Monday, November 28, 2022
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South Africa publishes terms of DKK 600 million. EUR climate loans from France and Germany

The 300 million euro loan from the French AFD has a term of 20 years and includes a grace period of five years. The interest rate is 3.6% or six-month Euribor plus 129 basis points (bps), South Africa’s National Treasury said in a statement.

The €300 million loan from Germany’s KFW also has a term of 20 years with a grace period of five years. Its interest rate is 3%, or six-month Euribor plus 69 basis points, the Treasury said.

Both loans are to support the country’s transition from coal to cleaner energy sources.

Last week, on the eve of the COP27 summit, President Cyril Ramaphosa unveiled a climate investment plan that calls for about 1.5 trillion rand ($84.4 billion) over the next five years. Countries such as France, Germany, the UK and the US pledged $8.5 billion last year at COP26 to help accelerate South Africa’s transition to coal.

The Finance Ministry described AFD and KFW loans as “very favorable” and said they were already factored into the gross borrowing requirement in last month’s medium-term budget.

South Africa’s dollar-denominated government bond maturing in 2044 is currently yielding around 8.6%, according to Tradeweb data, suggesting it would be much more expensive for the government to borrow through the international bond market.

“By reducing debt servicing costs, the South African government is creating greater fiscal space for important social and other priorities,” the Treasury said.

Under Mr Ramaphosa’s leadership, Africa’s most industrialized nation is trying to fix its public finances after a decade of steep debt build-up.

The medium-term budget showed an improved fiscal outlook, with deficits falling faster than previously and debt stabilizing at a lower level.

($1 = 1.0055 euros)

($1 = R17.7708)

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