The City of Cape Town has secured R2.8 billion in development finance towards major electricity grid upgrades. The agreement with the German Development Bank, KfW, on behalf of the German Government, forms part of the planned transition of the metro to a dynamic, decentralised energy future.
Reportedly, Cape Town is all set to spend R39.5 billion on infrastructure from July 2024 to June 2027 under the ‘Building For Jobs’ Budget for the city.
It is South Africa’s largest ever three-year infrastructure investment by a metropolitan municipality, with the city investing R4 billion in electricity grid upgrades and maintenance over this period. The concessional nature of the KfW finance provides the city with favourable financial terms for long-term affordability.
Mayor Geordin Hill-Lewis said that they are pleased to secure this critical finance for the plans to upgrade electricity grid of the Cape Town. Without reliable infrastructure, they simply cannot achieve their goals to beat power outages, diversify supply, ensure reliable electricity for a growing city and will enable thousands of small-scale sellers to move electricity across the grid.
Lewis claimed that they have been on a mission to raise the ambition of the infrastructure investment agenda, which they estimate to 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 infrastructures spend in 2024-25.
Considering this, Deputy Mayor Eddie Andrews said that the 10-year infrastructure pipeline of the City of Cape Town is valued at an estimated R120 billion, with the majority of projects linked to the metro’s overall Climate Change Strategy.
The concessional plan of the KfW was considered for more than a period of 15 years that will help the City of Cape Town to invest sustainably in infrastructure with long operational lifespans.
Member of the Mayoral Committee for Energy – Alderman Xanthea Limberg said that the Energy Directorate of the City of Cape Town is currently rolling out its three-year R4 billion infrastructure programmes to strengthen and expand the electricity grid and ensure that it is capable of harnessing new energy sources, including renewables.
Limberg said that the KfW’s support will boost the infrastructure programmes and will significantly improve the electricity services for both residents and the businesses in Cape Town.
Following this, CEO of KfW Banking Group – Stefan Wintels said that KfW is proud to support its longstanding partner, as the City of Cape Town is strengthening its environmentally friendly electricity infrastructure. They ensured a stable and sustainable power supply is essential for economic growth and social development.
German Ambassador – Andreas Peschke also expressed that they are delighted to see the partnership between South Africa and Germany evolving. Climate change is one of the biggest challenges of the 21st century. Germany’s support for Just Energy Transition of South Africa underlines the commitment to stand beside the partner in challenging times.
Notably, the City of Cape Town is following a blended finance model, that includes funding from its own healthy balance sheet, as well as finance from the local and international markets.
In June 2024, the city council approved R3.5 billion in finance from Nedbank alongside R2.8 billion from the International Finance Corporation (IFC). In April 2023, the Council greenlit €100 million developmental financing from the Agence Francaise de Development (AFD).