The South African government and the World Bank have signed a US$1.5 billion Development Policy Loan Agreement that will assist in unlocking key infrastructure bottlenecks, particularly in the energy and freight transport sectors.

In a statement on Monday, the National Treasury explained that the loan is aimed at supporting critical structural reforms to enhance the efficiency, resilience, and sustainability of the country’s infrastructure services.

The loan support is anchored on three key pillars of structural reform: improving energy security, enhancing the efficiency and competitiveness of freight transport services, and supporting South Africa’s transition toward a low carbon economy.

These reforms are critical enablers of inclusive growth and job creation.

“This partnership marks a significant step towards addressing South Africa’s pressing economic challenges of low growth and high unemployment.

“The financing forms part of the government’s broader efforts to implement structural reforms that strengthen public institutions, crowd in private investment, and improve service delivery across priority sectors of the economy,” National Treasury said.

The financing terms of the loan are in line with National Treasury’s financing strategy.

Specifically, the loan offers both favourable interest rates and flexible repayment terms, contributing to minimising increase in debt service costs.

The financing terms of the World Bank loan are as follows:

• Nominal value: US$1.5 billion,
• Maturity: 16 years with a 3 year-grace period,
• Interest rate: 6-month Secured Overnight Financing Rate (SOFR) plus 1.49%.