World Bank offers $1 billion loan to South Africa to solve power crisis

BY REUTERS

MARRAKECH, Morocco – The World Bank is in talks with South Africa to provide a $1 billion loan to help the country overhaul its troubled energy sector and address its chronic power crisis. South Africa is trying to surmount record power cuts that have hamstrung the country’s economy.

Image: REUTERS/Siphiwe Sibeko/File Photo 

The loan talks between the World Bank and South Africa are currently “under discussion,” revealed Marie Francoise Marie-Nelly, the bank’s director for South Africa, in an interview in Marrakech, Morocco.

“It is going to come very soon,” she said, without stating any specific timeframe.

The loan will be directly availed to the government rather than the debt-saddled state-owned power utility Eskom.

“It’s a policy development loan which supports critical reforms,” Marie-Nelly said of the potential World Bank funding.

“There’s a particular focus on transmission, because it is a stumbling block in terms of bringing new (capacity) that is going to be built mainly by the private sector.”

South Africa is grappling with its worst power crisis, which has hampered economic growth and spurred private investment in renewable energy sources.

The government agreed to take on more than half of Eskom’s debt through a relief scheme, but on the condition that the utility does not incur any new debt for three years without the approval of the finance minister.

In February, the South African government agreed to take on over 254 billion rand ($13.4 billion) of Eskom’s debt through a debt relief scheme, subject to conditions.

The main condition was that the power utility would not be permitted take on any new debt for three years unless approved by the country’s finance minister.

In 2019, the government pledged to split Eskom into three subsidiaries – transmission, generation and distribution.

Eskom said in August that its transmission arm would only be operational starting from 2025.

The World Bank loan would also enable South Africa to make a “just transition” away from coal, to ensure vulnerable people do not suffer as a result, Marie-Nelly said.

She said the government was “also looking at the broader climate agenda, including looking at the carbon tax.”

In November 2022, the World Bank approved $497 million in financing to decommission and repurpose one of Eskom’s coal-fired power plants. However, South Africa still faces an urgent need for viable solutions to mitigate its unprecedented power crisis.