(AfDB) - In June 2025, a quiet but important decision marked a real turning point in African urban finance. The African Development Bank's Board of Directors approved a ZAR 2.5 billion ($139 million) corporate loan for the City of Johannesburg, marking the first time the Bank has extended financing without a sovereign guarantee to a subnational government in Africa.

This funding will have a direct and tangible impact on the daily lives of Johannesburg residents by strengthening basic services and expanding economic opportunities. Residents can expect fewer power outages, improved water supply, more efficient waste collection, and increased industrial productivity, all of which contribute to broader economic growth. Importantly, these improvements are being financed through a more sustainable, market-based model that reduces reliance on national subsidies.

The deal is more than just a funding breakthrough; it validates the growing view among investors and development professionals alike that, when well-managed, African cities can and should access capital markets on their own terms.

A Market-Ready Metropolis

Johannesburg isn’t just South Africa’s largest city. It is a major economic hub and powerhouse. With $67 billion in economic output, and housing at least 6.44 million residents, the city generates more wealth than many African countries.

However, like many fast-growing African cities, the City of Johannesburg is under pressure.

Legacy infrastructure is aging. Its electricity and water systems suffer significant losses, at rates exceeding 30% and 46%, respectively. Sanitation and waste services are overwhelmed, particularly in underserved communities. Population growth is intensifying these challenges. Yet these constraints also represent opportunities: Johannesburg has unmet demand, real scale, and crucially, a clear willingness to reform.

From Municipal Risk to Bankable Asset 

Historically, African municipalities have struggled to attract direct capital investment due to legal constraints and concerns about credit risk. The City of Johannesburg has now defied this trend through a decade of governance, budgeting, and financial reforms that have strengthened its independently verified credit profile and inspired investor confidence.

The African Development Bank loan is tied to over 100 capital projects spanning four critical sectors:

• Electricity: Grid upgrades, smart meters, renewables, and 3,200 new household connections
• Water & Sanitation: Pipeline repair, water treatment, and a plan to reduce losses to 37%
• Solid Waste: More efficient collection, landfill upgrades, and recycling expansion
• Revenue-Generating Utilities: All investments are linked to tariff-backed revenue streams for repayment

Economic Stimulus with Returns

The infrastructure program is designed to deliver both economic and social returns:

• Job Creation: Nearly 2,900 construction jobs and 592 permanent roles, with gender and youth inclusion targets
• Procurement Opportunity: ZAR 500 million in contracts allocated to SMEs, half to youth-owned businesses
• Productivity Gains: More reliable services for industrial users support operational efficiency
• Service Equity: 160,000 low-income households will receive improved access to utilities

The partnership has embedded strong governance practices into the program, including independent oversight, transparent procurement, and financial safeguards, key criteria for future capital access.

Momentum Beyond the City of Johannesburg

While the City of Johannesburg may be the first African city to secure a non-sovereign guaranteed loan from the African Development Bank, it is not alone in its efforts to achieve financial independence. Other cities, such as Dakar, Cape Town, Nairobi, and Kigali, have also made significant progress towards attaining more autonomy and accountability in their financing mechanisms.

These cities share a common understanding that urban growth must be matched by fiscal capability, and that capital markets, not subsidies, will drive the next generation of infrastructure investments. 

Investor Takeaway: Cities Are the Next Frontier

Johannesburg’s breakthrough isn’t just a local success; it’s a signal to the market. African cities are increasingly proving themselves as bankable partners. For investors, lenders, and infrastructure firms, the rise of creditworthy municipalities is an untapped opportunity.

The trend is clear: well-managed cities are evolving from mere service providers. They are also infrastructure clients, capital partners, and engines of inclusive economic growth.

As Africa continues to urbanize, cities such as Johannesburg are showing that the future of investment is increasingly rooted in local contexts. When the appropriate financial architecture is established, cities are well-positioned to lead and drive sustainable development.

Bleming Nekati

 (Bleming Nekati is the Regional Head for Private Sector Operations in Southern Africa at the African Development Bank.)