The City of Cape Town has secured R2.8 billion in development finance to support major electricity grid upgrades. This agreement, made with the German Development Bank (KfW) on behalf of the German Government, forms part of the metro’s transition towards a more dynamic and decentralised energy future.
Largest Infrastructure Investment by a Metropolitan Municipality
Cape Town is set to invest R39.5 billion in infrastructure from July 2024 to June 2027 under the City’s ‘Building For Jobs’ Budget. This represents the largest three-year infrastructure investment ever made by a South African metropolitan municipality. Within this, more than R4 billion will be allocated to electricity grid upgrades and maintenance.
The concessional nature of the KfW financing provides the City with favourable financial terms, ensuring long-term affordability.
‘We are pleased to secure this critical finance for our plans to upgrade Cape Town’s electricity grid. Without reliable infrastructure, we simply cannot achieve our goals to beat power outages, diversify supply, ensure reliable electricity for a growing city, and enable thousands of small-scale sellers to move electricity across our grid. That is why we’ve been on a mission to raise the ambition of our infrastructure investment agenda, which we estimate will create 130,000 construction-related jobs alone over three years. Lower-income households will also directly benefit from 75% – or R9 billion – of Cape Town’s R12 billion infrastructure spend in 2024/25,’ said Mayor Geordin Hill-Lewis.
Sustainable Infrastructure for the Future of Cape Town
‘The City’s 10-year infrastructure pipeline is valued at an estimated R120 billion, with the majority of projects linked to the metro’s overall Climate Change Strategy. The KfW’s concessional loan – over a period of 15 years – will help the City invest sustainably in infrastructure with long operational lifespans,’ said Alderman Eddie Andrews, Deputy Mayor and Mayoral Committee Member for Spatial Planning and Environment.
‘The City’s Energy Directorate is currently rolling out its three-year R4 billion infrastructure programme to strengthen and expand our electricity grid and ensure it is capable of harnessing new energy sources, including renewables. The KfW’s support will boost our infrastructure programmes and significantly improve electricity services for both residents and businesses in Cape Town,’ said Alderman Xanthea Limberg, Mayoral Committee Member for Energy.
‘KfW is proud to support its longstanding partner, the City of Cape Town, in strengthening its environmentally friendly electricity infrastructure. Ensuring a stable and sustainable power supply is essential for economic growth and social development,’ said Stefan Wintels, CEO of KfW Banking Group.
‘We are delighted to see the partnership between South Africa and Germany further evolving. Climate change is one of the biggest global challenges of the 21st century. Germany’s support of South Africa’s Just Energy Transition underlines our commitment to stand beside our partner in challenging times,’ said German Ambassador Andreas Peschke.
Blended Finance Approach
The City is following a blended finance model, combining funding from its own financial resources with finance from both local and international markets. In June 2024, City Council approved R3.5 billion in finance from Nedbank, alongside R2.8 billion from the International Finance Corporation (IFC). Earlier, in April 2023, Council approved €100 million in development financing from the Agence Française de Développement (AFD).
