World Bank approves $1bn loan for South Africa’s energy reforms

Johannesburg, 25 October 2023 (TDI): The World Bank announced that its board had approved a $1 billion loan to aid South Africa in revitalizing its energy sector. This financial support is aimed at assisting the country in addressing the recurring power shortages that have hindered its economic growth

South Africa has been grappling with a series of power interruptions, and this financial infusion is poised to be a game-changer in mitigating these challenges.

The World Bank’s commitment to assist in this transformation underscores its dedication to fostering sustainability and progress in the region.

The primary objective of this substantial financial aid is to underpin South Africa’s ongoing efforts to restructure the ailing Eskom and usher in an era of a low-carbon economy.

This monumental step towards energy reform is a testament to the World Bank’s commitment to sustainability, as outlined in its official statement.

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Marie Francoise Marie-Nelly, Director for South Africa at the World Bank, conveyed her excitement about this development, stating, “This loan will significantly benefit the people of South Africa, particularly the most vulnerable households, the national economy, the environment, and expedite the transition to cleaner energy sources.”

Her remarks underscore the comprehensive positive impact this initiative seeks to achieve.

Eskom, South Africa’s predominant energy provider, has struggled with operational challenges, particularly the frequent breakdowns of its coal-fired power stations.

These issues have often resulted in debilitating power outages, lasting up to 10 hours a day. Furthermore, some Eskom plants have fallen short of government emissions standards, posing environmental concerns.

In light of these challenges, The World Bank’s Development Policy Loan is projected to be a pivotal catalyst for change.

Moreover, by reducing South Africa’s reliance on coal for power generation, the loan aims to contribute to a gradual reduction in both water and air pollution, marking a significant step forward in the transition towards a cleaner, more sustainable energy landscape.

The South African government has been unwavering in its commitment to energy sector reforms. A key milestone on this journey was the decision in 2019 to restructure Eskom into three separate subsidiaries, focusing on transmission, generation, and distribution.

Moreover, in February, the government took on a substantial portion of Eskom’s debt, effectively averting a potential default by absorbing R254 billion, more than half of the utility’s total debt.