- The World Bank’s $1 billion loan would also support South Africa’s transition from coal.
- South Africa is facing its worst power crisis, with Eskom’s ageing coal-fired plants often breaking down.
The World Bank is in talks about a potential $1 billion loan to help enable South Africa to reform its energy sector, a bank official told Reuters. This is as the country tries to overcome record power cuts that have weakened the economy. In an interview in Marrakech, Morocco, the World Bank director for South Africa, Marie Francoise Marie-Nelly, said the loan, which would be directly to the government rather than to state utility Eskom, is under discussion.
South Africa is facing its worst power crisis, with Eskom’s ageing coal-fired plants often breaking down. Rolling power cuts have crimped economic growth while fuelling private investment in renewable energy. Declining to specify a timeframe, she said, “It is going to come very soon. It’s a policy development loan which supports critical reforms. There’s a particular focus on transmission because it is a stumbling block in bringing new (capacity) that will be built mainly by the private sector.”
In February, the South African government agreed to take over R254bn of Eskom’s debt through a debt relief scheme, subject to conditions. The main condition was that the power utility would not take on any new debt for three years unless approved by the country’s finance minister. In 2019, the government pledged to split Eskom into three subsidiaries – transmission, generation and distribution. Eskom said in August that its transmission arm would not be operational until 2025.
The World Bank loan would also support South Africa to transition away from coal. Marie-Nelly added that this ensures vulnerable people do not suffer as a result. She said the government was also considering the broader climate agenda, including the carbon tax. In November 2022, the World Bank approved $497 million in financing to decommission and repurpose one of Eskom’s coal-fired power plants.