• November 4, 2023 1:29 am

World Bank Discussing $1 Billion Loan to Alleviate Load Shedding in South Africa

Oct 16, 2023
World Bank Discussing $1 Billion Loan to Alleviate Load Shedding in South Africa

The World Bank is in discussions regarding a potential $1 billion loan to assist South Africa in restructuring its energy sector. The aim is to address the persistent power shortages that have had a severe impact on the nation’s economy.

World Bank Discussing $1 Billion Loan to Alleviate Load Shedding in South Africa

Urgent Need for Reform

South Africa is currently grappling with a severe power crisis, primarily caused by frequent breakdowns in Eskom’s aging coal-fired power plants. These recurring issues have resulted in a significant strain on economic growth and have driven increased investment in renewable energy by the private sector.

Focus on Critical Reforms

Marie-Nelly, a bank official, described the proposed funding as a “policy development loan” that would support essential reforms. The primary focus is on improving the transmission infrastructure, as this is a key impediment to accommodating new capacity, which will largely be developed by private sector entities.

Restructuring and Debt Relief

The South African government previously agreed to undertake over R254 billion of Eskom’s debt through a debt relief program, subject to specific conditions. One of the main conditions is that Eskom cannot incur new debt for three years without approval from the country’s finance minister.

Transitioning Away from Coal

In 2019, the government committed to dividing Eskom into three subsidiaries: transmission, generation, and distribution. Eskom announced that its transmission division would not be fully operational until 2025.

The potential World Bank loan aims to support South Africa in making a “just transition” away from coal, ensuring that vulnerable populations are not adversely affected.

Addressing Climate Concerns

The government is also considering the broader climate agenda, including aspects like the carbon tax.

Decommissioning Coal-Fired Power Plants

In November 2022, the World Bank approved $497 million in financing to facilitate the decommissioning and repurposing of one of Eskom’s coal-fired power plants. This demonstrates a commitment to cleaner and more sustainable energy sources.

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