By Lehlohonolo Lehana.
South Africa has signed a R27.17bn loan agreement with the World Bank, aiming to overhaul its transport and energy infrastructure and reignite economic growth, the National Treasury said.
Treasury notes in a statement issued on Monday that the loan agreement is key to addressing the country’s long-standing economic constraints, including low growth and high unemployment.
“The loan will help unlock key infrastructure bottlenecks, particularly in the energy and freight transport sectors, thereby enabling inclusive economic growth and fostering job creation,” it adds.
According to Treasury, the loan is aimed at improving service delivery across priority sectors of the economy.
The financing forms part of “broader efforts” to implement structural reform, including improving energy security, enhancing the efficiency and competitiveness of freight transport, and supporting a low-carbon economic transition.
These areas are “critical enablers” of growth and job creation, Treasury notes.
Although electricity supply has stabilised in South Africa, the persistent unreliability of the power system in certain parts of the country has significantly constrained GDP growth, while ongoing port and rail inefficiencies — largely attributed to Transnet — continue to hamper the performance of the mining and manufacturing sectors.
Treasury says the financing terms of the loan are in line with its financing strategy, which is “important to the government’s financial stability”.
“Specifically, the loan offers both favourable interest rates and flexible repayment terms, contributing to minimising the increase in debt service costs”
In its 2025 Budget Review, Treasury projected South Africa’s debt service costs to reach R426.3 billion in the 2025/26 financial year, rising to R447 billion in 2026/27 and R477.5 billion in 2027/28.
The loan has a nominal value of $1.5 billion (R27.2 billion), a maturity of 16 years, including a three-year grace period, and carries an interest rate linked to the six-month SOFR (secured overnight financing rate) plus 1.49%.
South Africa’s public infrastructure needs have been a focal point of reform initiatives.
Through Operation Vulindlela, government has committed to structural changes at Eskom, introduced third-party access to the rail network, and taken steps to unbundle the national power utility.