The African Development Bank Group hasapproved a $400 million loan to support reforms aimed at improving electricity and water services in four municipalities in South Africa’s Mpumalanga province.
The financing will support theMpumalanga Municipal Utility Reform Programme (MURP), a results-based initiative that links loan disbursements to independently verified improvements in utility performance and service delivery.
Under the programme, funds will be released only after agreed targets are achieved. The approach is designed to strengthen accountability and improve the efficiency and financial sustainability of municipal utilities.
The initiative is part of South Africa’s broader Just Energy Transition efforts, focusing on coal-dependent communities affected by the country’s move away from coal-fired power generation. The programme will target challenges including electricity and water losses, weak revenue collection, ageing infrastructure and municipal utility management.
The four participating municipalities areeMalahleni, Lekwa, Govan Mbeki and Mbombela, with the programme expected to benefit an estimated 1.2 million people. Implementation will run from 2026 to 2031 and will also include support for the Inkomati-Usuthu Catchment Management Agency to strengthen integrated water re
“Strong municipalities are fundamental to South Africa’s long-term development,” said Dr Kevin Kariuki, African Development Bank Group Vice President for Power, Energy, Climate and Green Growth.
The initiative is part of South Africa’s broader Just Energy Transition efforts, focusing on coal-dependent communities affected by the country’s move away from coal-fired power generation
“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,” he said.
The programme will include measures such as customer and connection audits, smart and bulk metering, rehabilitation of electricity and water networks, reduction of non-revenue water, pressure management, LED street-light upgrades, alternative energy systems for public buildings, and efforts to improve municipal revenue collection.
Dr Daniel Alexander Schroth, the Bank’s Director of Renewable Energy and Energy Efficiency, said the financing model demonstrated how innovative approaches could support municipal 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.
The $400 million loan is backed by aguarantee from the United Kingdom’s Foreign, Commonwealth and Development Office (FCDO) under the Just Energy Transition Partnership guarantee framework. The FCDO also provided technical assistance during programme preparation.
Lisa Weedon, Acting British High Commissioner to South Africa, said the initiative showed how financing partnerships could support municipal improvements and investment.
“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,” Weedon said.
The Development Bank of Southern Africa will lead implementation through a dedicated Programme Management Office, with oversight from South Africa’s National Treasury and the Department of Cooperative Governance.
National Treasury Deputy Director-General for Intergovernmental Relations Ogalaletseng Gaarekwe said the programme would test a model that could be expanded to other municipalities.
“We view MURP as a strategic intervention to strengthen and stabilise critical municipal services,” Gaarekwe said.
The programme is expected to support improved access to reliable basic services, lower greenhouse gas emissions, create employment opportunities, strengthen municipal governance and improve climate resilience in communities affected by the transition from coal.
As a national pilot, MURP is intended to provide a model for municipal utility reform that could be applied more widely in South Africa and other countries facing similar infrastructure and service delivery challenges.
