The UK may extend a $1 billion (R17 billion) debt guarantee to help South Africa with its transition to a greener economy as it nears expiry without having been used.
The guarantee was approved in late 2023 and is scheduled to expire at the end of the year, even as South Africa negotiates with the African Development Bank over a $400 million (R6.8 billion) loan for municipal energy and water services, to be guaranteed under that arrangement.
“We are currently in discussions with partners to explore options to maintain our commitment to South Africa’s decarbonization efforts after this date,” the UK’s Foreign, Commonwealth & Development Office said in a response to questions.
The guarantee is part of an $8.3 billion (R142 billion) climate-finance pact agreed between South Africa and some of the world’s richest countries in 2021 to help the nation cut its reliance on coal, which accounts for four-fifths of its electricity generation.
The implementation of the program, known as the Just Energy Transition Partnership, has been slowed by a shortage of suitable projects in South Africa.
Still, both Germany and France have disbursed concessional loans to South Africa’s Treasury as part of the pact and all of the participating countries have issued grants to support a range of projects in the country.
The US withdrew from the agreement earlier this year following the inauguration of President Donald Trump.
While South Africa’s National Treasury confirmed the AfDB loan talks it didn’t answer a question about a possible extension of the UK guarantee.
The AfDB acknowledged the receipt of questions but didn’t respond. The UK’s FCDO didn’t answer a question about the loan talks.
The loan would be used to reduce water and electricity losses and boost infrastructure in four municipal areas in the eastern province of Mpumalanga, the Treasury said.
Mpumalanga is where most of South Africa’s coal mines and coal-fired power plants are located.
While traditionally South African municipalities have provided most services without the help of the private sector the loan will be used to encourage the inclusion of private companies in providing water and power.
“The program’s core focus will be to increase private sector-participation through performance-based contracts to achieve utility reforms.” the Treasury said.
