Historic subnational financing deal to boost water, energy, and waste services across South Africa’s economic hub. ESG BROADCAST shares key takeaways.
Regulatory Extract:
On July 1, 2025, the African Development Bank (AfDB) approved a ZAR 2.5 billion (approximately USD 139 million) corporate loan to the City of Johannesburg Metropolitan Municipality—the first-ever direct subnational lending by the Bank on the African continent. The landmark funding will support over 100 infrastructure projects in energy, water, sanitation, and solid waste management, aiming to significantly enhance urban service delivery for over 6 million residents.
This initiative marks the operational launch of the AfDB’s “Guidelines for Subnational Finance,” a policy tool designed to enable municipalities and regional governments to access capital directly. Johannesburg, South Africa’s largest city and contributor of 16% to the nation’s GDP, was selected as a pilot for this scalable financial model.
“This landmark transaction positions cities like Johannesburg as engines of sustainable development, capable of mobilizing long-term investment for inclusive infrastructure,” said Solomon Quaynor, AfDB Vice President for Private Sector, Infrastructure and Industrialization.
The approved loan will finance critical interventions including upgrading power distribution networks, installing smart meters, expanding renewable energy capacities, and connecting 3,200 new households to the electricity grid. The water and sanitation components include replacing aging pipelines, modernizing treatment facilities, and reducing water losses from 46% to 37%.
Waste management efforts will also receive significant investment to improve landfill compliance, expand recycling capabilities, and optimize waste collection services. These infrastructure overhauls are expected to reduce power outages, bolster industrial productivity, and expand access to essential services for vulnerable households.
Job creation is another major focus. The project anticipates generating 2,869 construction-phase jobs and 592 full-time roles post-completion—14% reserved for women and 23% for youth. Moreover, ZAR 500 million in project contracts have been earmarked for SMEs, with 40% allocated to women-led businesses and 50% to youth entrepreneurs.
The Bank is also seeking a USD 1.5 million grant from its Urban and Municipal Development Fund to further support governance, reform, and climate-resilient planning capacity within Johannesburg’s municipal systems.
To safeguard project implementation, AfDB has embedded robust monitoring mechanisms and financial compliance checks throughout the loan lifecycle. These include transparency obligations, measurable performance indicators, and timely reporting to ensure proper fund utilization.
Kennedy Mbekeani, Director General for Southern Africa at AfDB, emphasized the broader regional impact: “This financing redefines how cities in Africa can lead infrastructure modernization with accountability and autonomy. Johannesburg’s success will serve as a benchmark for other subnational entities seeking ESG-aligned development financing.”
Strategic significance lies in the deal’s precedent-setting nature for climate-resilient infrastructure development, ESG compliance, and decentralized financing in Africa. By anchoring investments in performance-based, revenue-generating services, the AfDB strengthens institutional capacity while promoting inclusive, climate-resilient urban growth.
This milestone illustrates a strategic shift in Africa’s infrastructure landscape—enabling cities to lead their own sustainable transformation.
ESG BROADCAST will continue monitoring the updates related to this topic. Stay tuned to be updated on the related policy and pivotal regulatory shift.
