SOUTH Africa has signed a $1.5bn loan agreement with the World Bank, aiming to overhaul its transport and energy infrastructure and reignite economic growth, the National Treasury said on Monday.
The agreement comes as Africa’s most advanced economy seeks to address chronic infrastructure challenges that have hampered growth for more than a decade, according to a report by Reuters on Monday.
Regular blackouts have crippled productivity whilst crumbling rail networks and chronically congested ports have frustrated major industries such as mining and automaking, the newswire said. The South African government hopes the loan will ease transport bottlenecks and improve energy security, though it did not provide details of specific projects the World Bank money would be earmarked for.
The financing should also limit rising debt-service costs as it carries more favourable terms than commercial borrowing, including a three-year grace period. The Treasury gave the interest rate on the 16-year World Bank loan as six-month Secured Overnight Financing Rate plus 1.49%.
State-owned energy and transport companies Eskom and Transnet have been mired in operational and financial crises for years, holding back growth, which rose just 0.1% in the first quarter.
The loan is separate from $500m of financing the World Bank Group is considering to help unlock private investment in the electricity transmission grid, which needs to be expanded to connect more renewable energy projects.
Finance Minister Enoch Godongwana’s budget last month contained more than 1 trillion rand ($55.5bn) of investment across transport, energy, water and sanitation to support growth and improve 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.
