African Development Bank Approves $474.6 Million Loan to support South Africa’s Infrastructure Governance and Green Growth

The Board of Directors of the African Development Bank Group has approved a $474.6 million loan for South Africa’s Infrastructure Governance and Green Growth Programme (IGGGP). This financing marks a significant milestone in the country’s transition toward a sustainable, low-carbon economy.

This IGGGP is the second phase of the Bank’s strategic support for South Africa’s Just Energy Transition. It builds on the success of the $300 million Energy Governance and Climate Resilience Programme, approved in 2023, which delivered key reforms that bolstered financial stability and increased renewable energy capacity.

Structured around three interconnected pillars: enhancing energy security through power sector restructuring, supporting a low-carbon and just transition, and improving transport efficiency – the IGGGP is designed to accelerate South Africa’s green transformation and promote inclusive, resilient growth. South Africa’s Minister of Finance, Enoch Godongwana, described the Bank’s support as valuable.

“Our country faces the significant challenge of energy shortages, leading to loadshedding, as well as significant transport bottlenecks, which have been detrimental to growing our economy and achieving our developmental aspirations. With your partnership, our government has committed itself to stay the course and implement these critical reforms in the energy and transport sectors, while endeavoring to achieve our international commitments on climate change and our JET objectives,” he said.

The IGGGP also places strong emphasis on green industrialization, skills development, and job creation, including support for electric vehicle manufacturing and green hydrogen production. Recent estimates from the IMF show that South Africa’s Just Energy Transition could boost the country’s GDP growth by 0.2 to 0.4 percentage points annually between 2025 and 2030.

“This approval represents more than financing — it’s a blueprint for Africa’s energy future,” said Kennedy Mbekeani, African Development Bank Group’s Director General for Southern Africa. “South Africa’s success in building a just, green, and inclusive energy system demonstrates that sustainable development and economic growth can go hand in hand.”

This financing includes targeted grant components to promote energy efficiency initiatives and advance rail sector reforms. Key priorities include accelerating vertical separation and establishing an investment framework to revitalize South Africa’s freight and logistics systems. These efforts are expected to strengthen competitiveness of the transport sector and contribute to regional integration and economic growth across the Southern African Development Community.

As an advanced economy in Africa and a regional power hub, South Africa’s success in its energy transition could catalyze similar transformations across the continent. Its experience integrating renewable energy, modernizing its grid, and implementing just transition policies will provide valuable lessons for other African nations pursuing sustainable development goals.

The initiative incorporates comprehensive environmental and social safeguards, with a particular focus on gender and youth empowerment. Women will constitute 70% of the beneficiaries of the expanded Social Employment Fund, and dedicated youth skills programmes will equip the next generation for emerging opportunities in the green economy.

The success of the IGGGP will contribute to several United Nations Sustainable Development Goals, including affordable and clean energy (SDG 7), decent work and economic growth (SDG 8), industry, innovation, and infrastructure (SDG 9), and climate action (SDG 13).

The African Development Bank’s support forms part of a historic $2.78 billion international financing package that includes $1.5 billion from the World Bank, €500 million from Germany’s KfW, up to $200 million from Japan’s JICA, and an expected $150 million from the OPEC Fund. This coordinated financing underscores the global significance of South Africa’s energy transition, particularly under its G20 presidency. The programme aligns with South Africa’s updated Nationally Determined Contributions under the Paris Agreement, which targets reducing greenhouse gas emissions to 398–510 million tons of CO₂ equivalent by 2025 and 350–420 million tons by 2030.