Africa's richest country agrees $1.5 billion World Bank loan for infrastructure upgrade
South Africa has signed a $1.5 billion loan agreement from the World Bank to upgrade its struggling transport and energy infrastructure in a bid to boost economic growth.
South Africa has obtained a $1.5 billion loan from the World Bank to improve its transport and energy infrastructure.
The funding aims to address challenges such as power outages, deteriorating rail infrastructure, and congested ports which impact key economic sectors.
The loan offers favorable terms including a three-year grace period, and supports state-owned enterprises Eskom and Transnet in their respective operations.
South Africa has signed a $1.5 billion loan agreement from the World Bank to upgrade its struggling transport and energy infrastructure in a bid to boost economic growth, the National Treasury announced on Monday.
Africa's most industrialized economy, has battled sluggish growth for over a decade, due to persistent power outages, deteriorating rail infrastructure, and congested ports, all of which have severely impacted key sectors like mining and manufacturing.
President Cyril Ramaphosa, speaking last month about his government's infrastructure drive, emphasized its importance to South Africa's future.
"Infrastructure is the flywheel that our economy needs to boost growth and to create jobs. Infrastructure that is well constructed and maintained encourages investors to see our country as a great investment destination. '
The Washington-based lender said earlier this month that the funding will tackle key challenges such as sluggish growth and high unemployment by easing bottlenecks in the country's energy and freight transport sectors.
While the government didn't specify which projects the loan will fund, it expressed hope that the financing will help ease transport bottlenecks and improve energy security, according to Reuters.
The 16-year loan offers better terms than commercial borrowing, including a three-year grace period, and is priced at the six-month Secured Overnight Financing Rate (SOFR) plus 1.49%.
The funding is separate from a proposed $500 million World Bank facility aimed at attracting private investment to expand South Africa's electricity transmission grid, which is essential for integrating new renewable energy projects.
Eskom and Transnet to benefit
The loan will provide funding for state-owned Eskom Holdings SOC Ltd. to strengthen the electricity grid and support renewable energy integration. It will also assist Transnet SOC Ltd., the country's port and rail operator, expand its freight transport capacity.
State-owned enterprises Eskom and Transnet, responsible for electricity and freight transport respectively, have long struggled with financial and operational woes, weighing down economic performance. In the first quarter of this year, South Africa's economy grew by just 0.1%.
Finance Minister Enoch Godongwana's recent budget earmarked more than 1 trillion rand ($55.5 billion) for investments in transport, energy, water, and sanitation, all aimed at stimulating growth and improving public services. The Treasury also projected that public debt would peak at 77.4% of GDP this fiscal year, before gradually declining.
South Africa has recently set its sights on revamping its infrastructure as a key driver of economic recovery and growth.
In March, the country partnered with the World Bank to launch a $3 billion initiative aimed at restoring essential services and upgrading infrastructure across eight of its largest cities.
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