South Africa has signed a $1.5 billion loan deal with the World Bank to help fix its failing transport and energy systems, the National Treasury said on Monday. The aim is to revive the struggling economy and make things work better across the country.
For over ten years, Africa’s most developed economy has been held back by constant power cuts and poor rail and port services. These challenges have made it hard for industries like mining and car manufacturing to grow.
Government says the loan should help reduce delays in moving goods and improve electricity supply. However, it didn’t mention which exact projects the money will be used for.
The Treasury also said this loan comes with better repayment conditions than normal commercial loans, including a grace period of three years before payments begin. That should help reduce the rising cost of paying back the country’s debts.
Power company Eskom and rail company Transnet—both state-owned—have been in crisis for years, making it difficult for the country to move forward. In fact, South Africa’s economy barely grew in the first quarter of the year, with only a 0.1% increase.
The Treasury gave the interest rate on the 16-year World Bank loan as six-month Secured Overnight Financing Rate plus 1.49%. The interest, according to reports, is based on a global rate called the “SOFR,” plus an extra 1.49%. This means if the global rate increases or decreases, the amount South Africa has to pay in interest will also increase or decrease.
