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South Africa Releases Terms of 600 Million Euro Climate Loans From France, Germany

JOHANNESBURG (Reuters) – South Africa on Thursday released the terms of two climate loans for a combined 600 million euros ($596.7 million) from French and German development banks, saying they were substantially cheaper than market borrowing.

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

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

Last week, on the eve of the COP27 summit, President Cyril Ramaphosa unveiled a climate investment plan requiring some 1.5 trillion rand ($84.4 billion) over the next five years. Countries including France, Germany, Britain and the United States pledged $8.5 billion last year at COP26 to help speed South Africa’s shift from coal.

South Africa’s sovereign dollar-denominated bond maturing in 2044 currently has a yield of about 8.6%, according to Tradeweb data, suggesting it would be much more costly for the government to borrow via the international bond market.

Under Ramaphosa, Africa’s most industrialised nation has been trying to nurse its public finances back to health after a decade of steep debt accumulation.

The mid-term budget showed an improved fiscal outlook, with deficits shrinking quicker than before and debt stabilising at a lower level.

($1 = 1.0055 euros)

($1 = 17.7708 rand)

 

(Reporting by Alexander Winning and Rachel Savage; Editing by Frank Jack Daniel)

Copyright 2022 Thomson Reuters.

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