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Daily Maverick
13 hours ago
- Business
- Daily Maverick
National Treasury secures R26bn World Bank loan in strategic move for infrastructure reforms
South Africa has secured a R26-billion loan from the World Bank to modernise our infrastructure – without adding to sovereign guarantee burdens. But favourable terms mean little without delivery. Can South Africa finally convert reform pledges into real power, rail, and fiscal performance? In a bid to shift our faltering economy out of low gear, the National Treasury and the World Bank have inked a $1.5-billion (R26.5-billion) Development Policy Loan agreement aimed at unlocking long-promised, but long-delayed, structural reforms across the country's infrastructure backbone. Sweet deal, soft start The loan, which was finalised on Monday, 23 June 2025, comes with some pretty good terms — definitely better than if South Africa had just gone to the open market: We have 16 years to pay it back. So, it's a long-term plan, not a quick smash-and-grab. We don't have to start paying anything back for the first three years. This is a 'grace period' that gives us some breathing room to get things in order before the first instalment is due. The interest rate isn't fixed. It's a 'floating rate', which means it will change over time. It's tied to something called the six-month SOFR, which is a very stable and trusted international benchmark rate for US dollars. On top of that, we pay an extra 1.49%. 'If the borrowing is associated with capital investment, then there's the opportunity to generate a return that will help service the debt,' Old Mutual Wealth strategist Izak Odendaal told Daily Maverick. 'Borrowing to fund recurrent expenditure is much harder to justify.' Spreading the spending power Political and economic analyst Daniel Silke said the real issue is how it will be spent. 'Will it be spent credibly, efficiently, and without graft and corruption? We've gone through a decade or two where we have not invested in domestic capital formation. The backlog in infrastructure… now ultimately has to be funded, certainly in part, by external loans like this.' According to the National Treasury, the deal is designed to 'enhance the efficiency, resilience, and sustainability' of South Africa's public infrastructure services. The main focus: policy reforms in the energy and freight transport sectors that can enable broader infrastructure modernisation and private investment. 'This agreement reinforces the strong and constructive collaboration between the World Bank and the government of South Africa,' the National Treasury noted in the release announcing the loan's approval. Show me the money It's important to distinguish the loan's structure and purpose. This is a Development Policy Loan, meaning the funds are not project-specific. Instead, they are general budget support disbursed in tranches conditional upon meeting agreed reform milestones. The Treasury says these reforms centre on: Improving energy security. Boosting freight transport competitiveness. Advancing the just energy transition. Unlike project loans, this money won't directly pay for power stations or rail upgrades, but is aimed at incentivising reform across state institutions like Eskom and Transnet — and unlocking further capital by stabilising policy conditions. Disbursements are tied to measurable regulatory or governance benchmarks — such as unbundling electricity transmission or enabling third-party rail access — designed to unlock future private capital inflows. Reform or rewind The loan lands at a time of acute public finance strain: sluggish growth, surging debt service costs, and deep political gridlock following the collapse of a proposed VAT hike. With fiscal consolidation plans fraying under coalition tensions, the Development Policy Loan becomes not just a financial tool but a litmus test of South Africa's political capacity to implement reform. South Africa's history with reform-tied financing is mixed. From unbundling Eskom to fixing port backlogs, targets are often missed, deferred, or diluted. The Treasury insists this loan aligns with its broader fiscal strategy: to avoid contingent liabilities, limit market borrowing and crowd in private capital. Transmission tangle — another $500-million While the Development Policy Loan grabs headlines, it is part of a broader ecosystem of multilateral support. Reuters reports that the World Bank Group is also weighing a $500-million contribution to a proposed credit guarantee vehicle meant to underwrite South Africa's planned $25-billion transmission build-out. This facility would be a stand-alone fund, absorbing project risk and unlocking private sector participation without drawing on sovereign guarantees. The goal: unlock up to 20GW of stalled renewable energy capacity, particularly in remote provinces like the Northern and Eastern Cape. The Treasury plans to contribute $100-million in junior capital (first-loss tranche), eventually scaling to $500-million. Discussions are under way with partners including Miga, the International Finance Corporation, DBSA, AfDB, KfW, and British International Investment. While discussions remain at the proposal stage, the Treasury expects to finalise initial commitments before the 2026 Budget, contingent on co-financier alignment. Can we afford this? On paper, the Development Policy Loan offers low-cost, flexible financing. But it's still dollar-denominated debt in a fiscus under pressure. Repayments begin after three years (on principal), but interest accrues and must be made in hard currency, exposing the Treasury to forex volatility. With a floating rate (SOFR +1.49%), repayments will rise if global interest rates increase. The Treasury already spends over 20% of its main budget on debt service, and gross loan debt is projected to exceed 75% of GDP. Odendaal notes that this loan remains within the Treasury's foreign borrowing limits, but South Africa must tread carefully: most debt is rand-denominated for a reason. Odendaal notes this loan remains within Treasury's foreign borrowing limits, but South Africa must tread carefully: most debt is rand-denominated for a reason. Reform isn't optional While the World Bank does offer oversight and monitoring, Odendaal warns that no loan is immune to governance risk. 'There's no guarantee that the money is going to be allocated 100% efficiently,' he said. 'But it's probably a better option than trying to raise money in the market.' For now, the $1.5-billion is a breath of fresh air that, with luck, will offset short-term fiscal pressure and offer credible support to reformists inside the Treasury. The key to whether it will be maximised effectively, however, will have to come squarely from State-Owned Enterprises and Prasa and Eskom will benefit financially, but in order for South Africa to do so, governance will need to improve correspondingly to make the loan less a windfall, and more a structural change. DM
The Citizen
08-06-2025
- Business
- The Citizen
Are you one of the almost 16% who can afford a home loan over R1.3 million?
The question is not only if you can afford a home loan but if you can afford all the other expenses of owning a property. Recent research by an independent economist reveals that less than 16% of South Africans can genuinely afford homes priced above R1.3 million, underscoring a growing disparity between loan approvals and actual affordability. This raises questions about the financial sustainability of homeownership for the average buyer, Henri Le Grange, certified financial planner at Old Mutual Personal Finance, says. 'Qualifying for a bank loan does not necessarily mean you can afford all the costs that come with owning a home. 'The affordability gap often arises because banks assess loan eligibility primarily based on income thresholds, without considering your broader financial plan.' Le Grange says banks typically evaluate affordability based not only on gross income but also on disposable income, net income and previous monthly expenses. 'However, they consider past data and may not account for additional costs that come with homeownership, such as maintenance, insurance, or the impact of interest rate changes. ALSO READ: More SA consumers battling to pay their home loans and credit cards – report Some people get home loans but cannot afford true repayment 'As a result, I have seen customers approved for loans that exceed their true repayment capacity, threatening their financial well-being. This disconnect highlights the importance of seeking professional advice before buying a home.' Research by Izak Odendaal, Investment Strategist at Old Mutual Wealth, highlights key reasons why owning a home remains out of reach for many South Africans: stagnant wages, rising inflation and higher interest rates. 'South Africa's high interest rates and increasing property prices have made homeownership increasingly difficult. 'Many prospective buyers have been locked out of the market due to these combined factors, resulting in record-low affordability levels in the housing sector. 'Buying a home is one of the biggest financial decisions you will ever make, and it is easy to underestimate the true cost of ownership. 'Many customers also overlook the ongoing costs tied to homeownership, such as maintenance, insurance, property taxes and utilities, all expenses that can place additional strain on household budgets over time.' ALSO READ: South Africans cannot afford their homes but also can't afford to sell them Financial adviser can help look at your financial long-term plan However, he says that a financial adviser can help customers look beyond simply qualifying for a loan and ensure they are financially prepared for the long term. 'Many customers focus only on whether they can afford the loan repayment, often neglecting their long-term goals. It is not just about paying the bond. You must plan effectively to secure your long-term financial well-being.' Le Grange says working with a financial adviser helps you to create a realistic budget and prepare for upfront as well as long-term costs. 'A solid financial plan ensures you are ready for the responsibilities that come with homeownership. The goal is to help customers avoid borrowing more than they can manage and stay financially secure in the future.' Le Grange encourages consumers to take these practical steps to check if they can afford a home loan before committing to one: #1: Prepare for ongoing and unexpected costs: When you buy a home, do not just budget for the deposit and monthly home loan payments. Ensure you are ready for other costs, such as repairs, maintenance and higher utility bills. There are also transfer duty, conveyancing fees and bond registration costs, which consumers often overlook. These costs can arise unexpectedly, and therefore it is important to set aside extra money to cover these expenses and avoid financial strain. ALSO READ: Thinking of buying your first home, here are five key issues to consider #2: Test your ability to make home loan repayments: Before committing to a home loan, try putting aside the amount you would pay each month into a savings account. This will help you to see if you can afford the repayment comfortably and, if necessary, adjust your spending habits to make sure you are ready for the commitment. #3: Think about changes in interest rates: Interest rates can change, which means your home loan repayments may increase in the future. It is a good idea to think about how a rate increase could affect your budget and make sure you are in a position to handle any changes to your repayment amount. #4: Choose a loan term that fits your budget: When you take out a home loan, think about how much time you want to pay it off. A shorter loan term will mean higher monthly payments, but you will pay less interest overall. A longer loan term can lower your payments, but you will pay more interest in the long run. Choose a loan term that works for your budget and future needs. ALSO READ: How to finance your home loan if you do not have a regular income #5: Speak with a financial adviser and have a financial plan in place A financial adviser can help you consider your overall financial situation and create a plan that works for your short-term and long-term goals. They can also highlight any risks or hidden costs and suggest the best strategy for managing your home loan while keeping your finances healthy. In a challenging economic environment, affordability and financial resilience have never been more important, Le Grange says. 'Now more than ever, making informed financial decisions is key to building a secure future. Speaking to a trusted financial adviser can help to ensure your choices support both your immediate needs and long-term goals.'
Daily Maverick
14-05-2025
- Business
- Daily Maverick
EQT: Seamless Trading for Investors With a Global Mindset
As the world becomes increasingly interconnected, technology is transforming the way investors access global markets. To meet this need, Old Mutual Wealth recently rebranded My Wealth Trader to EQT (pronounced equity). The rebrand comes with improvements in technology, security and ease of use. EQT is a cutting-edge trading platform set to revolutionise investing by providing South African investors with a seamless opportunity to trade in over 60,000 investment instruments worldwide. Jean Minnaar, Managing Director of Private Clients by Old Mutual Wealth, says, 'The South African financial market is small and shrinking, representing less than 1% of global stock exchanges. This makes it crucial for investors to explore international opportunities and diversify their investments globally. However, high barriers to entry and complex processes have traditionally discouraged investors from expanding beyond local markets. EQT eliminates these barriers by offering an intuitive, seamless platform.' He emphasises that EQT is more than just a trading platform, it's an essential partner and resource for investors focused on long-term investing and growing their wealth. With advanced technology, the platform, secured with institutional-grade encryption, biometric access, and multi-factor authentication, ensures a smooth, secure and empowering investment experience, even for those who are first time investors. According to Shivani Naidoo CFA, Head of Digital Investor Solutions at Private Clients business, the platform offers expert research and insights with access to in-depth market analysis and analyst recommendations for investors to make informed decisions. This includes daily market updates, thematic screeners and personalised newsfeeds. Naidoo says, 'For investors willing to expand their portfolios beyond South Africa's borders, EQT provides a timely and innovative solution to traditional investment channels by offering direct ownership of stocks, bonds, ETFs, structured notes, real-time insights, and low-cost trading, EQT empowers investors to take control of growing their wealth.' She adds 'Investor behaviour is evolving, and more investors want to play an active role in their wealth creation. They want flexibility and the ability to act independently, while still benefiting from high-quality research and institutional-grade tools guided by expert insights. Self-directed investing is no longer on the margins, it's becoming a core part of how people engage with their financial futures. At Old Mutual Wealth, we are committed to meet this shift with modern wealth solutions, and EQT is a powerful enabler of this.' Through the app, investors can execute trades across numerous global markets with ease and keep track of taxes and performance. There are no platform fees and no investment minimums. Investors also have the advantage of enhanced interest rates due to Old Mutual Wealth's size and scale, which enables it to partner with the biggest and most established financial services companies across the world. Minnaar points out that the backing of a trusted brand such as Old Mutual Wealth is also important because there have been many scams by fly-by-night forex trading companies in South Africa promising impossible returns and charging high up-front minimums. 'The trusted Old Mutual brand brings with it the advantages of scale which gives investors an opportunity to use Old Mutual's asset swap capacity for greater offshore exposure. In addition, investors gain access to relevant Old Mutual incentives, including receiving Old Mutual Rewards points for every rand invested. For Old Mutual Wealth, EQT is not just a platform, it's a movement towards smarter, borderless investing. Whether you're a seasoned investor or just getting started, EQT provides the tools, insights, and cost-effective solutions to make every decision impactful.'
