The African Development Bank (AfDB) has approved a $400 million loan to help South Africa overhaul electricity and water services in Mpumalanga Province, marking a significant boost to the country's efforts to modernise ageing municipal infrastructure and support its transition to cleaner energy.

The funding will finance the Mpumalanga Municipal Utility Reform Programme, a first-of-its-kind results-based financing initiative designed to improve the efficiency, reliability and financial sustainability of public utilities in some of the province's most vulnerable communities.

Unlike traditional infrastructure loans, the AfDB's financing will be disbursed only after independently verified improvements in service delivery are achieved. The results-based model is intended to strengthen accountability while ensuring investments translate into tangible improvements for residents.

The United Kingdom's Foreign, Commonwealth and Development Office (FCDO) is backing the loan through a guarantee under the Just Energy Transition Partnership (JETP) framework and also provided technical assistance during the programme's design.

The initiative forms part of South Africa's broader Just Energy Transition, which aims to reduce dependence on coal while protecting communities whose economies have long relied on coal mining and coal-fired power generation.

Implementation will be led by the Development Bank of Southern Africa (DBSA) in partnership with the National Treasury and the Department of Cooperative Governance. The programme will directly benefit about 1.2 million people across the municipalities of eMalahleni, Lekwa, Govan Mbeki and Mbombela between 2026 and 2031.

Key projects include smart metering, customer audits, rehabilitation of electricity and water networks, LED street-light upgrades, alternative energy systems for public buildings and measures to reduce non-revenue water.

Business Insider Africa has previously reported on South Africa's mounting infrastructure challenges, including unreliable electricity supply and deteriorating municipal services. If successful, the Mpumalanga programme could become a national blueprint for utility reform, helping strengthen local governance, improve climate resilience and attract greater investment into public infrastructure across South Africa.