South Africa secures R26 billion World Bank loan

The World Bank has approved a $1.5 billion (R26 billion) loan to support structural reforms aimed at boosting South Africa’s infrastructure.

The Washington-based lender said in a statement the operation will address the nation’s challenges of low growth and a high unemployment rate of almost 33% by easing constraints in its energy and freight transport sectors.

Electricity outages caused by power generation prone to breakdowns has also curbed economic growth. 

South Africa has vowed to modernize state-owned enterprises and open key sectors to competition to boost its economy.

The bank said its program will enhance energy security, increase port and rail volumes and support the shift to a low-carbon economy.

“Our ongoing partnership with the World Bank will assist us to move forward with greater speed on the reforms vital to transforming our infrastructure landscape,” said Finance Minister Enoch Godongwana in the statement.

The loan will make available funds for state-owned Eskom to bolster the grid for renewable generation and Transnet, South Africa’s port and rail company, to increase freight transport capacity.

South Africa is moving toward a competitive electricity market following a century-old monopoly held by Eskom.

The financing will support government plans to add 3,500 megawatts of renewable energy capacity by March 2027, along with private investment with the potential to add 200 kilometers of new transmission lines, according to a fact sheet on the development policy loan.

Transnet reforms are expected to increase rail network capacity and enable the entry of private operators. 

“South Africa’s macroeconomic framework is considered adequate for the operation,” the bank said. “The government remains committed to prudent fiscal policies and structural reforms.”