EU - €4.7 billion investment in South Africa

European Commission president Ursula von der Leyen has unveiled a €4.7 billion investment in South Africa targeted primarily to the country’s – and the EU’s – energy transition.

The ‘Global Gateway Investment Package’, comprised of EU grants of €303 million and loans from European financial institutions of €4.4 billion, has a three pronged approach – on a just energy transition for South Africa, connectivity infrastructure and vaccine production and pharmaceuticals.

With somewhat over half of South Africa’s population classified as living in poverty and about two-thirds living in urban areas and one third in rural, the country faces numerous challenges across these three fronts and ultimately growing the economy to provides jobs and services to reduce inequalities and provide opportunities for all.

With South African government spending budgeted at R2.4 trillion ($131 billion) in the current year, the €4.7 billion ($5.1 billion) represents an important injection with all three areas set to contribute to development and growth with potential important spinoffs for the EU.

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It also starts to redress the balance of influence of China, which has been a significant investor in South Africa over the last two decades, particularly in mining, energy and transport, and is the biggest trade partner.

Just energy transition

The lion’s share, €4.4 billion, is allocated for a ‘just energy transition’ to a low carbon economy through the development of critical raw minerals and green hydrogen value chains, along with complementary investments in green logistics, energy and support of a just energy transition.

For green hydrogen the aim is to establish financing facilities to leverage public and private sector investments and provide technical assistance for the production of low carbon hydrogen and derivatives such as efuels for the decarbonisation of transport.

For critical raw materials, of which South Africa contains an abundance – including iron ore, platinum, manganese, chromium, copper and titanium – the goal is to support investments in local processing and refining, research infrastructure and strengthening the business ecosystem.

Plans for green energy include solar, wind, grid scale energy storage and energy efficiency projects, while support for the ‘just’ part of the energy transition is on the development of workforce skills and jobs.

The other two areas of connectivity infrastructure is focussed on enhancing transport corridors, including ports, and digital connectivity, and on the pharmaceutical side to support South Africa to become a regional leader on local vaccine production for Africa.

Trade and investment partnership

In announcing the package at an EU-South Africa Summit in Cape Town, EU president Ursula von der Leyen, highlighted its role in terms of trade and investment in strengthening the ties between the two nations.

“[The investment] is in both our interest. It includes funding for the clean energy transition. But also funding to boost vaccine manufacturing. South Africa wants to protect the health of its people, as well as your autonomy and your local industries. We Europeans want to diversify some of our most critical supply chains, and we know that viruses know no borders. This is what I call a true mutual interest.”

She also highlighted the launch of negotiations on a ‘Clean Trade and Investment Partnership’, of which the signing with South Africa will be a first.

Its aim is to boost both local investments and trade in beneficiated products to strengthen supply chains – important for example for the production of batteries in the EU and to support industrial decarbonisation under the Clean Industrial Deal.

Ongoing developments within this are set to include an MoU on raw materials and a regular bilateral energy dialogue.

Added von der Leyen: “European companies are interested in investing here. But they need more incentives. So, the Clean Trade and Investment Partnership can support. Together with private companies, we can unleash investments in clean energy, raw materials and green hydrogen. We can boost local industry with agreements for the future production that gives them certainty. And we can facilitate the trade of made-in-South Africa products to Europe.”

Welcoming the announcement of the investment package, South African President Cyril Ramaphosa highlighted the strengthening of the partnership “… will support our efforts to drive inclusive economic growth, create jobs, eradicate poverty and address global challenges in a spirit of solidarity, collaboration and partnership.

“This partnership is expected, for example, to deliver short and long term solutions to enable Sasol to export sustainable fuel, especially aviation fuel, to the European Union.”

The ‘Global Gateway Investment Package’ is made in the context of ‘Scaling up renewables in Africa’ campaign launched by Von der Leyen and Ramaphosa at the G20 summit in Rio and is due to conclude with a pledging event at the next G20 summit in Johannesburg in November 2025.