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World Bank Grants $1 Billion for South Africa’s Clean Energy Transition

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7 months ago

October 27, 2023

World Bank Grants $1 Billion for South Africa's Clean Energy Transition

The World Bank Board has pledged $1 billion in Development Policy Loans to bolster South Africa’s long-term energy security and low-carbon transition efforts.

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Marie Francoise Marie-Nelly, the World Bank’s country director for South Africa, emphasised that this support reflects the government’s crucial energy crisis reforms, which will have wide-reaching positive impacts on the country, benefiting vulnerable households, the economy, and the environment while advancing the energy transition.

The loan focuses on two vital areas:

Restructuring South Africa’s power sector by unbundling Eskom
The national power utility
Opening the power market

It aims to enhance Eskom’s efficiency by redirecting resources towards transmission and existing power plant maintenance.

In addition to supporting the energy sector’s reform, the loan encourages private investment in renewable energy, particularly for households and small businesses, while strengthening carbon pricing mechanisms.

South Africa has grappled with an ongoing energy crisis that significantly hampers productivity and safety. In 2022, the nation experienced an average of eight hours of load-shedding daily, causing a 2-3% reduction in GDP growth.

The loan arrives at a pivotal time for South Africa, providing critical fiscal and technical support for energy sector policy priorities. It aims to alleviate the long-term electricity crisis, boost private sector involvement, and generate jobs in the renewables sector.

South Africa is one of the world’s top 20 greenhouse gas emitters, with energy accounting for 81% of its emissions, 45% of which come from electricity generation. The loan is expected to stimulate economic activity job creation, and protect vulnerable households from rising electricity tariffs. It will also reduce water and air pollution by reducing coal dependency for power generation.

The collaborative effort between the government, World Bank, African Development Bank, KfW Development Bank, and the Government of Canada aligns with South Africa’s development priorities, including the presidential energy plan and the just energy transition.

This loan is a significant step toward securing South Africa’s energy future and transitioning to a cleaner, more sustainable energy system.

Source: World Bank loans $1b to support SA’s cleaner energy transition