South Africa: South Africa Metro Trading Services Program

proposed

The Program will be jointly co-financed with the World Bank (WB), applying the WB's Policy on Program-for-Results Financing (PforR Policy), to support the government's Metro Trading Services Program (MTSP). The MSTP has been designed as a transformative platform to drive climate-smart urban service delivery. It will provide performance-based conditional grants to metros, incentivizing improvements in governance, operational efficiency, and financial performance across three key sectors: water supply and sanitation (WSS), electricity, and solid waste management (SWM), fostering a more integrated approach to service delivery. The MTSP places climate mitigation and adaptation at its core. By focusing on rehabilitating and modernizing infrastructure, reducing water and electricity losses, and improving waste management operations, the Program will contribute to reducing greenhouse gas (GHG) emissions and promote more sustainable urban practices. For instance, reducing technical and commercial power losses not only improves service efficiency but also lowers emissions. Similarly, modernizing waste management practices—including enhanced waste minimization and collection, and recycling interventions—offers tangible climate mitigation benefits. Overall strengthening service delivery systems through better governance, operational efficiency, and climate-smart investments will help metros mitigate climate change impacts, improve resilience, and foster a more sustainable, low-carbon urban environment, ultimately ensuring long-term sustainability. The Government of South Africa, through the National Treasury, requested the World Bank, AIIB and other development partners to support the MTSP, using the PforR financing instrument. The Program comprises of the following three Result Areas (RAs) to contribute to the outcomes of the government program covering WSS, electricity, and SWM services. Each RA will cover each service with a focus on its governance and accountability, financial, and operational performance. These improvements are critical to enabling metros to become low-carbon, climate-resilient service providers. Disbursements will be made based on the verified achievement of Disbursement Linked Indicators (DLIs). Metro-wise DLIs involve metros having council-approved Performance Improvement Action Plans (PIAPs) for three municipal services, with progress monitored through the achievement of periodic performance targets outlined in these plans. The PIAP will include measurable climate-focused targets, such as reductions in non-revenue water and technical power losses, and methane emissions from SWM. This integrated, climate-focused approach, supported by national policy alignment and capacity building, positions the Program as a transformative effort to strengthen metropolitan service delivery and unlock broader climate-adaptive urban development potential. South Africa's metropolitan municipalities (metros), home to 22 million people and generating 85 percent of the country's economic output, are at the frontline of both the climate crisis and the national development agenda. These urban centers face mounting challenges in delivering critical municipal services—such as water, electricity, and waste management—due to aging infrastructure, poor governance, weak revenue collection, and financial mismanagement. These service delivery constraints are exacerbated by rapid urbanization, inherited spatial inequalities, and growing pressure on overstretched systems.  At the same time, metros are among the largest contributors to GHG emissions in South Africa, while also being increasingly vulnerable to climate change impacts including rising temperatures, more frequent droughts, and extreme flooding that strain water, energy, and waste systems. Addressing these issues is therefore central to South Africa's climate mitigation and adaptation goals, and critical to building resilient, low-carbon urban systems.