AfDB president Akinwumi Adesina, who is on a three-day charm offensive in South Africa that started on Tuesday, also came bearing a R42.5bn pledge from the multilateral financier on Thursday for President Cyril Ramaphosa’s Investment Conference. This was the largest pledge made at the conference across all segments.
READ MORE Africa's Great Green Opportunity
“Net zero cannot be done with zero financing. We supported [Eskom’s] Medupi coal power plant, now we will support the drive towards renewable energy for South Africa in its drive towards net zero emissions,” said Adesina in an address delivered at the fourth edition of the Investment Conference held at the Sandton Convention Centre.
A Ramaphosa brainchild, the conference first kicked off in 2018 with the aim to raise R1.2 trillion in investments over five years from domestic, regional, and international investors.
As part of his three-visit, Adesina held meetings with President Ramaphosa, G7 ambassadors credited in South Africa, and the African chapter of the Ambrosetti CEO Community, as well as made the address at the Investment Conference.
Adesina has been accompanied by a high-powered delegation of the bank’s senior executives: Swazi Tshabalala, Solomon Quaynor, Yacine Fal, Kevin Kariuki, and Leila Mokaddem.
“The … [AfDB], working in partnership with international partners, especially the G7 countries, plans to establish a Just Energy Transition Facility that will support South Africa to raise at least $27bn in support of its energy transition into renewable energy,” said Adesina to rousing applause at the Sandton Convention Centre.
“We will do it, without South Africa getting into debt,” added the AfDB president.
As the continent’s most industrialised economy, South Africa is the region’s largest producer of greenhouse gas emissions and is among the top 20 emitter countries in the world. The country’s primary source of energy is coal-fired electricity produced by state-owned utility Eskom, which has a monopoly in the sector.
However, at last year’s COP26 in Glasgow President Ramaphosa committed the country to a transition away from coal power to greener sources.
Over the next three years, the AfDB is preparing R6bn towards support for Eskom’s transition to renewable energy, according to Adesina.
Walking the funding talk
“I am delighted to announce that the … [AfDB] will commit R42.5bn in South Africa over the next five years. The African Development Bank believes in South Africa,” Adesina said.
The AfDB’s financing will support public and private sector investments in agriculture, renewable energy, transport, youth employment, health, vaccines, and manufacturing.
The AfDB’s current portfolio in South Africa totals $3.2bn:
- Financing to the private financial sector amounting to R16.5bn ($1.1bn), including support to the Development Bank of Southern Africa and lines of credit and trade finance facilities for leading domestic banks.
- A R6.2bn ($413m) loan to Transnet, the state-owned freight rail and logistics company that operates the country’s ports and port terminals.
- A total of R48bn ($3.2bn) for the energy sector, including Eskom’s capital expenditure and the Medupi power project.
Said Adenisa: “We have … gradually shifted our financing towards renewable energy. We supported the 100MW Sere wind farm with R884.9m ($69m) and the Xina 100MW solar concentrated power plant with R1.45bn ($97.1m). Last year we financed the Red Stone 100MW solar project with R2.3bn ($152m).”
President Ramaphosa acknowledged during the Investment Conference that “… [no] economy can operate without a reliable supply of electricity.” “That is why we have undertaken the most extensive transformation of our energy sector in nearly a century.”
To prepare for South Africa’s energy transition, Ramaphosa has set up a Presidential Climate Finance Task Team to lead the mobilisation of funds.
Daniel Mminele, a career central banker and the former CEO of big four bank Absa, will head the task team. The task team will lead engagements on the R131bn just transition partnership with the European Union, France, Germany, UK and the US.
“This partnership will involve repurposing and repowering some of the coal plants that are reaching the end of their lives, and creating new livelihoods for workers and communities most impacted by this change,” Ramaphosa explained.
Hitting the mark
Ramaphosa also revealed that the fourth instalment of the Investment Conference has helped his administration reach 95% of the R1.2-trn target.
“The 80 investment pledges at today’s [Thursday’s] conference come to a total of R332bn. With the pledges we have received today – and with cancellations and additions we have heard about from investors in previous conferences – we have now taken the total level of investment pledged at the four Investment Conferences to R1.14-trn,” Ramaphosa said.
Some of the largest pledges received at Thursday’s Investment Conference by sector came from: Scatec, R16bn in the energy sector; Ford, R16.4bn in the automotive sector; Renergen, R14bn in the mining beneficiation sector; Biovac, R2.5bn in the healthcare and pharmaceutical sector; Telkom, R7bn in the infrastructure, property and logistics sector; and the New Development Bank, R21.7bn in the development finance institutions sector.
“With just one year left to go, we have now reached 95% of the ambitious target we set,” said the South African president.
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