By: The electricity hub

South Africa will receive a €500 million ($583 million) loan from German development bank KfW to support the urgent expansion of its electricity grid and accelerate renewable energy reforms.

German Federal Minister for Economic Cooperation and Development, Reem Alabali Radovan, confirmed the agreement with the South African government, stating that the loan will support critical reforms to strengthen the country’s energy sector and encourage private investment.

The funds, raised entirely from market sources, will help build the infrastructure needed to integrate solar and wind power into the national grid.

“The partnership with South Africa supports climate change mitigation while creating real opportunities for German and South African businesses,” Radovan said. “German companies are already active in South Africa’s solar market, supplying technology, machinery, and expertise that benefit both sides.”

Enrico Brandt, the deputy head of mission at the German Embassy, underscored the importance of cross-border collaboration during his engagement at the Africa Green Hydrogen Summit. He emphasised that grid expansion will stabilise South Africa’s energy supply and emphasised investment potential.

The first stabilising part of the broader Just Energy Transition Partnership (JETP), launched in 2021, brings together Germany, the UK, France, the Netherlands, Denmark, and the EU to support South Africa’s clean energy ambitions. Under the JETP, South Africa has committed to phasing out coal and scaling up renewable energy deployment, with plans to build over 14,000 kilometres of new transmission lines by 2032.

In addition, South Africa signed a $474.6 million loan agreement with the African Development Bank (AfDB) to support the implementation of the Just Energy Transition. The financing also forms part of the third Development Policy Operation, which includes contributions from the World Bank, KfW, Japan’s JICA, and the OPEC Fund.

According to the National Treasury, the agreement builds on a previous policy loan completed in 2023 and reflects the government’s focus on structural reforms that enhance infrastructure efficiency, resilience, and sustainability.

“This partnership strengthens our efforts to improve energy security, accelerate decarbonisation, and deliver inclusive economic growth,” the Treasury stated. “With AfDB’s continued support in helping us implement critical reforms and meet our development goals.”

With over 600 German companies operating in South Africa, both governments expect the strengthened energy partnership to unlock mutual economic gains while advancing climate and energy security objectives.