SA takes on an extra R34 billion in loans

South Africa has signed multiyear loan agreements amounting to about R34 billion with the World Bank, the government of Germany and the African Development Bank to help fund the country's transition to using more renewable energy, according to National Treasury on Tuesday.The sovereign loans have been provided directly to South Africa’s National Treasury for general budget expenditure purposes, with the World Bank committing US$1 billion over 15 years at what’s known as the six-month secured overnight financing rate (SOFR) plus 0.95% in interest and attaching a five-year grace period for repayments. Germany’s Kreditanstalt für Wiederaufbau has loaned €500 million, fixed at 4.4% interest for 12 years with a three-year grace period, while the African Development Bank’s loan amounts to US$300 million over 12 years at six-month SOFR plus 1.22% and a two-year grace period. Despite the rand's consistent weakness over the years, National Treasury said the loans to tackle the energy crisis that were announced on Tuesday were made at "very affordable rates", and will help to reduce government's public debt. Treasury added that the money would help the state diversify its funding mix for international borrowing.EmittersSouth Africa is one of the world's top 20 worst greenhouse gas emitters. Energy makes up 81% of South Africa's emissions, of which 45% comes from electricity, according to the World Bank. Eskom's coal-burning plants account for the bulk of the electricity produced, and the lack of reliability of many of the coal-fired stations meant that load shedding cost the economy 2% to 3% of gross domestic production growth last year, the World Bank said in an earlier statement. South Africa already has US$12.5 billion (R229 billion) in financing commitments for its Just Energy Transition Investment Plan, but the facilities have yet to be allocated to specific projects. Speaking on Sunday, Electricity Minister Kgosientsho Ramokgopa said the government has signed off on plans to use part of the funding to help raise more cash to improve Eskom's performance and build renewable energy resources.It's estimated that South Africa needs about R390 billion to stave off the endless load shedding and produce cleaner energy.Ramokgopa also said on Sunday there had been progress in securing additional financing for electricity transmission outside of Eskom or the Treasury, and expected to present a plan to Cabinet at its next meeting in about two weeks. –Fin24.

SA takes on an extra R34 billion in loans

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