The programme forms part of South Africa's Just Energy Transition efforts by helping municipalities affected by the country's shift away from coal while strengthening the delivery of essential municipal services.
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The African Development Bank (AfDB) Group has approved a $400 million (about R6.5 billion) loan to South Africa to support the Mpumalanga Municipal Utility Reform Programme.
This is an initiative aimed at improving the quality, reliability and financial sustainability of electricity and water services in four municipalities in the province.
The programme, approved last week, forms part of South Africa's Just Energy Transition efforts by helping municipalities affected by the country's shift away from coal while strengthening the delivery of essential municipal services.
The initiative will focus on reducing electricity and water losses, improving municipal revenue collection, rehabilitating critical infrastructure, strengthening utility management and encouraging greater private sector participation through performance-based contracts.
According to the AfDB, the programme is expected to reduce greenhouse gas emissions, create jobs, improve municipal governance and strengthen climate resilience in coal-dependent communities. It is also intended to serve as a pilot model that could be expanded to other municipalities in South Africa and replicated in other countries facing similar challenges.
Kevin Kariuki, the AfDB's Vice president for power, energy, climate and green growth, said stronger municipalities were essential for South Africa's long-term development.
"Strong municipalities are fundamental to South Africa's long-term development. By strengthening the financial sustainability of municipal utilities, this operation will improve electricity delivery, build more resilient local institutions, and establish a replicable model for reforms that strengthen municipalities across South Africa," Kariuki said.
The bank's financing is backed by a guarantee from the United Kingdom's Foreign, Commonwealth and Development Office (FCDO) under the Just Energy Transition Partnership guarantee framework. The FCDO is also providing technical assistance to support project preparation.
Acting British High Commissioner to South Africa Lisa Weedon said the UK supported South Africa's efforts to improve municipal service delivery through innovative financing.
"The UK welcomes South Africa's efforts to advance municipal utility reform. MURP represents a practical partnership that demonstrates how innovative financing can help municipalities deliver more reliable services and create the conditions for greater investment and economic growth, while advancing South Africa's Just Energy Transition. We are pleased to support the National Treasury and its partners in delivering this important initiative," Weedon said.
The programme will be implemented by the Development Bank of Southern Africa (DBSA) through a dedicated Programme Management Office under the leadership of the National Treasury and the Department of Cooperative Governance.
The participating municipalities are eMalahleni, Lekwa, Govan Mbeki and Mbombela, which collectively serve about 1.2 million people. The programme will also support the Inkomati-Usuthu Catchment Management Agency in strengthening integrated water resource management between 2026 and 2031.
National Treasury deputy director-general for intergovernmental relations Ogalaletseng Gaarekwe said the programme would help municipalities improve the sustainability of essential services.
"We see the Mpumalanga Municipal Utility Reform Programme as an important step towards improving and stabilising municipal services," Gaarekwe said.
"It will test a support model that strengthens operations and maintenance, planning, infrastructure, and municipal capability, helping to provide more reliable and sustainable water and energy services while advancing the Government's Just Energy Transition goals."
The AfDB said the programme underscores its commitment to supporting South Africa's infrastructure reform agenda, climate-resilient development and inclusive economic growth by linking financing to verified results while strengthening municipal institutions and improving service delivery.
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