- South Africa launches performance-based grants to unlock 100 billion rand
- The program aims to improve municipal services and strengthen financial management.
- Incentives linked to reforms addressing infrastructure, revenue and governance failures
South Africa introduced performance-based grants on March 19, 2026, with the aim of unlocking 100 billion rand ($5.8 billion) for the country's eight largest metropolitan municipalities.
The program aims for more reliable delivery of water, electricity, sanitation and waste collection services.
The government plans to stabilize municipal administration, strengthen financial management, modernize infrastructure and install smart meters. The reforms also include legislative changes and tighter monitoring of the budget and fiscal recovery plans.
“Metro Trading service improvements target a specific problem. Many of our cities are failing to provide services or adequately collect revenues. Even when they do, the revenue they collect goes to the general municipal share rather than being invested in maintaining and upgrading infrastructure.” said Duncan Pieterse, Director General of the National Treasury.
To improve efficiency, the government will allocate 54 billion rand in performance-linked incentives, including 27.7 billion rand over the medium term. Municipalities must meet targets set in their performance improvement action plans to access the funding.
South Africa has been facing an energy crisis since 2008, largely caused by aging coal-fired power plants, causing blackouts of up to 12 hours a day. According to the Public Investment Corporation, the outage has reduced the country's economic potential by 20%. The World Bank estimates the economy will lose 2% of GDP and 500,000 jobs in 2023.
The water sector is under severe stress. According to the Department of Water and Sanitation, the infrastructure is deteriorating and requires more than 90 billion rand annually for modernization. The South African Institution of Civil Engineering (SAICE) states that more than 40% of produced water is lost due to leakage, theft and poor maintenance.
“The direct economic impact of the drought on the Western Cape economy was estimated to be approximately R15 billion, which is approximately 3.4 per cent of provincial GDP and 0.3 per cent of national GDP in 2018.” Asmin Khan, the World Bank's country director for Southern Africa, said in a statement in June 2023.
In response, the World Bank approved a $1.5 billion loan over 2025 to support structural reforms aimed at modernizing infrastructure and strengthening energy security, including improved grid access and municipal distribution.
Separately, Finance Minister Enoch Godongwana's 2025 budget allocates more than 1 trillion rand to transport, energy, water and sanitation to support growth and improve public services.
The program is part of broader efforts to restore the financial viability of essential municipal services and support economic growth.
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