Germany and South Africa Deepen Ties with €500 Million Loan to Support Just Energy Transition

29 July 2025 | Pretoria, South Africa — In a significant boost to South Africa’s efforts to accelerate a sustainable and inclusive energy future, German Cooperation has concluded a €500 million public policy loan through the KFW Development Bank to support the country’s Just Energy Transition (JET). The loan, finalised in collaboration with South Africa’s National Treasury, forms part of the third Development Policy Operation (DPO) supported by international partners including the World Bank, African Development Bank, Japan International Cooperation Agency, and the OPEC Fund.

The financial support is aimed at promoting structural reforms in South Africa’s energy sector and advancing climate change mitigation, while bolstering the efficiency, resilience, and sustainability of the country’s critical infrastructure services.

This latest agreement builds on Germany’s longstanding commitment to South Africa’s energy transition agenda, following two earlier policy loans concluded in 2022 and 2023. With a total of €1.3 billion committed through three development policy loans via KFW, Germany is fulfilling its pledge made at COP26 under the Just Energy Transition Partnership (JETP). The broader package also includes technical assistance and grants, reflecting a comprehensive approach to supporting South Africa’s decarbonisation ambitions.

Finance Minister Enoch Godongwana welcomed the agreement, stating:

“Our partnership with Germany and KFW remains critical to our national development agenda. This latest loan represents a significant step in securing our energy future, promoting decarbonisation, and ensuring that disadvantaged communities benefit from the energy transition. It enables inclusive growth and lays the foundation for job creation.”

The Minister also acknowledged the urgent need for further institutional and policy reforms within the energy sector to foster an enabling environment that attracts sustainable investment and accelerates the energy transition.

Cornelia Tittmann, KFW’s Country Director for South Africa, expressed confidence in the partnership:

“This loan supports the Government of South Africa’s ongoing commitment to energy sector reforms aligned with its climate targets. It also enables private sector participation, opening new pathways for German-South African economic cooperation. We thank National Treasury for its leadership and strong collaboration over the past four years.”

She further noted that the loan offers favourable concessional terms to facilitate long-term impact:

• Nominal Value: €500 million
• Maturity: 13 years with a 3-year grace period
• Interest Rate: Fixed at 4.31%

The financing forms part of a broader government strategy to implement structural reforms, strengthen public institutions, attract private sector investment, and improve service delivery in key sectors.

As the world looks to South Africa as a pivotal player in global climate action, this milestone loan underscores the country’s commitment to a balanced, equitable transition that addresses both environmental and socio-economic imperatives.