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South Africa to receive US $1bn energy loan

South Africa to receive US $1bn energy loan

South Africa is set to receive loan of US $1bn from the World Bank that aims to address the country’s ongoing energy crisis and transition to low-carbon energy sources.

South Africa has been facing severe energy problems, with the state utility company, Eskom, struggling to provide a reliable power supply due to corruption, mismanagement, and aging infrastructure. The situation has led to rolling blackouts, known as “load-shedding,” which reached a critical point in 2023.

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The country’s government has also faced challenges in bailing out Eskom due to its high levels of debt. The energy crisis has had significant economic repercussions, costing the South African economy an estimated US $13bn in a year, as reported by the central bank.

The World Bank’s loan is intended to support the restructuring of South Africa’s power sector, including the unbundling of Eskom. It aims to facilitate investments in the transmission infrastructure and maintenance of existing power plants.

Additionally, the loan seeks to promote private investment in renewable energy by strengthening carbon pricing mechanisms and encouraging households and small businesses to participate in the renewable energy sector.

“This operation comes at a crucial time for South Africa as it will provide much needed fiscal and technical support, enabling us to pursue our policy priorities in the energy sector including easing the electricity crisis in the long term, stimulating private sector engagement and creating jobs in the renewables space,” said Mmakgoshi Lekhethe.

 

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