South Africa’s plan to get by without the United States

South Africa’s National Treasury is in talks to secure loans from Germany and the UK under the terms of a climate pact the US walked away from last month.  

The Treasury said it’s in talks to secure so-called policy loans from lenders including KfW, Germany’s state development bank, and the African Development Bank, through which the UK is channeling its assistance by providing credit guarantees. It didn’t give further details in a response to queries.

The loans are evidence that countries that are part of the Just Energy Transition Partnership are pushing ahead with the program, even after the US cancelled plans to contribute $1 billion in loans and $48 million in grants.

People familiar with the situation said the two loans could total close to $1 billion, asking not to be identified as a public statement hasn’t been made. 

“While the withdrawal of the US is regrettable, the International Partners Group remains fully committed to supporting South Africa to deliver its just energy transition,” the other countries and groups in the pact — Germany, France, UK, the European Union, Denmark and the Netherlands — said in a March 19 statement. 

The JETP, agreed in 2021, is designed to help South Africa, which has the most carbon-intensive economy of any nation with a population of more than 4 million people, cut its dependence on coal.

Similar programs have since been agreed between wealthy nations and Indonesia and Vietnam. The US has quit those programs as well. 

The KfW loan could be close to €500 million ($553 million) and would be used to help capacitate South Africa’s recently formed national transmission company, three of the people said.

South Africa is planning to expand its grid to allow it to take on more renewable energy. 

KfW declined to comment. The National Transmission Company South Africa and its holding company Eskom Holdings SOC Ltd. didn’t respond to a request for comment. 

The UK loan channeled through the AfDB could exceed $400 million and would be targeted at helping municipalities in South Africa’s coal belt with water and other projects, one of the people said.

The UK’s Foreign, Commonwealth and Development Office declined to comment and the AfDB didn’t respond to a query.

Both KfW and France’s Agence Francaise de Developpement have already made loans to the National Treasury under the JETP program directed toward specific objectives.

KfW has advanced €800 million while AFD has made two loans totaling €700 million. Overall, more than $2.5 billion has been paid out by the partners in the JETP from a total pledge of $8.3 billion.

Germany and the UK are also considering paying some of the grants that the US had pledged to projects, three of the people said.

Those projects include the rehabilitation of ash dumps at coal-fired power plants, decarbonization programs for municipalities, training programs for workers in the renewable energy sector and promoting women’s involvement in that industry.