South Africa has entered into a US$1.5bn loan agreement with the World Bank to support the revitalisation of its transport and energy infrastructure and stimulate economic recovery, the National Treasury announced recently
For over ten years, Africa’s most industrialised economy has faced stagnation, hindered by ongoing power outages that have reduced productivity and deteriorating rail systems and port congestion that have impacted key industries like mining and automotive manufacturing.
The government expects the loan to help alleviate transport constraints and bolster energy security, although it has not disclosed which specific projects the World Bank funds will support.
The loan is expected to help manage the country’s rising debt-service burden by offering more favourable conditions than those available in commercial markets, including a three-year grace period.
State-run utilities Eskom and Transnet, responsible for energy and transport respectively, have faced long-standing operational and financial difficulties, contributing to the country’s sluggish growth, which stood at only 0.1% in the first quarter.
The Treasury stated that the interest rate on the 16-year loan from the World Bank is the six-month Secured Overnight Financing Rate plus 1.49%.
This facility is distinct from another US$500mn in funding that the World Bank Group is considering to help mobilise private investment in South Africa’s electricity transmission infrastructure, which needs to be expanded to accommodate more renewable energy projects.
Last month, Finance Minister Enoch Godongwana outlined a budget that includes over 1 trillion rand (US$55.5bn) in investment across sectors including transport, energy, water and sanitation, aimed at driving growth and improving public services.
It aimed for public debt to peak at 77.4% of gross domestic product in the current fiscal year, slowly declining after that.
South Africa secures World Bank loan for infrastructure revival
