South Africa Secures $925M World Bank Loan to Boost Metro Service Delivery

“Metros will unlock the incentive grant funding by demonstrating improved institutional and service delivery performance,” said Minister of Finance Enoch Godongwana.

In a landmark move aimed at revitalising urban infrastructure and transforming essential services, the Government of South Africa has secured a US$925 million loan from the World Bank, the first tranche of a broader US$3 billion (R55 billion) initiative. This programme will benefit the country’s eight largest metropolitan municipalities and is a key component of a new results-based reform framework intended to drive performance, accountability, and sustainability in public service delivery.

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A Milestone Reform: The South Africa Metro Trading Services Program (MTSP)

The newly launched South Africa Metro Trading Services Program (MTSP) marks the country's first-ever Program-for-Results (PforR) operation—a performance-linked financing model that ties disbursement of funds to the actual achievement of service delivery and institutional targets.

The program will directly benefit the metros of:

• Buffalo City

• Cape Town

• Ekurhuleni

• Johannesburg

• Tshwane

• eThekwini

• Mangaung

• Nelson Mandela Bay

Collectively, these eight cities are home to over 22 million residents, accounting for approximately 85% of South Africa’s economic output. They are vital engines of national growth—but have faced mounting pressure over the last decade, grappling with infrastructure decay, declining service reliability, financial instability, and rising public dissatisfaction.

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A Results-Based Approach to Municipal Transformation

Under the PforR structure, municipalities will receive funding only after achieving verified performance outcomes across core trading services, including:

• Water supply and sanitation

• Electricity

• Solid waste management

Each of these services is classified as a municipal trading service—a category of services intended to be financially self-sustaining through tariffs and fees. However, many metros have struggled with declining revenue collection, weak asset management, and underinvestment in infrastructure.

“Metros will unlock the incentive grant funding by demonstrating improved institutional and service delivery performance,” said Minister of Finance Enoch Godongwana.

These improvements may include measurable gains such as:

• Increased service coverage and reliability

• Improved billing and collection efficiency

• Asset registry and lifecycle maintenance systems

• Strengthened financial and operational governance

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Incentivising Performance Through Conditional Grants

A major innovation under the MTSP is the creation of a new performance-based fiscal grant from the national government to the metros. These conditional grants are designed to reward good governance and service delivery outcomes.

“Should results not be achieved, the grants are not released. This approach incentivises performance and promotes accountability to citizens,” the World Bank explained.

This design places greater responsibility on local leadership, and links funding directly to public outcomes—essentially making "payment for good performance" the new standard.

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World Bank Endorsement and Strategic Partnership

The World Bank’s Board of Executive Directors approved the US$925 million operation, with Satu Kahkonen, Division Director for South Africa, calling the program a milestone in the country’s reform agenda.

“This operation is designed to incentivize real performance improvements, accountability and institutional reforms through a results-based approach, contributing to better lives and livelihoods in South Africa,” she said.

This new form of results-driven financing marks a major shift from traditional project-based lending and reflects international confidence in South Africa’s evolving governance systems.

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Anchored in Operation Vulindlela Phase II

The MTSP is embedded in the government’s broader Operation Vulindlela Phase II, a joint initiative of the Presidency and National Treasury to accelerate structural reforms and enable economic recovery.

Approved by the Cabinet in March 2025, the initiative places strategic emphasis on the professionalisation and financial sustainability of municipalities, particularly metro-level trading services, which directly impact millions of South Africans.

To build political momentum and ensure local buy-in, Minister Godongwana met with mayors from all eight metros in October 2025, reinforcing the shared accountability for delivering meaningful change on the ground.

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Learning from the Cities Support Programme (CSP)

The MTSP builds on over a decade of lessons learned through the National Treasury’s Cities Support Programme (CSP), which was established in 2011 with backing from the World Bank and other partners.

The CSP aimed to enhance urban governance, fiscal resilience, and inclusive growth in metros by supporting reforms in land management, infrastructure financing, and service delivery systems. The new MTSP extends this framework by linking financial support to measurable outcomes, thereby raising the bar for transparency and accountability.

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The Road Ahead: Strengthening Urban Infrastructure and Governance

South Africa’s metros face the dual challenge of maintaining aging infrastructure while also meeting the growing demands of urban populations. The MTSP promises to shift the trajectory by:

• Unlocking targeted investment in service delivery systems

• Reinforcing public trust through visible performance improvements

• Aligning fiscal support with national development goals

This initiative also aligns with the country’s commitment to the UN Sustainable Development Goals, particularly Goal 11: Sustainable Cities and Communities, and Goal 6: Clean Water and Sanitation.

With the MTSP now in motion, the spotlight turns to metros to demonstrate that they can deliver services that are efficient, sustainable, and accountable—thereby restoring confidence in local governance and building the foundation for inclusive economic growth.