Some of the loans South Africa secured as part of an $8.5 billion climate finance package will cost a fraction of what it would have paid commercial lenders and will cut the country’s future borrowing costs, Finance Minister Enoch Godongwana said. “When we get these loans, in fact they are between 500 and 400 basis points lower than we would have paid in the market,” Godongwana said in an interview in Johannesburg on Thursday, without being more specific. “We would have raised that money anyway.
Godongwana was referring to the interest rates paid on the concessional loans, his office said in response to a query. The bulk of the climate funding will be used to bolster electricity production as state utility Eskom Holdings plans to close many of its dilapidated coal-fired power plants in coming years. Energy shortages have been a major constraint on Africa’s most industrialised economy, with Eskom subjecting the nation to intermittent blackouts because it can’t meet electricity demand.