• South Africa launches performance-based grant to unlock 100 billion rand
• Program targets improved municipal services and stronger financial management
• Incentives tied to reforms addressing infrastructure, revenue, and governance failures

South Africa introduced a performance-based grant on March 19, 2026, aimed at unlocking 100 billion rand ($5.8 billion) for the country’s eight largest metropolitan municipalities.

The program targets more reliable delivery of water, electricity, sanitation and waste collection services.

The government plans to stabilize municipal governance, strengthen financial management, modernize infrastructure and roll out smart meters. The reforms also include legislative changes and tighter oversight of budgets and financial recovery plans.

“The Metro Trading Service Reform targets a specific problem. Many of our cities are failing to provide services or to collect revenue adequately. Even when they do, the revenue they collect goes into the general municipal pot instead of being invested to maintain and upgrade 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 out in their Performance Improvement Action Plans to access the funding.

South Africa has faced an energy crisis since 2008, largely due to aging coal-fired power plants, leading to rolling blackouts lasting up to 12 hours a day. According to the Public Investment Corporation, the outages have reduced the country’s economic potential by 20%. The World Bank estimates they cost the economy 2% of GDP and 500,000 jobs in 2023.

The water sector is under severe strain. Infrastructure is deteriorating and requires more than 90 billion rand annually to modernize, according to the Department of Water and Sanitation. The South African Institution of Civil Engineering (SAICE) says more than 40% of water produced is lost through leaks, theft and poor maintenance.

“The direct economic impact of the drought on the Western Cape economy was estimated to be nearly R15 billion, which is about 3.4 percent of provincial GDP and 0.3 percent of national GDP in 2018,” said Asmeen Khan, World Bank Country Director for Southern Africa, in a statement in June 2023.

In response, the World Bank approved a $1.5 billion loan in 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 development.

Ingrid Haffiny