AfDB Approves $474.6M Loan to Power South Africa's Green Growth Drive

The IGGGP aims to take that foundation further by addressing systemic challenges in energy and transport sectors and by fostering a green, just, and inclusive transformation.


Devdiscourse News Desk | Pretoria | Updated: 01-07-2025 21:24 IST | Created: 01-07-2025 21:24 IST
AfDB Approves $474.6M Loan to Power South Africa's Green Growth Drive
The IGGGP is part of a larger, historic $2.78 billion international financing package, demonstrating the global community’s shared interest in South Africa’s transition. Image Credit: ChatGPT
  • Country:
  • South Africa

In a major step toward accelerating South Africa’s transition to a sustainable, low-carbon economy, the Board of Directors of the African Development Bank Group (AfDB) has approved a $474.6 million loan for the Infrastructure Governance and Green Growth Programme (IGGGP). This milestone financing package forms part of a broader global initiative supporting the country’s Just Energy Transition (JET) strategy, reinforcing its commitment to clean energy, climate resilience, and inclusive economic growth.

Building on a Strong Foundation

The IGGGP represents Phase Two of the AfDB’s strategic support to South Africa’s energy transition. It builds on the success of the $300 million Energy Governance and Climate Resilience Programme, launched in 2023. That earlier phase focused on strengthening the country’s financial and energy governance structures, enhancing climate resilience, and expanding renewable energy capacity.

The IGGGP aims to take that foundation further by addressing systemic challenges in energy and transport sectors and by fostering a green, just, and inclusive transformation. Structured around three strategic pillars, the programme will:

  1. Enhance energy security through restructuring of the power sector.

  2. Support a low-carbon, just transition aligned with climate goals.

  3. Improve transport and logistics efficiency, enabling long-term economic growth.

Responding to National Challenges

South Africa’s Minister of Finance, Enoch Godongwana, welcomed the AfDB’s support, recognizing the partnership as vital to overcoming persistent national challenges:

“Our country faces the significant challenge of energy shortages, leading to loadshedding, as well as significant transport bottlenecks, which have been detrimental to growing our economy and achieving our developmental aspirations.”

He emphasized that the government is fully committed to staying the course on reforms in the energy and transport sectors, while simultaneously honoring international climate obligations and pursuing Just Energy Transition (JET) objectives.

Unlocking Green Growth and Industrialization

One of the transformative aspects of the IGGGP is its focus on green industrialization and economic diversification. The programme will promote:

  • Electric vehicle (EV) manufacturing

  • Green hydrogen development

  • Energy efficiency initiatives

  • Rail sector reform and freight logistics modernization

These efforts are designed not only to reduce carbon emissions, but also to create new jobs, build technical skills, and enhance competitiveness in key sectors. Notably, the IGGGP includes grant components to advance energy-efficient infrastructure and unlock new investment frameworks for transport.

The International Monetary Fund (IMF) projects that South Africa’s Just Energy Transition could contribute 0.2 to 0.4 percentage points to annual GDP growth between 2025 and 2030—a significant gain for the country’s economy.

A Blueprint for Africa's Energy Future

AfDB’s Southern Africa Director General, Kennedy Mbekeani, described the programme as a landmark initiative with far-reaching implications:

“This approval represents more than financing — it’s a blueprint for Africa’s energy future. South Africa’s success in building a just, green, and inclusive energy system demonstrates that sustainable development and economic growth can go hand in hand.”

As Africa’s most industrialized economy and a key energy hub for the Southern African Development Community (SADC), South Africa’s transition progress is expected to set an important precedent for other African nations pursuing similar climate and development goals.

Regional Impact and Global Backing

The IGGGP is part of a larger, historic $2.78 billion international financing package, demonstrating the global community’s shared interest in South Africa’s transition. This broader package includes:

  • $1.5 billion from the World Bank

  • €500 million from Germany’s KfW

  • Up to $200 million from Japan’s JICA

  • An anticipated $150 million from the OPEC Fund

This multilateral effort aligns closely with South Africa’s G20 presidency and its updated Nationally Determined Contributions (NDCs) under the Paris Agreement, which target reductions in greenhouse gas emissions to 398–510 million tons of CO₂ equivalent by 2025, and 350–420 million tons by 2030.

Inclusive, Socially Responsible Transition

Importantly, the IGGGP includes comprehensive environmental and social safeguards, with targeted interventions to ensure equity and inclusion. Among these:

  • 70% of beneficiaries of the expanded Social Employment Fund will be women

  • Youth skills development initiatives will prepare the next generation for jobs in clean energy, sustainable transport, and green manufacturing

  • Gender mainstreaming and social equity principles will be embedded across all programme activities

This social inclusion framework ensures that South Africa’s energy transition not only reduces emissions but also lifts communities, addresses inequality, and builds a resilient workforce equipped for the green economy.

Advancing the SDGs

The IGGGP is expected to significantly advance South Africa’s progress toward several UN Sustainable Development Goals (SDGs), including:

  • SDG 7: Affordable and Clean Energy

  • SDG 8: Decent Work and Economic Growth

  • SDG 9: Industry, Innovation, and Infrastructure

  • SDG 13: Climate Action

By targeting both climate and economic objectives, the programme offers a model for integrated, cross-sectoral development in line with international best practices.

A Pivotal Moment for South Africa and the Continent

The AfDB’s support of the IGGGP marks a pivotal moment in South Africa’s journey toward a sustainable and inclusive energy future. With strong national leadership, international solidarity, and a focus on justice, this initiative has the potential to transform not only the country's energy systems but also the broader development narrative across Africa.

As global climate deadlines draw closer, South Africa’s example provides a powerful message: that economic revitalization and environmental stewardship can—and must—be pursued together.

 

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