Africa in the news: South Africa launches stimulus plan and Somalia receives World Bank loan
By Mariama Sow
South Africa announces $3.5 billion stimulus plan
Last Friday, South African President Cyril Ramaphosa announced that the country would be launching a $3.5 billion stimulus and recovery plan in order to revive the economy and create jobs. President Ramaphosa added that his government would also launch a $28 billion medium-term infrastructure fund. Finance Minister Nhlanhla Nene stated that half of the funds from the stimulus plans would be sourced from underperforming government programs; though no further information was provided on the specific programs. The other half will be provided by internal development finance institutions. President Ramaphosa added that the infrastructure fund would draw financing from development institutions, banks, private lenders, the private sector, and other investors. After the announcement, the rand’s value increased against the dollar. The country is in dire need for an economic boost; the unemployment rate currently stands at 27 percent and the central bank just revised its 2018 growth prediction downward to 0.7 percent.
The plan, which does not include increased spending and borrowing, was met with some skepticism by experts. For instance, on Tuesday, the Fitch rating agency stated, “South Africa’s latest economic plan is unlikely to deliver a significant boost to economic growth.” The agency added that the rand’s recent plunge would hinder the plan’s success.
Somalia to receive its first World Bank loan in 30 years
This week, the World Bank approved the disbursement of $80 million in grants to Somalia in order to assist in funding public finance reforms. This marks the first disbursement from the bank to Somalia in 30 years. Three quarters of the funds will go toward improving Somalia’s financial institutions and the remaining 20 million will go toward improving access to education and energy. In 1991, the bank broke ties with Somalia when the war started. In 2003 the bank announced that they would be resuming support to Somalia, with a focus on HIV/AIDS and livestock. Until this week, the bank had yet to approve direct lending to the Somalia government. The bank also vowed to work with the Somali government toward improving education, healthcare, access to water, energy and finance. Somali Finance Minister Abdirahman Duale Beileh stated that the grants provide a sign that trust in the country’s leadership is improving.
One day after the bank’s announcement, the European Union announced the approval of a $116 million budget support to Somalia, the first of its kind. The funds, which will be disbursed until 2021, will be dedicated to assisting local authorities in providing basic services.