AfDB approves R5bn loan for South Africa's Covid-19 fight

23rd July 2020 By: Donna Slater - Creamer Media Staff Writer and Photographer

The African Development Bank (AfDB) board has approved a loan of about R5-billion ($288-million) to the government of South Africa, as the country battles one of the largest Covid-19 caseloads in the world.

The loan forms part of the AfDB’s $10-billion Covid-19 Response Facility and will finance South Africa’s Covid-19 Response Support Programme, and represents the bank’s first ever budget support to the country.

The operation is designed as a Crisis Response Budget Support Operation prepared following a request from the government of South Africa.

South Africa confirmed its first case of Covid-19 on March 5 and currently has the most infections in Africa. It is also among the top five in the world in terms of confirmed current cases.

The purpose of South Africa’s Covid-19 response programme is to protect lives and promote access to essential equipment to prevent infection, such as protective personal equipment, sanitizers and gloves; protect livelihoods by preserving jobs, incomes, food security and access to essential public services; and to protect firms by supporting enterprises in the formal and informal economy to withstand the impacts of Covid-19 and prepare for economic recovery.

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

Even before the pandemic, South Africa was experiencing an economic slump. In 2019, the country registered gross domestic product (GDP) growth of 0.2% – the lowest in a decade – and according to AfDB estimates, GDP could drop by the most in 90 years this year.

Projections show a GDP contraction of 6.3% and 7.5% under baseline and worst-case scenarios, respectively. These growth forecasts have placed budgetary constraints on the government’s ability to deal with the health crisis.

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