African Development Bank Greenlights $1 Billion Guarantee from the United Kingdom to Back South Africa’s Just Energy Transition
The Board of Directors of the African Development Bank Group has sanctioned a groundbreaking $1 billion guarantee program in partnership with the UK Foreign Commonwealth and Development Office (FCDO). This collaboration will empower the Bank to amplify its lending capabilities, specifically in aiding South Africa’s Just Energy Transition (JET).
Formulated in close cooperation with the government of the Republic of South Africa, the initiative is designed to bolster projects aligned with South Africa’s JET investment plan. These projects encompass areas such as transmission and grid-balancing storage, renewable energy generation, energy efficiency, rehabilitation of municipal electricity delivery, green hydrogen, and new electric vehicles.
Notably, it addresses the “just” dimension, particularly in the Province of Mpumalanga, situated in the north-eastern part of the country, adjacent to Swaziland and Mozambique.
The approval, coinciding with COP28 and its focus on escalating climate finance, is apt and pertinent. Dr. Kevin Kariuki, Vice President for Power, Energy, Climate, and Green Growth at the African Development Bank, remarked,
“This is another innovative operation that reaffirms AfDB’s leadership in crafting financial solutions to increase access to climate finance for Africa’s low carbon development and net-zero ambitions.”
Melinda Bohannon, Director General of Humanitarian and Development at FCDO, emphasized their unwavering commitment to the Just Energy Transition Partnership with South Africa. She highlighted its role in supporting green growth, job creation, enhancing energy security, and aiding South Africa in achieving its carbon reduction goals outlined in its National Determined Contribution.
Bohannon emphasized that the guarantee would unlock funds for projects outlined in South Africa’s recently released Just Energy Transition implementation plan.
Mmakgoshi Lekhethe, Deputy-Director General for Asset and Liability Management in South Africa’s National Treasury, expressed satisfaction with the AfDB Board’s approval of the guarantee framework. Lekhethe emphasized the significance of this partnership between the government, the UK, and AfDB, facilitating the implementation of South Africa’s just energy transition in an equitable and socially responsible manner.
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Lekhethe looks forward to collaborating with the AfDB on preparing and financing a pipeline of programs and projects within the transition priority areas, as identified in the JET Implementation Plan.
Max Ndiaye, Director of Syndications, Co-financing, and Client Solutions, highlighted the prior collaboration between the Bank and FCDO and commended this transaction as further evidence of the Bank’s ongoing commitment to adhere to G20 recommendations on capital adequacy. These recommendations call for increased collaboration and additional shareholder support to optimize the balance sheets of Multilateral Development Banks (MDBs).
