South Africa Gets R10 Billion Loan for Energy Transition From France and Germany; What Are the T&Cs?

• President Cyril Ramaphosa signed a loan agreement with the governments of Germany and France at COP27
• Through this agreement, both nations will extend just over R5 billion each to SA for the country's shift away from coal
• The Treasury explained that the concessional loan would be cheaper to pay back than an ordinary market loan

PRETORIA- South Africa has scored an additional R10 billion in concessional loans from France and Germany during Finance day at the COP27 negotiations currently underway in Egypt. The loan will be used for the nation's just energy transition.

The loan agreement with the French and German governments forms part of SA's Just Energy Transition Partnership (JEPT). The agreement states that the development banks of the European nations will extend approximately R5.3 billion each to SA, Daily Maverick reported.

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The loans will be provided directly to the National Treasury, which will direct the funds to projects that align with what the JEPT is trying to achieve.

The Treasury released a statement praising the plans for being the best deal SA could get given the current economic climate. Being concessional, the loans would be far cheaper than what the nation could have raised in capital markets.

According to BusinessTech, the Treasury broke down both loans' financial terms and stated that each loan would have to be paid back in 20 years, including a 5-year grace period. The loan from French Development Bank Agence Française de Développement (AFD) has an interest rate of 3.6%, while the German development bank's Kreditanstalt für Wiederaufbau (KFW) has a 3% interest rate.

The Treasury explained that were the government to approach the market for the same loan, it would cost around 8.9%. Therefore the concessional loan from the European nations will reduce SA's cost of funding and overall debt burden.

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South Africans weigh in on the R10bn concessional loan

Not all citizens are on board with borrowing money from rich countries for the energy transition.

Here are some comments:

Magda Labuschagne suggested:

"Give the money to Gift of the Givers... They will ensure that it is spent for the purpose it was acquired for!"

Duiker Rams commented:

"There is still a loan from China which was for the Medupi power Station. Er yah neh"

Tish Singh

"3.6% interest for loans between governments. Must be nice."

IDavids Davids speculated:

"One of these days FRANCE, GERMANY, CHINA ECT. going to fight over South Africa."

Maureen Hirschson Segall asked:

"Dont forget loans need to be repaid..... wonder what the payoff will be when they are due?"

Cop27 unpacked: What exactly is it, and why should South Africans care about it?

In a related story, Briefly News reported that the phrase "COP27 negotiations" has polluted news feeds over the last few days, with little explanation of what is happening behind closed doors. The name makes it sound like leaders are stuck in long uninteresting debates in closed-off boardrooms, but there is more to COP27.

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The COP27 negotiations are currently underway in the Egyptian coastal city of Sharm el-Sheikh. The question on many South African minds is, what exactly is COP27, and why should we care?

Briefly News unpacks the climate negotiations and why South Africans should give a hoot.

Source: Briefly News