The African Development Bank Group has approved a $400 million loan to South Africa for the Mpumalanga Municipal Utility Reform Programme, aimed at improving the efficiency and financial sustainability of public electricity and water services in selected municipalities. Utilizing a results-based financing approach, loan disbursements will depend on verified improvements in utility performance, ensuring accountability and operational efficiency while delivering long-term community benefits.
This initiative supports South Africa’s Just Energy Transition by enhancing municipal services in coal-dependent areas affected by the shift from coal-fired power generation. The programme focuses on reducing water and electricity losses, improving revenue collection, rehabilitating crucial infrastructure, and encouraging private-sector participation through performance-based contracts.
Strong municipalities are fundamental to South Africa’s long-term development,” said Dr Kevin Kariuki, the African Development Bank Group’s Vice President for Power, Energy, Climate and Green Growth.
“By strengthening the financial sustainability of municipal utilities, this operation will improve the delivery of electricity and water services and build more resilient local institutions while establishing a replicable model for reforms that can strengthen municipalities across South Africa.”
Dr Daniel Alexander Schroth, the Bank’s Director of Renewable Energy and Energy Efficiency, said the programme shows how innovative financing can accelerate reforms.
“Through this Results-Based Financing operation, backed by the UK’s Just Energy Transition Guarantee, the Bank is linking financing to verified results,” Schroth said.
“By combining performance-based contracts with independent verification, the programme will improve service delivery and support South Africa’s Just Energy Transition in coal-dependent communities.”
The project is backed by a guarantee from the UK’s Foreign, Commonwealth and Development Office (FCDO), which also provided technical assistance. Implementation will be led by the Development Bank of Southern Africa, with oversight from South Africa’s National Treasury and Department of Cooperative Governance, benefiting approximately 1.2 million people across municipalities like eMalahleni and Mbombela.
Key actions include customer audits, smart metering, network rehabilitation, and enhancing municipal revenue collection. The programme aims to improve access to reliable services, reduce greenhouse gas emissions, create jobs, and bolster climate resilience in coal-affected communities, ultimately serving as a scalable model for municipal utility reform across South Africa and beyond.
Source: The African Development Bank Group
