Phasing out coal: KfW is supporting South Africa in its environmentally sustainable and socially responsible energy sector refor

• A total of EUR 500 million has been made available to address the acute energy crisis and ensure long-term energy supply
• More jobs and income for the population are set to be created
• A competitive and transparent electricity market is being developed through private investments

On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), KfW has signed an additional promotional loan with the South African Ministry of Finance for EUR 500 million to finance comprehensive reforms of the South African energy sector. The funds are a further contribution to the Just Energy Transition Partnership (JET-P) that South Africa agreed with Germany, three other countries and the EU at the 2021 UN Climate Change Conference in Glasgow to support South Africa’s coal phase-out and promote investments in the expansion of the renewable energy sector. South Africa is entitled to up to USD 1.9 billion in total as part of the second financing package for implementing the socially responsible energy transition. The funds are used by the South African government to implement a comprehensive reform programme with the aim of demerging the state-owned ESKOM group, establishing an independent transmission system operator and fundamentally realigning the country’s energy supply through targeted promotion of renewable energies.

"This second promotional loan is another milestone on the road to the South African energy transition. An important goal of the socially responsible transformation in South Africa is to combine energy security and economic growth. The comprehensive reforms of the energy sector will lead to the development of a renewable energy industry and in so doing consolidate South Africa's economic position. Social responsibility is being considered at every stage of the transformation. Creating jobs for the population is necessary for social and economic stability as well as acceptance of the energy transition among the population,”

said Christiane Laibach, Member of the Executive Board of KfW Group.

A core element of the structural reform is the amendment of the 2006 Electricity Regulation Act (ERA). This enables free and fair grid access for the transmission of electricity and for the feed-in of electricity into the grid from renewable energy sources by private providers. These are important prerequisites for the development of a competitive and transparent electricity market.

In addition, state-subsidised electricity and credit guarantees are intended to help mitigate the sharp price increases that can be expected and at the same time prevent negative social consequences. The allocation by means of the municipal financial compensation system will support municipalities in providing basic municipal services and enable the poorest households and population groups to access renewable energy.

Further information about KfW Development Bank is available at: www.kfw-entwicklungsbank.de.

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