The United Kingdom and the African Development Bank (AfDB) have extended a $1 billion climate-linked debt guarantee to South Africa, securing a $400 million municipal financing deal that was at risk of expiring at the end of 2025.
The guarantee ensures that the financing can proceed as planned, supporting the Municipal Utility Reform Project and other low-carbon infrastructure initiatives.
In a statement, the British High Commission said the extension was made to enable the government of South Africa to deliver the Municipal Utility Reform Project and to develop other low-carbon infrastructure projects this year.
The support forms part of the Just Energy Transition Partnership (JETP), a climate-finance pact between South Africa and several wealthy nations, including the UK, France, Germany, the European Union, and previously the United States.
Allocation of funds under the partnership
The JETP was first announced at COP26 in Glasgow in 2021, aimed at supporting South Africa’s transition from coal to cleaner energy while funding social and economic measures for communities affected by coal industry changes.
The partnership combines grants, concessional and commercial loans, and guarantees, with an initial funding target of roughly $8.5 billion, later expanded to about $10 billion by international partners.
According to the framework, these funds are allocated to coal plant retirements, renewable energy projects, electricity infrastructure upgrades, and employment programs for affected workers.
South Africa’s Just Energy Transition Investment Plan (JETP IP) outlines the distribution of funds between 2023 and 2027.
It identifies key projects in municipal utility reform, grid upgrades, renewable energy deployment, and skills development for coal-dependent communities.
Government officials reported that, by early 2026, only a portion of the pledged funding had been deployed, with some initiatives awaiting approvals and financial backing.
AfDB loan targets municipal losses
The $400 million loan from the African Development Bank (AfDB), secured by the UK guarantee, will support municipal utility reforms across South Africa.
Projects funded by the loan focus on upgrading electricity and water distribution networks, reducing technical and commercial losses, and improving service delivery in local municipalities.
The guarantee enables local governments to maintain progress on ongoing infrastructure upgrades and continue implementing reforms that had been at risk due to funding delays.
What you should know
South Africa has established institutional and intergovernmental committees to oversee the JEPT implementation across sectors, including electricity, skills development, and provincial planning.
The Department of Finance noted that the UK guarantee extension will allow the country to keep projects on track and a broader plan to release funds while following donor rules and project requirements.
While coal remains the main electricity source, the government said JETP financing will support adding solar, wind, and other renewables and help municipalities deliver services more effectively.
