The loan will support electricity, water supply and sanitation, and solid waste management in eight metros.
The MTSR programme recognises that metropolitan municipalities and their financial sustainability are key to achieving economic growth for South Africa via improved service delivery. Picture: iStock
National Treasury has secured concessional loan financing from German and French development cooperation, via KfW Development Bank (KfW) and Agence Française de Développement (AFD), worth €300 million (R5.6 billion) to support the Metro Trading Services Reform (MTSR) programme.
This agreement comes just eight weeks and six days ahead of the local elections. The MTSR programme is designed to support the improvement of three trading services, namely electricity, water supply and sanitation, and solid waste management, in South Africa’s metropolitan municipalities.
These municipalities: Buffalo City, City of Cape Town, City of Ekurhuleni, City of eThekwini, City of Johannesburg, Mangaung, Nelson Mandela Bay, and City of Tshwane, serve more than 22 million residents. Therefore, ensuring these three trading services run smoothly is important.
Improvement of services in metros
Finance minister, Enoch Godongwana, on Tuesday, said the concessional loans will help support the objective of the MTSR programme. The programme recognises that metropolitan municipalities and their financial sustainability are key to achieving economic growth for South Africa via improved service delivery.
“The €300 million in concessional financing from KfW Development Bank and Agence Française de Développement strengthens the Government’s broader programme of support to improve the governance, financial sustainability and operational performance of essential trading services in metropolitan municipalities,” he said.
The reform seeks to improve the financial and operational performance of those trading services. It will ensure that generated revenues are reinvested in much-needed infrastructure to reduce outages and investment backlogs.
“We welcome the continued partnership of Germany and France in supporting more reliable services, increased infrastructure investment and stronger, more sustainable cities,” he added.
Loan to help drive investments in metros
Treasury said the €300 million concessional loan is divided between €200 million from KfW and €100 million from AFD. The loans fall under France and Germany’s Just Energy Transition mandate, as the MSTR will contribute to implementing the municipal component of the JET-Investment Plan (JET-IP).
“Improving the performance of essential municipal services is a fundamental prerequisite for delivering the JET and will help accelerate the public and private investments needed to address infrastructure backlogs and modernise electricity distribution networks,” added Treasury.
It is understood that these loans follow German Cooperation, via KfW, which has provided at least €350 million in concessional loans to Johannesburg and Cape Town over the last two years to fund much-needed investment in grid infrastructure upgrades and renewable energy integration.
Treasury noted that “given the scale of investment required to turn around their trading services, the metros need to increase investment and secure additional financing to complement the MTSR funding,” thus the new loans.
Gauteng a mess
None of the metros in Gauteng received a clean audit in the previous financial year. The Auditor-General (AG) shone a spotlight on the mess the metros are in, including Mangaung in Bloemfontein, Free State and eThekwini metro municipality in KwaZulu-Natal.
The AG found that the City of Ekurhuleni, headquartered in Germiston, Gauteng, has deteriorated over the past three years. The AG found project delays and poor project management, reflecting ongoing governance and financial management challenges.
The AG also highlighted that the City of Tshwane in Pretoria continues to face weaknesses in financial reporting and internal controls, including failure to produce credible financial statements without audit intervention and persistent non-compliance with procurement regulations.
The City of Johannesburg is also a mess; however, a partnership between government and businesses committed to helping the metro will begin only after the elections. This metro represents around 16% of the country’s economy.
Commitment to growing SA
Treasury said AFD’s new loan is part of its long-standing partnership with South African municipalities, built through numerous direct loans, notably to Johannesburg, eThekwini and Cape Town.
“These loans have been aimed at financing municipal infrastructure programmes while supporting policies to reduce inequalities and strengthen resilience to climate change.”
Marie-Hélène Loison, AFD’s Regional Director for Southern Africa, commended the National Treasury for leading the programme. “The MTSR programme will contribute to ensuring that the necessary investments in essential urban services are protected and sustained over time and will bring tangible improvements in service delivery for residents and businesses,” said Loison.
Germany’s commitment
Treasury added that the additional loan from KfW also shows Germany’s commitment to South Africa’s growth.
Cornelia Tittmann, KfW’s Country Director for South Africa, stated the importance of the reforms underway and recognised National Treasury’s leadership in developing a programme that will improve service delivery and living conditions for millions of South Africans.
She said that “as a key partner on the continent, South Africa’s success matters deeply to Europe and this commitment is reflected in continued cooperation across trade, investment, and development initiatives such as the MTSR”
