credible pathway to remaining within the 2030 target range if mitigation measures are accelerated.”Africa’s plan to expand its power grid may be an opportunity to utilize the offered funds, but those would need to be “affordable,” Ramokgopa said..© 2026 Bloomberg L.P.

SA aligns with global trends, backs away from $8.5bn COP loan requiring closure of coal-fired power stations

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