Johannesburg municipality confirms billions to be loaned from German development bank
· Citizen
The Johannesburg municipality will be pushing ahead with a multi-billion-rand loan from a European financier.
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The city on Friday confirmed it had secured a €200 million loan facility with Germany’s state-owned development bank, Kreditanstalt für Wiederaufbau (KfW).
City Power will be the sole beneficiary of the loan, with the municipality stating the entity had an infrastructure backlog totaling an estimated R40 billion.
The city has identified R5.5 billion worth of City Power infrastructure projects over the next three years, with R3.8 billion of that coming from the KfW loan.
“The city believes that strategic collaboration between government, development finance institutions, and the private sector will remain critical in supporting Johannesburg’s long-term energy transition and infrastructure recovery agenda,” officials stated on Friday.
Billions repaid over 15 years
The €200 million loan was secured to finance City Power’s “infrastructure refurbishment, maintenance and modernisation backlog”.
Projects being prioritised include upgrades to bulk infrastructure, substations, medium and low voltage networks, metering, public lighting, and more.
“The city further notes that the scale of Johannesburg’s infrastructure requirements cannot be addressed through conventional municipal funding mechanisms alone.
“As a result, the city and City Power continue engaging additional financial institutions, development agencies, and private sector partners to explore further infrastructure funding and blended financing opportunities,” the municipality stated.
The loan will only be repayable from May 2031 at a fixed rate of 8.56% per year for a 15-year repayment term.
“Every rand of this facility will go directly into the ground – into transformers, cables, meters, substations and renewable energy infrastructure that will make City Power more reliable, more efficient and more financially sustainable,” stated the municipality’s CFO Tebogo Moraka.
Bonuses to be frozen
ActionSA stated last week that it would not support the approval of the loan, citing existing financial challenges plaguing the municipality.
These include R23 billion in wasted funds flagged by the Auditor-General of South Africa, over R6 billion owed to Eskom, and a multi-year R10 billion deal with the municipal workers’ union flagged by National Treasury.
“This superficial and frenzied attempt to repair the mismanagement of the City of Joburg’s finances will not improve electricity supply.
“Instead, it will entangle the residents to an unaffordable loan agreement over a period of 15 years,” stated the party’s Johannesburg mayoral candidate Herman Mashaba.
The Democratic Alliance (DA) supported the loan on condition that the funds went only to specific infrastructure projects and be subject to strict auditing measures.
“The DA in Johannesburg has supported the proposed R3.8 billion KfW loan for City Power after successfully pushing for stricter oversight, accountability, and financial safeguards,” confirmed DA shadow MMC for finance Chris Santana.
Additional conditions set by the DA include the German government overseeing implementation, as well as City Power agreeing to freeze executive salaries and bonuses for two years.
“Debt should never be taken lightly, especially when residents are already dealing with collapsing infrastructure, rising costs, and poor service delivery,” Santana concluded.