World Bank and South Africa unveil R55bn plan to revitalise cities

Source: Cathay Pacific. The Nelson Mandela Bridge in Johannesburg, South Africa.

South Africa's R55bn infrastructure initiative comprises a $1bn loan from the World Bank and $2bn in government funding, totalling $3bn (approximately R54.6bn).

According to the World Bank, this funding will supplement approximately $6bn raised through revenue collection and borrowing by the metropolitan areas, resulting in a $9bn government programme

Targeted fiscal reforms

The initiative introduces a targeted, performance-based fiscal transfer to municipalities which incentivises cities to implement reforms in their trading services—the essential utilities provided to residents. By linking financial support to performance outcomes, the programme aims to improve service delivery and operational efficiency within these municipalities. ​

The programme “will involve a combination of grant reforms together with the provision of conditional financial incentives that encourage municipalities to aggressively target the challenges affecting service delivery,” the World Bank said. It said the municipalities of Bloemfontein, Pretoria, East London, Gqeberha, and Ekurhuleni are also earmarked for inclusion in the programme.

The South African Treasury outlined specific requirements for metropolitan municipalities to qualify for this performance-based funding. These include developing council-approved turnaround strategies for water services, creating roadmaps for institutional reforms, and formulating comprehensive business and investment plans aligned with water services development objectives.

These measures are designed to ensure that the allocated funds are utilised effectively to address the pressing infrastructure needs of urban areas.

Global urban development

The World Bank's initiative in South Africa follows a similar model to urban development initiatives in countries like India, Kenya, and Indonesia, which it has supported. In India, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) follows a performance-based approach to improve water supply, sanitation, and urban transport. In Kenya, the Kenya Urban Support Program (KUSP) provides grants to municipalities based on governance and service delivery improvements.

Meanwhile, in Indonesia, the National Urban Development Project (NUDP) assists cities in integrating sectoral plans, including transportation, housing, economic strategies, and environmental considerations. It aims to enhance urban planning and infrastructure prioritisation.

Similarly, South Africa is also focusing on improving urban infrastructure development. The South African Treasury outlined plans in its 2025 Budget to address infrastructure decline in major cities through incentive-based programmes, and allocated an additional R46.7bn for infrastructure investments over the next three years.

The funding's focus will be on sectors such as transport, energy, and water and sanitation. The Treasury did not, however, provide details on the requirements, targets, or funding specifics, nor did it mention the World Bank and South Africa's R55bn plan to revitalise its cities. While South Africa’s government currently allocates funding to municipalities for infrastructure investments, there is no performance-based incentive tied to the delivery of urban infrastructure.

This targeted, performance-based fiscal transfer to municipalities marks a historic milestone.