Western powers set to give South Africa $8.5 billion for energy transition

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In a joint statement released by the South African government and the African Development Bank (AfDB), it was revealed that the countries of United Kingdom (UK), United States (US), France and Germany, among others in the European Union (EU) pledged an initial amount of 8.5 billion dollars to South Africa.

The said fund is intended to finance the country’s long-term “just transition” process to reduce the carbon intensity of its electricity system, while developing new sectors such as green hydrogen and electric vehicles.

South Africa submitted an ambitious Nationally Determined Contribution (NDC) ahead of COP 26. At COP26, the South African government also forged the Just Energy Transition Partnership (JETP) jointly with Western powers aforementioned.

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JETP’s goal is to ensure a just transition for workers and communities who historically depended on coal value chains in South Africa for their livelihoods.

The scale of the challenge means that partnerships, including with the private sector and development finance institutions, would be essential to achieve the desired results, according to the AfDB and the country’s government.

As part of its commitment to the development of the energy sector in Africa in line with its New Deal on Energy for Africa (NDEA) strategy, the AfDB plays a leading role in supporting African countries in their energy transition with policy advice, technical assistance, and financing.

In this context, the Minister of Finance of the Republic of South Africa, Enoch Godongwana has formally requested the AfDB to support South Africa with technical assistance on its just energy transition process.

The AfDB responded positively to South Africa’s request and agreed to provide the requested support through the COP26 Energy Transition Council’s Rapid Response Facility, funded by the Sustainable Energy Fund for Africa (SEFA) of the Bank.

The technical assistance would aim to build the capacity of relevant institutions in South Africa – primarily the Asset and Liability Management (ALM) Division of the National Treasury and the Presidential Climate Finance Team (PCFTT) – to engage and negotiate with external and internal partners. partners in the South African just energy transition process.

This technical assistance would be independent, separate and in no way linked to any other financial support that the AfDB may provide to South Africa’s just transition in the future.

The scope of technical assistance had been agreed between the ALM Division and PCFTT, allowing them to draw on financial, technical and other expertise to enable them to fulfill their respective mandates and responsibilities to develop recommendations for the financial package proposed within the framework of the JETP.

According to the AfDB, the details of the implementation of the agreed technical assistance are being finalized with a launch of the assistance expected in the coming weeks.

The government and the AfDB had also reached an agreement in principle that this rapid assistance could be followed by a broader SEFA technical assistance program, responding to the medium and long-term needs of South African institutions under the just energy transition process, once the needs become more apparent.

“This technical cooperation builds on a long-term partnership between the AfDB and the South African government, which is based on the recognition of the importance that energy security and just transition play in the country’s climate response, as well as on the need to meet economic needs, environmental and social development goals, concludes the joint statement.

This type of cooperation is indeed commendable and therefore deserves all the necessary support and encouragement. Other countries currently in need of such an energy transition are therefore called upon to take advantage of the opportunities offered by this rare platform.

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