The United Kingdom may extend a $1 billion (about R17 billion) debt guarantee to South Africa as part of efforts to help the country shift to cleaner energy. The guarantee, first approved in late 2023, is due to expire at the end of this year even though it has not yet been used. Officials now say discussions are underway to keep the arrangement alive, at a time South Africa continues to negotiate with the African Development Bank (AfDB) over a $400 million (R6.8 billion) loan to support municipal water and electricity services.
The UK’s Foreign, Commonwealth and Development Office (FCDO), in response to questions from journalists, confirmed that talks are ongoing. The department explained that Britain is looking at options to maintain its commitment to South Africa’s decarbonisation efforts beyond the expiry date. This commitment forms part of international climate funding aimed at helping developing nations adapt to global energy reforms.
The guarantee was created as a segment of an $8.3 billion (R142 billion) climate finance agreement known as the Just Energy Transition Partnership (JETP). The pact was signed in 2021 between South Africa and some of the world’s richest countries, including the UK, France, Germany and the United States. The goal is to support South Africa in reducing its heavy dependence on coal, which currently provides around 80 per cent of its electricity supply. Coal reliance has made South Africa one of the highest greenhouse gas emitters on the continent, and global climate partners see its transition as crucial to meeting emission targets.
However, the implementation of the JETP programme has been slow. Government officials and analysts say a major challenge has been the lack of suitable projects that meet funding conditions. There are also concerns over governance, utility inefficiencies, and policy uncertainty affecting the country’s energy sector. Despite the delays, Germany and France have already released concessional loans to South Africa’s National Treasury in line with their climate pact commitments. All partner countries have also provided grants to support research, capacity building and technical projects linked to renewable energy and infrastructure upgrades.
Meanwhile, the United States withdrew from the agreement earlier this year following the inauguration of President Donald Trump. Washington’s exit created a funding gap in the partnership, leading partner nations to assess how to adjust financial commitments and policy support.
South Africa’s National Treasury confirmed that negotiations are ongoing with the AfDB over the $400 million loan. However, it did not clarify whether Pretoria is seeking a formal extension of the UK guarantee. Efforts to obtain comments from the AfDB produced no response. The UK’s FCDO also declined to answer questions specifically related to the AfDB loan discussions.
According to the Treasury, the loan being pursued would be used to address high levels of electricity and water losses in municipalities. It will also support infrastructure upgrades in four municipal areas in Mpumalanga, a province that hosts most of the country’s coal mines and coal-fired power stations. Mpumalanga remains a central battleground for South Africa’s energy transition policy due to its dependence on coal jobs and coal-linked industries.
Historically, most South African municipalities have delivered water and electricity services without major private sector involvement. But under the new proposal supported by the AfDB, the loan is expected to help drive private sector participation. Treasury officials said part of the programme is focused on performance-based contracts that encourage private companies to deliver improved results in areas such as water treatment, metering, distribution and electricity management.
According to Treasury, the goal is to reduce service delivery failures, improve infrastructure reliability and minimise financial losses at municipal level. Analysts say this development aligns with wider reform efforts in South Africa’s power sector, where policymakers are encouraging independent power producers to help stabilise energy supply.
Observers say the unresolved state of the UK guarantee reflects the complexity of South Africa’s transition movement. While funding pledges have been made, project readiness, governance and economic stability are key stumbling blocks. International donors want to see bankable green projects, while local authorities argue that more time and technical support are needed to bring such projects to life.
With pressure rising on South Africa to cut emissions and diversify its energy mix, the UK decision on extending its guarantee could influence confidence among other funding partners. Climate watchers believe that the outcome of the talks may determine momentum for key projects linked to green energy, infrastructure upgrades and municipal reforms over the coming year.
