Germany pledges over R50bn to SA’s Just Energy Transition

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JIMMY MOYAHA: South Africa continues with its Just Energy Transition programme objectives – and in those objectives, attracting more investment towards Just Energy Transition objectives and goals seems to be front of mind. To that extent, Germany has confirmed that they are currently in talks with South Africa for a further €720 million, around R12 billion, in climate-related concessional loans that would be advanced to the South African economy.

For more on this, I’m joined on the line by the Deputy Ambassador from Germany to South Africa, Enrico Brandt, to take a look at this and see what to make of it. Enrico, lovely having you on the show. Thanks so much for taking the time.

Let’s perhaps start with an overview of the relationship that South Africa and Germany enjoy, where it relates to these types of conversations. We know that the Just Energy Transition is a global initiative, not specific to South Africa, but we also know that from the Just Energy Transition programme, South Africa was the first country to be onboarded for that specific programme at a global level.

Where does our relationship stand with Germany and indeed with the European Union at the moment?

ENRICO BRANDT: Thank you for having me. Indeed, the context is important to better understand this Just Energy Transition Partnership [JETP].

In 2021, the South African president [Cyril Ramaphosa] approached a couple of countries, including Germany, and he spoke of the energy transition he wanted for his country, South Africa, and that loans and technical expertise were needed to implement it and to accelerate this transition.

So Germany and other countries, among them France and the UK, the United States and the EU, agreed to cooperate on that, and the Just Energy Transition Partnership was born.

It is, as you rightly said, the first one. We have this model now extended to some other countries.

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The question is why did we agree, the Germans? I think it is important to understand that at the time, the energy production of South Africa was completely coal-based. South Africa being [the] number 12 worldwide emitter of greenhouse gases and even with that, it had a supply problem. So if it was able to do more, it would have done even more emissions and so on, and these emissions have a global effect.

So it makes sense for us to assist in reducing these emissions.

As you said, there were quite high numbers being discussed when it came to loans and grants. It is true, we committed ourselves to €2.7 billion [R51.2 billion]. This is exactly as you said, more than 2.5 times the original commitment that we made in 2021.

JIMMY MOYAHA: Deputy Ambassador, I want to look at the commitment that Germany has made initially, of course, we did expect just shy of €1 billion [R19 billion] in commitment. That was the initial amount. That amount has increased significantly, as you said, more than two times.

Can you take us perhaps through, from your perspective, the rationale behind that commitment? It does speak to an element of confidence in the efforts that are going to be put in, or that are being put in at the moment, from a South African perspective.

But it also does strengthen and speak to a deepening of ties and relationships where it relates to actively being more than just transitioning in word, but in action too.

ENRICO BRANDT: Yeah, definitely. This more than doubling of our original commitment is a response to this strong South African demand for this financing of the Just Energy Transition Partnership.

It turned out that what was proposed by the South African side made sense for us and our financing institutions.

They said, okay, under these circumstances, we can allocate this amount of money for South Africa.

I think it’s not a bad investment for Germany, although it must be said and really pointed out that the loans are offered at very, very below-market rates.

So this is what we had offered to South Africa, and the National Treasury, as you know, they certainly know how to do maths, and they agreed. Yeah, it made sense. So we allocated these loans to these conditions.

JIMMY MOYAHA: Deputy Ambassador, can we take a look at the funding mechanisms? You touched on the fact that the loans are offered at very attractive and affordable rates, and ideally, that is what we hope concessional loans will look like.

Can we perhaps look at the funding mechanisms, because earlier on you touched on the fact that some of the support is in the form of grants, some of it is in the form of technical expertise. Why the loan factor? If we are looking to have these transitions take place on a global scale and we’re looking to have meaningful commitments, why concessional loans as opposed to other forms of funding mechanisms?

ENRICO BRANDT: Well, among these concessional loans, we established, along with the South African partners, to have so-called policy-based loans.

So they work in this way, that if South Africa meets certain benchmarks when it comes to the liberalisation of the electricity market and the implementation of the respective regulations, then the loan will be given.

The policy-based loans are the biggest part in this financial cooperation. We are talking about three loans so far: one of €300 million, one of €500 million, and the next one of again €500 million.

You see the interest rates, they are between 2.8% and 4.31% currently.

If you are a homeowner or another person who looks for a loan at the bank, you know that these are very, very good interest rates for that. It works for both sides, so to say. Therefore, we found something to agree on in this regard.

You mentioned the grants. It’s true. We have €125 million in grants that were allocated at the beginning, and now we have pledged €314 million allocated. Indeed, these are linked to projects and initiatives that, for instance, are such as the technical assistance that we provide when it comes to the nitty-gritty of this energy transition.

JIMMY MOYAHA: Ambassador, before I let you go, I want to take a look at how this particular partnership and how this deployment of capital at a state level allows you to be able to take this model to other countries.

What, from a South African perspective, have you been able to see and learn that allows you to then say, this is the type of support that we can sustainably roll out to other emerging market countries and South Africa is a good example thereof?

ENRICO BRANDT: Yeah, I would say South Africa is a very good example. Each and every cooperation in that field needs to be seen for its own merits. But we keep saying, if the Just Energy Transition Partnership works in South Africa, it might work in other places as well.

I can say that this kind of partnership is the most advanced that we have worldwide, and we have put a lot of effort into it.

Why is that? I think we see a genuine, a real commitment to change things in South Africa.

I have to applaud South Africa and the administration, and all people concerned that, for instance, this load shedding has ended.

That we have now other times, I know there are some more bottlenecks and challenges ahead of us, but this is already a big thing.

You have now 13.5% of your electricity production made by renewables. Before that, it was close to zero.

So you can see progress and we are very hopeful that you can see even more progress in the years to come.

JIMMY MOYAHA: Clear progress is evident in South Africa’s Just Energy Transition initiatives, and that progress is what continues to provide confidence to the likes of Germany and our global partners, that South Africa is the right partner to take this Just Energy Transition Partnership forward with.

We’ll leave the conversation on that note. Thanks so much to the Deputy Ambassador to South Africa from Germany, that’s Ambassador Enrico Brandt, for joining us to take a look at Germany’s increased commitment to helping South Africa in its Just Energy Transition initiatives.

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