This is expected to create nearly 600 000 jobs.
The loan will be repaid over 15 years, with South Africa getting a three-year grace period. Picture: iStock
South Africa and the World Bank have signed a $1.5 billion (R24.66 billion) Development Policy Loan Agreement aimed at addressing infrastructure challenges, which the government says are among the biggest obstacles to economic growth and job creation. This is expected to create nearly 600 000 jobs.
The loan will be repaid over 15 years, with South Africa getting a three-year grace period. The interest rate is variable and is based on the United States (US) benchmark Secured Overnight Financing Rate (SOFR), plus an additional 1.35%.
This comes a year after the country secured a $1.5 billion loan from the lender for “structural reforms in SA’s infrastructure sectors, with a particular focus on energy and freight transport”.
2026 World Bank loan
National Treasury on Tuesday said this is the fourth Development Policy Loan South Africa has secured from the World Bank as part of the country’s ongoing partnership with the lender. Concessional loans from institutions such as the World Bank are cheaper to service than loans raised at market rates.
“The loan will help South Africa implement necessary interventions and reforms aimed at advancing reforms in the electricity, freight and logistics sectors, and addressing pressing challenges in the water and sanitation sector,” said the department.
“The financing forms part of the government’s broader efforts for continued momentum on structural reforms in the energy, logistics, and water sectors amongst others, reforms which are the foundation of faster and inclusive growth.”
World Bank loan to support 3 pillars
Treasury added that the loan will support the country’s electricity supply, freight transport, and water and sanitation services. The government believes these reforms will make it easier for businesses to operate, encourage investment and create more jobs.
“The financing terms of the loan are in line with the National Treasury’s borrowing strategy that aims to ensure long-term debt sustainability and affordability by raising funding at the lowest cost,” noted the department.
“Specifically, the loan offers both a favourable interest rate and flexible repayment terms, contributing to minimising the rise in debt service costs.”
Borrowing from other countries
“The World Bank’s Development Policy Loan of $1.5 billion, together with financing secured from other multilateral development partners, has enabled government to meet its 2026-27 foreign currency borrowing requirement of $3.2 billion,” Treasury said.
World Bank Group division director for South Africa, Satu Kahkonen, said the country has “shown sustained reform can turn around even deep-seated infrastructure crises”.
“By extending this support to water and sanitation for the first time, we are helping ensure the benefits of reform reach every household, while these efforts together are expected to help create almost 600 000 jobs and attract much-needed private investment.”
