African Development Bank offers SA financing deal to raise $41 billion

The African Development Bank has offered a plan to South Africa that will help the country use the $8.5 billion in climate finance pledged by some of the world’s richest countries to raise even more funds.

The AfDB recommended that South Africa place the funds in a special purpose vehicle, bank president Akinwumi Adesina. The SPV, which can apply for a credit rating, can sell zero-coupon bonds to raise up to $41 billion, Adesina said in an interview Thursday at Bloomberg’s New York office.

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The United States, United Kingdom, Germany, France and the European Union plan to provide South Africa with $8.5 billion to help the country reduce its consumption of coal, which is used to produce more than 80% of its electricity. The world’s 13th-largest producer of greenhouse gases will have to spend $250 billion over the next three decades to finance the closure of coal-fired power plants, develop green energy sources and an expanded electricity grid, according to a study published in may.

Read: Africa loses up to 15% of GDP growth due to climate change – AfDB

South Africa is working on a fund access plan, which will be a combination of grants, concessional funding and possibly guarantees. The structure of the financing agreements, which can be project by project, could make it impossible to use an SPV structure.

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The AfDB proposal received little support from South Africa or financial partners, according to people familiar with the matter.

The funding commitment, which will be made available over three to five years, was announced at the COP26 climate talks in Glasgow in November.

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