With $474.6 million in newly approved financing, the African Development Bank (AfDB) is doubling down on South Africa’s energy transition, backing a broad structural reform agenda that places equal weight on infrastructure governance, green growth, and inclusive development.
This is the second phase of the Infrastructure Governance and Green Growth Program (IGGGP), designed to accelerate the decarbonization of South Africa’s energy and transport sectors while anchoring long-term industrial transformation.
The financing is part of a larger $2.78 billion multi-donor package that includes contributions from the World Bank ($1.5 billion), KfW (€500 million), JICA (up to $200 million), and the OPEC Fund ($150 million anticipated). While South Africa has long been Africa’s largest greenhouse gas emitter due to its reliance on coal, the IGGGP represents a shift from legacy dependency toward low-carbon development pathways, particularly through policy-driven investments in clean transport and green hydrogen.
South Africa’s energy system remains under acute strain. Load shedding, grid unreliability, and Eskom’s financial and operational challenges have become recurring crises. The IGGGP aims to fast-track reforms that address systemic barriers to energy security, while laying foundations for market liberalisation. This includes vertical unbundling—separating generation, transmission, and distribution operations—as well as improving the investment framework for freight and rail.
The policy matrix also targets a scaled ramp-up in renewable power generation and a clear regulatory path for green hydrogen deployment, signalling the government’s intent to reposition South Africa as a clean energy hub within the African continent.
South Africa’s automotive industry, which contributes roughly 5% of GDP and 13% of total exports, is also under pressure to decarbonise. The IGGGP includes targeted interventions to support the development of an electric vehicle (EV) manufacturing ecosystem, building on existing infrastructure while repositioning the sector for future competitiveness.
Yet South Africa risks lagging behind global trends if policy clarity and manufacturing incentives remain ambiguous. As international markets—particularly the EU—tighten carbon border taxes, alignment with low-emission standards becomes essential for maintaining export viability. The program’s transport component also prioritises the revitalisation of the rail sector, including freight corridor investment and institutional reforms to improve governance and commercial viability.
Beyond physical infrastructure, IGGGP is explicitly designed to deliver social co-benefits, particularly for women and youth. Women are expected to represent 70% of beneficiaries in the expanded Social Employment Fund, which is integrated into the broader reform framework. This gender-targeted investment complements AfDB’s climate and development strategy, recognising that a just transition cannot succeed without addressing employment displacement and inequality.
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