JOHANNESBURG — South Africa is set to bolster its transportation infrastructure and move towards a greener economy courtesy of a $1.5 billion loan from the World Bank, announced by the National Treasury on Monday.
Persistent challenges such as degraded rail systems, congested ports, and consistent power outages have disrupted crucial sectors like mining and automobile manufacturing within South Africa, contributing to stagnant economic expansion over recent years in Africa’s leading economy.
Resolute actions have been pledged by President Cyril Ramaphosa and his governing coalition to confront corruption, rectify years of mismanagement, and instigate pivotal reforms. The overarching goal is to rejuvenate the country’s sluggish economy and address its severe unemployment crisis.
Although specific plans were not detailed, the South African administration expressed optimism that the World Bank’s financial support will invigorate economic growth and foster job creation. This would be achieved primarily through eliminating critical infrastructure impediments, particularly in the energy and freight transportation sectors.
The National Treasury underscored that this loan agreement exemplifies the robust and positive collaboration with the World Bank, representing a pivotal stride in tackling South Africa’s urgent economic predicaments like diminished growth and rampant unemployment.
Moreover, the loan comes with favorable terms compared to usual borrowing avenues, such as a three-year grace period, which is expected to alleviate burgeoning debt-service expenses.
Over the next three years, South Africa’s budget for 2025-26 has earmarked more than R1 trillion for critical upgrades in transportation, energy, and water and sanitation infrastructure. Additionally, efforts are being made to enhance access to basic services.
Yet, the Finance Ministry adjusted the real GDP forecast for 2025 downward to 1.4%, from an earlier estimate of 1.9% revealed in March, due to an exacerbating global economic climate, persistent logistical hurdles, and increasing borrowing costs.
Finance Minister Enoch Godongwana shared that the government’s debt is anticipated to stabilize at 77.4% of GDP by the 2025/26 fiscal year.
Compounding the financial strain, the dismantlement of USAID funding by the previous U.S. administration resulted in a loss of approximately $436 million annually for South Africa’s HIV treatment and prevention initiatives, jeopardizing the program and numerous healthcare-related positions.
Godongwana candidly admitted that the nation lacks the resources to offset the over $430 million gap left by the reduction in foreign aid, threatening the expansive network supporting one of the planet’s largest populations living with HIV.