South Africa said on Monday it had won a new $1.5 billion (R26 billion) World Bank loan to revive its sluggish growth rate through reforms targeting rundown transport and energy infrastructure.
Africa’s most industrialised economy has struggled to build momentum since the 2008 global financial crisis, hampered by chronic power cuts and bottlenecks at the ports and on the freight rail network.
The loan “marks a significant step towards addressing South Africa’s pressing economic challenges of low growth and high unemployment”, the country’s Treasury said in a statement.
It forms part of the government’s agenda to improve basic service delivery, and comes as the mineral-rich nation prepares to host the G20 summit in November.
The Treasury did not specify which projects the loan would fund, but said the 16-year financing plan included a three-year interest grace period.
Will loan alleviate South Africa’s economic woes?
Despite its industrial base, South Africa’s economy remains weighed down by an unemployment rate that tops 32%, one of the highest in the world. Young people are the most severely affected.
Growth reached just 0.6% in 2024, with the South African Reserve Bank projecting a modest 1.2% for this year.
The International Monetary Fund, meanwhile, revised down its growth forecast for the country to 1%.
The country’s frequent power cuts are driven by breakdowns at the grid’s coal-fired plants.
At times of crisis the cuts have left South Africans without power for up to 12 hours a day.
Debt-laden state logistics firm Transnet has also long been hobbled by maintenance troubles, graft scandals and theft.
The Organisation for Economic Co-operation and Development (OECD) last month urged South Africa to invest more in public infrastructure to tackle those challenges.
But the Paris-based forum also warned against the country’s rising debt, which it estimated had soared from 31.5% of gross domestic product in 2010 to a projected 77% in 2025.
What the risks for South Africa in securing this World Bank loan?
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© Agence France-Presse
