The World Bank is in talks about a potential US$1-billion (R19-billion) loan to help South Africa reform its energy sector, a bank official said, as the country tries to overcome record power cuts that have crippled the economy.

The loan, which would be directly to the government rather than to Eskom, is “under discussion”, Marie Francoise Marie-Nelly, the bank’s director for South Africa, said in an interview in Marrakech, Morocco.

“It is going to come very soon,” she added, declining to specify a timeframe.

South Africa is facing its worst power crisis, with Eskom’s ageing, coal-fired plants often breaking down. Rolling power cuts have crimped economic growth, while fuelling private investment in renewable energy.

“It’s a policy development loan which supports critical reforms,” Marie-Nelly said of the potential World Bank funding. “There’s a particular focus on transmission, because it is a stumbling block in terms of bringing new capacity that is going to be built mainly by the private sector.”

In February, government agreed to take on more than R254-billion of Eskom’s debt through a debt relief scheme, subject to conditions.

The main condition was that the power utility would not be able to take on any new debt for three years unless approved by the finance minister.

Eskom split

In 2019, the government pledged to split Eskom into three subsidiaries: transmission, generation and distribution. Eskom said in August that its transmission arm would not be operational until 2025.

The World Bank loan would also support South Africa to make a “just transition” away from coal, to ensure vulnerable people do not suffer as a result, Marie-Nelly said.