West News Wire: According to a Thursday Bloomberg article, Spain has pledged to offer €2.1 billion ($2.3 billion) in loans and grants for South Africa’s energy transition and water projects to aid the continent’s largest industrialized nation in moving away from coal.
The agreement mandates a 30% return to Spanish businesses in the form of ownership or purchasing power.
The money will prioritize solar and wind energy projects and support the manufacturing of environmentally friendly hydrogen and electric vehicles in addition to programs for water and sanitation.
With 80% of its electricity coming from coal, South Africa is one of the nations with the highest dependence on the fossil fuel. In this nation, coal is directly responsible for at least 100,000 jobs. In the meantime, the country’s outdated and poorly maintained coal-fired power plants struggle to satisfy peak energy demand.
The funds will be provided through discounted loans, risk insurance and capital investments, according to Spanish Ambassador to South Africa Raimundo Robredo Rubio. Madrid has promised to provide €15 million ($16.4 million) in grants for feasibility studies.
“This is the first time in history we have done something like this,” Robredo said in an interview.
In October 2022, the Spanish government’s development finance institution Cofides signed a cooperation agreement with South Africa’s Industrial Development Corp (IDC) to accelerate the nation’s green transition. However, the amount of investment and funding instruments have yet to be finalized.
According to Robredo, capital investment will be managed together with Cofides and the IDC, with clear exit prices and dates, Robredo said. He added that, while green projects would be fully financed, the deal requires a 30% return to Spanish companies in the form of equity or procurement.
The Spanish initiative follows a separate $8.5 billion funding package from the EU, the UK and the US. Known as South Africa’s Just Energy Transition Partnership (JETP), the project has been presented as “a pioneering example” of how wealthy nations can help developing countries to cut their dependence on coal.
Meanwhile, the South African government has criticized the structure of the JETP finance package, saying it relies too heavily on loans that will add to the country’s debt burden.