NDB to monitor SA’s spending on R14.5 billion COVID-19 loan

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South Africa’s R14.5 billion loan from the New Development Bank (NDB) will come with an implementation and monitoring programme to ensure that funds are spent as agreed.

The NDB approved a 30-year loan agreement to support the country’s economic recovery from the COVID-19 pandemic.

The finance institution says the loan comes with a five-year payment holiday to allow tax collection time to recover.

South Africa will receive its disbursement of the latest loan from the New Development Bank in the next few weeks.

The loan is the second provided by the NDB to help the country overcome the impact of the pandemic. Last year, the Development Financier approved a R14 billion emergency loan for South Africa.

The bank says it will ensure that the funds are spent on economic stimulus programmes as agreed.

In the video below President Cyril Ramaphosa announces the stimulus package:

Director-General of the NDB in South Africa Monale Ratsoma says, “Unlike commercial banks who would buy into government bonds and take the view of government being able to repay over time, we will build into our loan agreement an implementation monitoring framework. Yes, government decides the type of programmes that they would like to present to us. We will ensure that the funds do in fact get spent on the programmes that we have jointly agreed with and over a period we will get an audit report on the programme.”

Ratsoma says the country will save half a billion rand a year due to favourable terms attached to the loan.

“When we compare this R1 billion over 30 years with an interest rate of six-months libor-plus 125bps, it compares favourably to where South Africa would have borrowed in capital market and we estimate that a saving could be to the tune of 300bps on the final interest rate. In actual numbers it means that South Africa could be saving half a billion rand a year for having borrowed from an institution like ourselves.”

Government has said the loan will be used to finance the creation of employment opportunities in the country, in particular the first phase of the Presidential Employment Stimulus programme to create and support about 700 000 job opportunities in the public sector.