Rich countries to fund 80% of South Africa’s climate plan with loans, some hard to unlock


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  • South Africa and rich countries at odds over climate funds
  • Funds would come mainly in the form of loans, despite appeals for grants
  • At least 10% of funds are at risk from the country’s procurement rules
  • South Africa still working on investment plan, long-term costs

JOHANNESBURG, Sept 1 (Reuters) – About 80% of the billions of dollars pledged by rich countries for South Africa’s coal phase-out will be loans, not grants, and some may be difficult to unlock due to national rules protecting national jobs, an official familiar with the matter said.

Last year, the United States, European Union, Britain, France and Germany pledged $8.5 billion over three to five years to help South Africa reduce its carbon emissions, which are among the highest in the world because it depends on coal for 80% of its electricity. .

The plan is intended to help the country shut down polluting smokestacks and coal mines and reallocate their locations to solar panels and wind farms – and possibly the production of electric vehicles and green hydrogen.

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This would create jobs that would help compensate for the hundreds of thousands of people who would be lost in the coal sector.

If successful, it could be a model for other emerging coal-dependent economies in the global fight against climate change. Read more

South Africa has requested mainly grants, but international partners are instead offering loans at below market rates. Only less than a fifth would be documents, usually for tech support, the person familiar with the matter told Reuters.

The person, who spoke on condition of anonymity because discussions were confidential ahead of the November deadline to complete the deal, said South Africa’s status as a middle-income country limited its access to grants, noting that loan rates had yet to be decided.

The 80% figure, which could still change as talks continue, has not been released, but there have been reports of international partners willing to offer loans primarily to South Africa.

Financial guarantees for private investors willing to support the agreed projects are also part of the offer.

The European Commission and the British government, among the main architects of the project, did not comment on this subject.


It may also be difficult to release funds from multilateral institutions included in the pledge due to South Africa’s procurement rules, which protect local businesses and workers, the source said.

This raises concerns over the $1 billion commitment from the European Investment Bank (EIB), the EU’s financial arm.

The EIB can only fund projects with a limited preference for local content in tenders, which is likely against South Africa’s rules, the person said.

The bank made no official comment, but an EIB official said talks over its more than 10% share of the funding plan were at an “early stage”, despite an agreed November deadline.

While talks continue, South Africa has not finalized its list of projects eligible for foreign funding. It has also not yet specified the total cost of greening its energy system – an academics estimate the figure at $250 billion – the source and a second official said. Read more

The investment plan, with an estimate of long-term costs, is to be agreed with partners at the annual UN climate conference in Egypt in early November.

“Our work is progressing according to the timelines previously indicated,” said former central bank governor Daniel Mminele, who chairs the investment plan task force, declining to give further details.

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Reporting by Francesco Guarascio Editing by Tim Cocks and Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.


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