South Africa announced on Monday that it had obtained a new $1.5 billion loan from the World Bank to boost its slow economic growth by fixing long-standing problems with its energy and transportation infrastructure.
The loan is intended to support the country’s efforts to overcome persistent economic stagnation, which has plagued Africa’s most industrialised nation since the 2008 global financial crisis.
The South African Treasury described the loan as a crucial development in tackling the nation’s pressing challenges of weak growth and exceptionally high unemployment.
The government stated that the financing forms part of a broader strategy to improve the delivery of essential public services and comes as South Africa prepares to host the G20 summit in November.
Although the Treasury did not detail the specific projects that will benefit from the loan, it confirmed that the financing arrangement spans 16 years and includes a grace period on interest payments for the first three years.
Despite its well-developed industrial sector, South Africa continues to wrestle with an unemployment rate exceeding 32 per cent, one of the highest globally, with young people bearing the brunt of joblessness.
The economy managed a modest growth rate of only 0.6 per cent in 2024, and the central bank predicts an equally modest increase of 1.2 per cent for this year.
The International Monetary Fund recently downgraded its forecast for South Africa, projecting just one per cent growth.
Among the key factors hindering economic expansion are frequent power outages caused by persistent failures at ageing coal-fired power stations.
At the height of recent crises, blackouts have left parts of the country without electricity for as long as 12 hours a day, disrupting businesses and daily life alike.
South Africa’s state-owned logistics firm, Transnet, has also struggled for years with maintenance issues, corruption scandals, and widespread theft, contributing to severe bottlenecks at ports and on freight rail lines that are critical to the nation’s trade.
In light of these ongoing challenges, the Organisation for Economic Co-operation and Development (OECD) last month urged the South African government to increase public infrastructure investment to stimulate growth and improve efficiency.
However, the OECD also raised concerns about the country’s escalating debt levels, warning that public debt has surged from 31.5 per cent of gross domestic product in 2010 to a projected 77 per cent by 2025.
