EIB in talks with SA over Transnet loan

The European Investment Bank said it’s in talks to loan South Africa money to upgrade its port and freight-rail infrastructure as its first contribution to a decarbonization pact known as the Just Energy Transition Partnership.

The loan, the size of which the EIB didn’t disclose, is part of its €1 billion ($1.07 billion) commitment to the JETP, it said in a response to queries on Thursday. The agreement to help South Africa transition away from the use of coal consists of $8.8 billion in climate finance pledged by the European Union, via the EIB, France, Germany, the US, UK, Netherlands and Denmark.

Read: SA completes key step to receive climate funds

“This potential investment would aim to support South Africa’s ambitious decarbonisation efforts under the JETP, while boosting economic growth through more efficient and reliable freight transport,” the EIB said.

The loan talks come at a time when South African shipments of coal and iron ore, two of its biggest exports, are being constrained by an unreliable freight-rail system and fruit destined for overseas markets is rotting in some of the world’s most inefficient ports.

Read all our Transnet coverage here.

EIB loans are made “at a favourable rate” and would possibly be complemented by grant finance from the European Commission, the bank said.

National Treasury and Transnet, its state logistics company, didn’t respond to requests for comment.

The JETP, which was agreed in 2021, is seen as a prototype for similar agreements between some of the world’s richest nations and coal-dependent nations such as Indonesia and Vietnam.

South Africa, which relies on coal for more than 80% of its power, is also aiming to boost its output of renewable energy, expand its transmission grid and develop electric-vehicle and green-hydrogen industries.

In November and December, in agreements separate to the JETP, the EIB agreed to lend the state-owned Development Bank of Southern Africa €300 million ($322 million) so that it can finance private-sector renewable energy projects in South Africa.

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