South Africa has clinched a $1.5 billion World Bank loan aimed at easing infrastructure constraints in energy and transport, sectors that have long weighed on the country’s economic performance.
The National Treasury announced the deal on Monday, describing it as a step towards unlocking bottlenecks that have contributed to years of low growth.
Africa’s most industrialised economy has suffered repeated power outages and an overburdened logistics network, both of which have disrupted key industries such as mining and automotive manufacturing.
“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,” the finance ministry said in a public statement.
Although the government did not specify which projects the funds will target, the Treasury noted the loan is part of its broader infrastructure drive.
In the third iteration of the 2025 budget tabled in May, over $55.5 billion was earmarked for investment in transport, energy, water, and sanitation.
The loan, classified as a Development Policy Operation, will mature in 16 years and includes a three-year grace period.
It carries an interest rate linked to the six-month Secured Overnight Financing Rate (SOFR) plus 1.49%.
“Specifically, the loan offers both favourable interest rates and flexible repayment terms, contributing to minimising the increase in debt service costs,” the Treasury added.
The 2025 Budget Review projects debt payments will rise from $23.65 billion in 2025/26 to $26.49 billion by 2027/28.
The Treasury expects public debt to peak at 77.4% of GDP in the current fiscal year before slowly declining.
The loan comes as Eskom and Transnet — state-owned power and freight giants — continue to struggle with financial and operational difficulties.
The impact of these issues has been reflected in the latest economic data, with GDP growth slowing to just 0.1% in the first quarter.
Meanwhile, the Washington-based lender is also considering a separate $500 million facility to help South Africa attract private investment for expanding the electricity transmission grid.
This is critical for integrating new renewable energy projects and improving power reliability.
The Treasury has said that improved infrastructure, faster implementation of reforms, and stronger collaboration with the private sector will be key to boosting economic growth, which is projected to reach only 1.4% in the current fiscal year.
For now, the World Bank’s support offers some breathing room — though how effectively the funds are deployed will determine whether they deliver lasting impact.
The budget figures were originally reported in South African rand and have been converted at an exchange rate of 18.02 rand to $1, as of June 23, 2025.
