The United Kingdom and the African Development Bank (AfDB) have extended a $1 billion climate-related debt guarantee to South Africa, saving a $400 million municipal financing agreement that would have been at risk if it had expired, Bloomberg reported on Thursday, January 22.
The guarantee is part of a $10 billion climate finance pact between South Africa and some of the world’s richest nations and was due to expire at the end of last year. The pact is known as the Just Energy Transition Partnership (JETP).
Its extension comes as South Africa negotiates with the AfDB for a $400 million loan for municipal energy and water services, to be guaranteed by the United Kingdom under that agreement.
The JETP program, a landmark climate finance agreement that paved the way for similar deals with Vietnam and Indonesia, has been criticized for the slow pace at which South Africa has utilized the funding. About $3.8 billion of the $10 billion has been used so far in a deal signed at the end of 2021.
South Africa’s National Treasury has previously stated that the extension was still being negotiated.
“The municipal loan, once agreed, will be used to reduce water and electricity losses and improve infrastructure in four municipal areas in the eastern province of Mpumalanga,” the Treasury said.
Mpumalanga is home to most of South Africa’s coal mines and coal-fired power stations.
Although South African municipalities have traditionally provided most services without the help of the private sector, the loan will be used to encourage the inclusion of private companies in water and energy supply.
