SOUTH AFRICA: IFC commits $300m for housing and clean energy
At a time when the energy transition is in full swing in South Africa, the International Finance Corporation (IFC) has granted a $300 million loan to the local subsidiary of the Standard Bank group. This "sustainable capital" financing will also support the construction of "affordable housing" in the rainbow nation.
The International Finance Corporation (IFC) is once again financing the energy transition in South Africa. The private sector financing arm of the World Bank Group is providing Standard Bank South Africa with $300 million. The loan is made up of $260 million financed by the IFC and $40 million raised from commercial investors.
“The successful conclusion of this $300 million sustainable loan provides the bank with the financial resources to continue to support its clients in their social and environmental projects,” explains Kenny Fihla, Managing Director of Standard Bank’s corporate and investment banking arm. In practical terms, the loan will enable Standard Bank to continue financing the energy transition.
Financing the energy transition?
Standard Bank is one of the main financial supporters of the energy transition in South Africa. Recently, the bank headed by Sim Tshabalala participated alongside other South African banks in raising 4.5 billion rand ($243 million) for the construction of the Ummbila Emoyeni wind farm in Mpumalanga province. This investment will ultimately enable South Africa to reduce its dependence on fossil fuels.
The country currently relies on coal for 80% of its electricity generation. In recent years, this dependence has led to an increase in the rate of load shedding, due in part to the dilapidated state of its thermal power stations. Drawing on “green and social loans and bonds, sustainability loans and bonds, sustainable trade and working capital solutions, and impact investments”, Standard Bank will use the financing provided by the IFC to support the construction of new housing in South Africa.
Financing affordable housing
Affordability will be the key to meeting South Africa’s housing challenge. The Centre for Affordable Housing Finance in Africa (CAHF) estimates the housing deficit in this country of around 60 million people at 3.7 million units. According to the same source, most of the demand is for low-cost housing from people on low incomes.
However, according to official figures, South Africa has a well-developed housing market with a mortgage financing rate of 16.3%, which is higher than the average of 5.1% in sub-Saharan Africa. The increase in mortgages granted to low-income segments could be a game-changer in Nelson Mandela’s country.
