The World Bank grants SA $1bn loan for energy reform.
World Bank grants SA $1bn
The primary objective of this funding is to facilitate the restructuring of the power sector. This will be achieved through the unbundling of Eskom, a state-owned utility. The World Bank’s support is aimed at opening up the power market and enhancing Eskom’s efficiency. This will be done by redirecting Eskom’s resources towards investments in transmission and maintenance of existing power plants.
South Africa currently relies heavily on coal for its electricity generation, which has led to regular power cuts due to the age and unreliability of Eskom’s plants. The plan to split Eskom into separate entities responsible for generation, transmission, and distribution is intended to restore the company’s profitability and allow more private producers to contribute to the grid.
Encouraging Low-Carbon Transition
In addition to restructuring the power sector, the World Bank also plans to support a low-carbon transition. This will be done by encouraging private investment in renewable energy sources, including investments made by households and small businesses. The World Bank also plans to strengthen carbon pricing instruments as part of this initiative.
Fiscal and Technical Support
Mmakgoshi Lekhethe, National Treasury’s deputy-director general for asset and liability management, has stated that this loan will provide much-needed fiscal and technical support. In addition to financial assistance, South African authorities will also receive technical assistance to identify future reforms necessary to manage the social costs associated with decommissioning coal-fired power plants.