African Development Bank Approves USD 503.75 Million to Back South Africa's Infrastructure Reforms

The African Development Bank Group's Board of Directors has approved a USD 503.75 million loan to South Africa to support reforms opening its electricity, freight transport and water sectors to competition and private investment.

The Infrastructure Governance Reform Program builds on budget support to South Africa that has been ongoing since 2023 and now totals over USD 1.2 billion. Of that, USD 300 million went to the 2023 Energy Governance and Climate Resilience Support Program (ECGRSP), which supported electricity-sector restructuring, Eskom's financial sustainability, the establishment of the National Transmission Company South Africa (NTCSA), and greater private-sector participation in renewable energy.

The 2025 Infrastructure Governance and Green Growth Program (IGGGP), at USD 474.5 million, strengthened implementation of electricity-market reforms, promoted renewable-energy integration, improved distribution efficiency, introduced transport-sector reforms, and incorporated social-protection measures associated with the just energy transition.

The program is being implemented within a coordinated development-partner framework, led by the National Treasury.

"This operation sits squarely on the Bank's Four Cardinal Points," said Kennedy Mbekeani, Director General for the Southern Africa Region. "It crowds private capital into transmission and rolling stock, strengthens the institutions that let South Africa finance infrastructure on its own terms, targets the jobs a young population needs, and builds infrastructure that can stand climate pressure."

Electricity: from single seller to open market

The central reform will transform South Africa's state-owned power utility, Eskom, from the sole buyer and seller of electricity. The regulator, NERSA, has issued a market operator license to the market operator housed inside the National Transmission Company South Africa (NTCSA), Eskom's ring-fenced transmission subsidiary. It has also approved Grid Capacity Allocation Rules, which set out who may connect to the grid and in what order, and created a Market Surveillance and Competition Unit to police the new market. The target is for the wholesale market to account for 10 per cent of total electricity transactions by December 2027.

The Transnet Rail Infrastructure Manager allocates train paths across 21,232 km of track under a gazetted network statement, and the Department of Transport has issued slot licenses to private train operators -- at least 11 slots across six corridors were awarded in August 2025, a first for South African freight rail. The regulator is expected to approve at least six licensed new private rail and port operators by December 2027, with rail freight throughput rising from 161 to 180 million tonnes a year.

South Africa also signed its first port terminal concession in December 2025 - a 25-year deal with International Container Terminal Services for Durban Container Terminal Pier 2, which handles 46 per cent of the country's containers and should lift capacity from 2.0 to 2.8 million TEUs by 2028. Rolling stock investment is targeted to triple to R6 billion (roughly $360 million) a year.

The Bank remains committed to supporting South Africa in implementing structural reforms in energy, transport and water effectively, and to delivering measurable service-delivery outcomes to citizens.

The expected gains will ensure shorter truck queues at Durban port, more reliable water supply and competitively priced electricity.

Read the original article on African Development Bank (AfDB).