SA takes on an extra R34 billion in loans to help fund transition to renewable energy

SA 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 SA’s National Treasury for general budget expenditure purposes, with the World Bank committing $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 $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.