Picture: GETTY IMAGES/CAMERON SPENCER
Picture: GETTY IMAGES/CAMERON SPENCER

The African Development Bank (AfDB) has granted SA a R5bn loan, to support its fight against the Covid-19 pandemic, it announced in a statement late on Wednesday.

The loan is the second to be approved by an international finance institution, with the New Development Bank extending a $1bn (roughly R16.5bn) loan to SA in June. In his recent supplementary budget speech finance minister Tito Mboweni said SA hopes to raise $7bn from international finance institutions

The fallout from the pandemic has pushed SA’s already weak government finances to their limit. With the consolidated budget deficit set to rise to 15.7% of GDP and debt levels expected to reach 81.8% this year, SA has been forced to turn to international financiers to seek concessional funding.

SA is also in the process of applying to the International Monetary Fund (IMF) for $4.2bn (roughly R70bn) in funding.

Treasury director-general Dondo Mogajane told Business Day last week, that negotiations with the IMF are complete and that SA was on track to receive the money by the end of July.

The AfDB loan falls under the bank’s $10bn Covid-19 response facility and will be its first ever budget support to SA.

The AfDB money will go towards healthcare efforts that include access to essential equipment such as personal protective equipment. It will also support job preservation efforts and income protection as well as provide support for formal and informal businesses through the crisis and help prepare them for recovery.

To ensure “a complementary intervention, the African Development Bank operation was designed in collaboration with other partners, including the International Monetary Fund, World Bank and the New Development Bank”, the AfDB said.

Though SA is ranked as the most prepared African country to deal with a pandemic, according to a Global Health Security Index, significant challenges remain in the public health sector, including underfunding and human resource shortages, it said. And while the private health sector is better equipped, “it remains unaffordable to the majority of South Africans”.

SA’s ability to respond to the pandemic also has implications for neighbouring countries and the continent as a whole, given its position as Africa’s second-largest economy after Nigeria, the AfDB said.

donnellyl@businesslive.co.za

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