The EU's lending arm the European Investment Bank (EIB) signed the deal with the government-owned Development Bank Of Southern Africa (DBSA) at the COP27 climate summit in Egypt, they said in a statement.
The EIB will provide 200 million euros ($206 million) while DBSA and the Green Climate Fund (GCF) will each contribute 100 million euro.
"The funding will finance private sector renewable energy projects," DBSA's head Patrick Dlamini told AFP.
This is the latest tranche of funding South Africa has secured in recent days to transition from fossil-fuelled power production.
Dlamini called it "an important contribution to South Africa's resilient and sustainable growth".
South Africa, one of the world's top 12 largest polluters, generates about 80 percent of its electricity through coal.
The funds will support private-sector solar and wind investments expected to add 1200 megawatts of generating capacity to the country's ailing energy system, the banks said in a statement.
South Africa's monopoly state-owned power utility Eskom currently generates a daily average 26,000MW of electricity against national demand of 32,000MW.
Last month Eskom said 53 gigawatts of new capacity, mostly from renewable sources, are needed by 2032, to make up for the shortfall and ensure energy security as ageing coal plants are closed.
The money unlocked by the EIB, which the bank said represented its largest ever investment in South Africa, adds to $8.5 billion that the country was pledged last year by a group of rich nations.
Earlier this week, France and Germany signed the first loans worth 600 million euros.
The wind and solar projects the EIB funds will support are expected to avoid the release of 3.6 million tonnes of CO2 into the air, and to create hundreds of new jobs, the bank said.
The announcement came with developed countries under pressure at UN climate talks in Egypt to step up efforts to help their poorer peers make their economies green.
South Africa will require at least $500 billion dollars to achieve carbon neutrality by 2050, according to the World Bank.
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