South Africa Metro Trading Services Program – Frequently Asked Questions (FAQs)

1. What is the South Africa Metro Trading Services Program?

The South Africa Metro Trading Services Program is a $925 million Program-for-Results (PforR) operation and represents the World Bank's first use of this financing instrument in South Africa. It is designed to support improved accountability, financial and operational performance of trading services (water supply and sanitation, electricity, and solid waste management). The PforR will be implemented across the country's eight metropolitan municipalities, namely Buffalo City, the City of Cape Town, City of Ekurhuleni, City of Johannesburg, City of Tshwane, eThekwini, Mangaung, and Nelson Mandela Bay. These municipalities collectively serve over 22 million residents and are central to South Africa's economy and urban development agenda.

2. How is the program financed?

The program is financed through a $925 million loan from the World Bank, with a $2.31 billion contribution from the Government of South Africa. The World Bank loan supports results-driven disbursement, enabling municipalities to scale up reforms and performance improvements over time.

• The Government of South Africa uses the loan to fund a new performance-based fiscal grant to the metros, called the Metro Trading Services Grant (MTSG).
• Metros do not receive loans. They receive grants from the national government, which are disbursed based on results achieved.
• Should results not be achieved, the grants are not released. This approach incentivizes performance and promotes accountability to citizens.

3. What is the Program-for-Results (PforR) financing instrument, and how does it work?

PforR is a results-based financing instrument that disburses funds only after agreed results are achieved and verified. In this case, funding will only be released upon measurable improvements in areas such as institutional reform, revenue collection, asset management, and service quality. This approach strengthens accountability and ensures a sharp focus on tangible development outcomes and institutional change. The performance-based grants will enable the metros to invest in services, resulting in tangible service delivery improvements for South Africa's people.

4. Why is the program necessary?

South Africa's metros are facing a growing crisis in service delivery due to:

• Persistent underinvestment in operations and maintenance,
• Weak revenue management and low collection rates,
• Ineffective governance and fragmented responsibilities,
• Declining infrastructure reliability and service quality, particularly for underserved populations.

The program responds to these challenges by supporting municipalities to restore financial and operational control over trading services and ensure sustainable, inclusive urban development.

Over the past decade, service delivery in South Africa's metropolitan areas has declined due to a combination of financial, operational, and governance challenges. These include low revenue collection and weak control over billing and payments, especially within service departments; poor and uneven service quality-particularly in historically underserved communities; limited financial transparency and inefficiencies in procurement; inadequate asset management practices; and sustained underinvestment in infrastructure and maintenance.

The program is structured to address these challenges through targeted interventions aimed at:

• Enhancing Revenue Collection: Implementing measures to improve billing systems and collection rates to ensure financial sustainability.
• Strengthening Governance: Establishing clear lines of accountability and integrating support services such as finance, human resources, and supply chain management within trading services departments.
• Improving Asset Management: Developing comprehensive asset management plans to ensure proper maintenance and timely upgrades of infrastructure.
• Promoting Financial Transparency: Streamlining procurement processes and financial reporting to reduce inefficiencies and corruption.
  

5. What results is the program expected to achieve?

The MTSP is designed to support metropolitan municipalities in strengthening the performance and sustainability of water, sanitation, electricity, and solid waste services. Specifically, the program aims to:

• Improve financial transparency and governance within municipal trading services departments;
• Improve revenue management, including cost recovery and collection efficiency;
• Institutionalize robust asset management practices and systems;
• Improve the quality and reliability of service delivery, particularly in historically underserved and low-income communities;
• Strengthen the use of data, digital systems, and performance information for planning, accountability, and investment readiness.