South Africa has finalized a $1.5 billion loan agreement with the World Bank to support efforts aimed at revitalizing its transport and energy sectors while stimulating economic recovery, the National Treasury announced on Monday.
The country, widely regarded as Africa’s most advanced economy, has endured over a decade of stagnated growth. Persistent power outages have severely hampered productivity, while deteriorating rail systems and persistently congested ports have disrupted key industries, including mining and automotive manufacturing.
According to the Treasury, the new funding is intended to help alleviate transport bottlenecks and enhance energy security. However, it did not disclose specific infrastructure projects that would be financed under the World Bank facility.
The loan is expected to ease the burden of rising debt-service costs, as it offers more favorable conditions than commercial borrowing, including a three-year grace period. The Treasury stated that the 16-year loan carries an interest rate of the six-month Secured Overnight Financing Rate (SOFR) plus 1.49%.
State-owned enterprises Eskom and Transnet, which manage the country’s energy and logistics infrastructure respectively, have faced persistent operational and financial challenges, further impeding economic growth. South Africa’s GDP expanded by only 0.1% in the first quarter of the year.
In a separate initiative, the World Bank Group is also evaluating a $500 million financing proposal aimed at mobilizing private investment in South Africa’s electricity transmission network, which must be expanded to integrate new renewable energy projects.
Finance Minister Enoch Godongwana’s most recent national budget outlined more than 1 trillion rand ($55.5 billion) in investments across transport, energy, water, and sanitation—critical sectors identified for economic revitalization and improved public service delivery. The government has projected public debt will peak at 77.4% of GDP in the current fiscal year, with a gradual decline anticipated thereafter.
(Exchange rate: $1 = 18.0283 rand)
