South Africa and the African Development Bank (AfDB) have signed a $475mn loan agreement aimed at supporting the implementation of the Just Energy Transition (JET) in the continent's biggest carbon emitter.

The finance ministry said in a release on July 24 that the facility is part of the third Development Policy Operation which includes participation from the World Bank, KFW Development Bank, Japan International Cooperation Agency, and the Organisation of the Petroleum Exporting Countries Fund for International Development (OPEC Fund) to support structural reforms to enhance the efficiency, resilience, and sustainability of the country’s infrastructure services.

The $474.6mn loan agreement follows the first policy loan concluded in 2023 to support South Africa's JET.

"This new agreement highlights the importance of South Africa’s partnership with the AfDB in advancing South Africa’s development agenda. It strengthens efforts to improve energy security measures, accelerate the decarbonisation of the economy, and enhance the socio-economic benefits of the energy transition enabling inclusive economic growth and fostering job creation," said the statement.

South Africa, the continent's largest and most advanced economy, accounts for 33% of air pollution in Africa, according to the Development Bank of Southern Africa.  It ranks 14th globally mainly because it generates about 85% of its electricity from coal-based facilities.

South Africa thanked the funder for its continued support.

"This includes efforts to implement critical reforms in the energy and transport sectors, while also advancing the country’s Just Energy Transition goals and meeting foreign currency commitments at lower interest rates," it noted.

The loan, which it said offers favourable terms, has a three-year grace period, a tenure of 15 years and a daily secured overnight financing rate plus 1.22%.