By Staff Reporter
South Africa has signed off on a US$1.5 billion Development Policy Loan Agreement with the World Bank to support critical structural reforms to enhance the efficiency, resilience and sustainability of the country’s infrastructure services, the National Treasury said on Monday.
It said the partnership was a significant step towards addressing the country’s pressing economic challenges of low growth and high unemployment.
“The loan will help unlock key infrastructure bottlenecks, particularly in the energy and freight transport sectors, thereby enabling inclusive economic growth and fostering job creation,” the Treasury said in a statement on Monday.
South Africa has been struggling to grow due to load-shedding that has impeded productivity. At the same time, congested ports and a deteriorating rail network continue to frustrate major industries.
The Treasury said the financing formed part of the government’s broader efforts to implement structural reforms that strengthened public institutions, crowded in private investment and improved service delivery across priority sectors of the economy.
The loan support is anchored on three key pillars of structural reform. They include improving energy security, enhancing the efficiency and competitiveness of freight transport services and supporting South Africa’s transition toward a low carbon economy.
It reiterated that these reforms were critical enablers of inclusive growth and job creation.
The financing terms of the loan were in line with the National Treasury’s financing strategy, which was important to government’s financial stability, the Treasury said.
“Specifically, the loan offers both favourable interest rates and flexible repayment terms, contributing to minimising increase in debt service costs,” it said.
The Treasury gave the interest rate on the 16-year World Bank loan as six-month Secured Overnight Financing Rate plus 1.49%. There is a three-year grace period for intertest rates.
It is separate from US$500 million of financing that the bank is considering to help unlock private investment in the electricity transmission grid.
It must be extended so that more renewable energy projects are connected to the grid.
“The National Treasury wishes to express its appreciation to the World Bank for its continued partnership and support in advancing South Africa’s development objectives. “This agreement reinforces the strong and constructive collaboration between the World Bank and the government of South Africa,” it said.
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