The government is in talks with the French Development Bank (AFD) on a €300m concessional loan, as well as a further loan from the New Development (Brics) Bank, to add to the $1.5bn (R27bn) development policy loan it recently signed with the World Bank.
The loans could raise as much as $2bn-$3bn of the almost R130bn ($7.2bn) in foreign borrowing which the Treasury has pencilled into the budget, to help finance the government’s borrowing requirement over the next three years, with the rest raised on the market.
Treasury director-general Duncan Pieterse told Business Day earlier in June that these loans were at much cheaper than market rates.
The World Bank loan was the third in a row from the Washington-based lender and would go into the National Revenue Fund for general budget support in the current fiscal year, as would the AFD financing. The Brics bank loan might be finalised only for the next fiscal year.
The government has over the past five years raised more than $12bn from international financial institutions that offer pricing and terms and conditions that are much more favourable than those available in the market.
The loans are so-called development policy loans that recognise SA’s progress on reforms in areas such as climate change and infrastructure but are not ring-fenced for any particular project, going instead towards general budget support.
The Treasury announced on Monday that the government and the World Bank had signed the $1.5bn loan, which aimed at unblocking key infrastructure bottlenecks, particularly in energy and freight transport.
The loan has a maturity of 16 years, and 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, the Treasury said.
The terms were in line with its financing strategy, offering both favourable interest rates and flexible repayment terms. This would contribute to minimising the increase in debt service costs, it said.
Structural reform
The loan was anchored on three key pillars of structural reform: improving energy security; enhancing the efficiency and competitiveness of freight transport services; and supporting SA’s transition towards a low-carbon economy. “These reforms are critical enablers of inclusive growth and job creation,” the Treasury said.
Pieterse confirmed the latest loan was separate from government’s collaboration with the World Bank to develop a new credit guarantee vehicle to mobilise and leverage private capital for infrastructure, starting with the independent transmission projects that are expected to unlock billions in investment to “rewire” SA’s transmission infrastructure. The Treasury said earlier in June the new credit guarantee vehicle was expected to be up and running by 2026.
Reuters reported last week that the World Bank was considering finance of $500m for SA’s participation in the new vehicle, part of an ambitious plan to add 14,500km of new transmission line and enhanced transformer capacity over the next decade, at an estimated total cost of $25bn.
The World Bank said on June 5 its board had approved the $1.5bn infrastructure modernisation for SA development policy loan to “support critical structural reforms to enhance the efficiency and sustainability of SA’s infrastructure services, contributing to inclusive growth and job creation”.
The loan would help to ease energy and freight transport constraints that had severely affected businesses and households in recent years, and disproportionately the most vulnerable.
“The government of SA has committed to modernise state-owned enterprises and open the power and freight transport sectors to private sector competition — an effective means to attract new technologies and financing,” the bank said.
Previous development policy loans from the World Bank included one in January 2022 to support SA’s Covid-19 response and a further loan in September 2023 that recognised and supported the progress SA was making on the energy transition.
AFD extended an earlier €300m loan to support SA’s just energy transition in December 2022, while the Brics Bank has provided three $1bn loans to the government since 2020, as well as in 2024 approving up to $1bn for water projects in SA as well as a R5bn loan directly to Transnet.
Update: June 23 2025
This story has been updated with more information.
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