AfDB on Drive to Raise $40 Billion to Wean South Africa Off Coal

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JOHANNESBURG (Capital Markets in Africa) – The African Development Bank plans to help mobilize as much as $40 billion to help coal-dependent South Africa’s to transition to cleaner energy, part of a plan that it says won’t add to the country’s debt and could serve as a model for other nations.

The lender, which didn’t give details on how the money would be raised, has been meeting members of the Group of Seven rich nations  — which pledged $8.5 billion last year for the most industrialized country on the continent to move away from the dirtiest fossil fuel — to raise additional resources, Akinwumi Adesina, the AfDB’s president, told reporters on Friday.  South Africa’s government has stressed a deal to use such funding will only be accepted if the terms are better than it would get from commercial borrowing. State-owned Eskom Holdings SOC Ltd., which generates almost all the nation’s power from coal-fired power plants, is reliant on state bailouts to pay interest on its 396 billion rand ($25 billion) of debt.

“We will do it in such a way that South Africa will not get into any debt — that’s a very important point,” Adesina said, without specifying how that target will be achieved. The G-7, other nations, foundations and philanthropic institutions needs to raise $17.5 billion of grants, concessional financing and guarantees, for South Africa, he said. The AfDB would then “use our business model” to more than double that amount, he said. 

The bank plans to establish an energy transition facility that will be used for any African nation in order to receive concessional funding and guarantees, he said. 

“That allows us to have a special-purpose vehicle that we can use to raise money on the capital markets,” Adesina said. The facility can then be used to transition all the coal-based and heavy-fuel power generation in Africa to a greater use of renewables.

Job creation and how such transitions affect the communities supported by the coal industry are an essential aspect of the undertaking. 

“We’re dealing with lives of people and families, so we need to have the money in hand and we are working with South Africa to make sure that works,” he said. “If we get it right in South Africa, we’ll get it right everywhere else.”

Still, South Africa will likely need $250 billion to transition to green energy over the next three decades, according to a May 27 report by the Blended Finance Taskforce and the Centre for Sustainability Transitions at Stellenbosch University. 

Source: Bloomberg Business News

 

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