- UK and AfDB extend a $1bn guarantee.
- Deal secures $400m municipal financing.
- Funds support utility reform and clean energy.
The United Kingdom and the African Development Bank have agreed to extend a $1 billion climate-linked debt guarantee for South Africa, clearing the way for a $400 million municipal financing package that had faced an end-2025 deadline.
The extension allows the financing to proceed as planned, supporting South Africa’s Municipal Utility Reform Project and a range of low-carbon infrastructure initiatives. Without the extension, the guarantee would have expired before the loan could be fully deployed, placing several projects at risk.
In a statement, the British High Commission said the decision was taken to allow the South African government to deliver the municipal reform programme and advance additional low-carbon infrastructure projects during the current year.
The support is part of South Africa’s Just Energy Transition Partnership, a climate-finance arrangement involving the UK, France, Germany, the European Union and, previously, the United States. The partnership aims to help the country reduce its dependence on coal while addressing the social and economic impact of the energy transition.
Just energy transition funding framework
The Just Energy Transition Partnership was announced at the COP26 climate summit in Glasgow in 2021. It was designed to combine climate action with measures to support workers and communities affected by the decline of coal-based industries.
Funding under the partnership includes grants, concessional loans, commercial lending and guarantees. The initial funding target of about $8.5 billion was later expanded to roughly $10 billion as additional commitments were secured from international partners, according to .
Under the agreed framework, funds are directed toward coal plant retirements, renewable energy development, electricity transmission upgrades and employment programmes for workers in coal-dependent regions.
South Africa’s Just Energy Transition Investment Plan sets out how financing is expected to be deployed between 2023 and 2027. Priority areas include municipal utility reform, grid expansion, renewable energy projects and skills development initiatives.
Government officials said that by early 2026, only part of the pledged financing had been released, with several projects still awaiting approvals and final funding arrangements.
AfDB loan targets municipal losses
The $400 million loan from the African Development Bank, backed by the UK guarantee, is focused on reducing losses and improving performance at municipal utilities, according to Energy in Africa.
Projects supported by the financing include upgrades to electricity and water distribution systems, efforts to cut technical and commercial losses, and improvements in service delivery across local governments.
Officials said the guarantee extension allows municipalities to continue work on infrastructure upgrades that had been delayed by funding uncertainty.
South Africa’s Finance Department said the move will help keep projects on schedule while authorities work through donor conditions and project approval processes. While coal continues to dominate the country’s power mix, officials said JETP funding will support the expansion of solar and wind generation and strengthen municipal service delivery.
