The funding will support the Mpumalanga Municipal Utility Reform Programme (MURP), a results-based financing initiative aimed at improving the efficiency, reliability and financial sustainability of public electricity and water services in selected municipalities across the province.
Under AfDB’s Results-Based Financing model, loan disbursements will be linked to independently verified improvements in utility performance and service delivery. Funding will only be released once agreed targets have been achieved.
The programme is designed to strengthen municipal services in coal-dependent communities affected by SA’s transition away from coal-fired power generation. Key objectives include reducing electricity and water losses, improving revenue collection, rehabilitating critical infrastructure and strengthening municipal utility management.
AfDB Vice President for Power, Energy, Climate and Green Growth Kevin Kariuki said the initiative could serve as a model for broader municipal reform. “Strong municipalities are fundamental to SA’s long-term development.”
Kariuki added: “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 SA.”
AfDB Director of Renewable Energy and Energy Efficiency Daniel Schroth said the programme demonstrates how innovative financing can be used to drive reform. “Through this Results-Based Financing operation, backed by the UK’s Just Energy Transition Guarantee, the Bank is linking financing to verified results.”
Schroth added: “By combining performance-based contracts with independent verification, the programme will improve service delivery and support SA’s Just Energy Transition in coal-dependent communities.”
The AfDB financing is backed by a guarantee from the United Kingdom’s Foreign, Commonwealth and Development Office under the Just Energy Transition Partnership guarantee framework. The UK government also provided technical assistance during programme preparation.
Acting British High Commissioner to SA Lisa Weedon welcomed the initiative. “The UK welcomes the leadership shown by the South African government in advancing municipal utility reform.”
Weedon said: “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 SA’s Just Energy Transition.”
Implementation will be managed by the Development Bank of Southern Africa through a dedicated Programme Management Office under the oversight of the National Treasury and the Department of Cooperative Governance.
The programme will cover the municipalities of eMalahleni, Lekwa, Govan Mbeki and Mbombela, benefiting an estimated 1.2 million people. It will also support the Inkomati-Usuthu Catchment Management Agency over the five-year implementation period from 2026 to 2031.
National Treasury Deputy Director-General for Intergovernmental Relations, Ogalaletseng Gaarekwe, said the programme is intended to test a model that can be expanded nationally. “We view MURP as a strategic intervention to strengthen and stabilise critical municipal services.”
Gaarekwe added: “The programme will test a scalable support model to improve operations and maintenance, utility management and planning, and infrastructure and municipal capabilities.”
Key interventions include smart metering, customer audits, rehabilitation of water and electricity networks, reduction of non-revenue water, pressure management, LED street-light retrofitting and alternative energy systems for public buildings.
AfDB said the programme is expected to improve service delivery, strengthen municipal governance, create jobs, reduce greenhouse gas emissions and enhance climate resilience. As a pilot project, the initiative is also intended to provide a model for municipal utility reform that could be replicated across SA and other countries facing similar challenges.
–AfDB/ChannelAfrica–
