Beijing-based Asian Infrastructure Investment Bank (AIIB) has signed an R8.1 billion ($500 million) loan agreement with South Africa to improve the operational performance of the country’s largest cities.

The National Treasury of South Africa said that part of the loan was aimed at improving electricity services across the country’s eight metropolitan municipalities, which include its major cities.

“The programme is co-financed with the World Bank as part of a broader $3 billion programme led by the government of South Africa,” Treasury said.

Large cities in South Africa are grappling with long-term systemic issues affecting their electricity distribution, including enormous mounting debts and widespread infrastructure under-maintenance.

This has left many South Africans in major cities with an unreliable electricity supply despite constantly increasing prices.

Energy expert and consultant Chris Yelland explained in January that South Africa’s electricity distribution industry has placed municipal distributors in an untenable position.

Most municipalities have become “locked-in” and completely dependent on Eskom for their bulk electricity supply, stemming from the dismantling of the historical decentralised power generation model.

These municipalities must sell their power to customers at the national utility’s ever-increasing prices, as they have essentially become Eskom resellers.

However, as Eskom’s bulk tariffs have increased significantly since 2007, this has driven “non-technical losses” in the country’s largest cities.

“This is where ‘non-technical losses’ become central,” said Yelland. “Electricity consumed but unpaid due to payment default, illegal connections, meter bypassing, billing failures and fraud.”

“Rising Eskom electricity tariffs to municipalities reduce affordability, drive higher non-technical losses, and rising municipal arrears.”

Underfunded, overburdened, and deeply in debt, municipal distributors like Johannesburg’s City Power face electricity grids on the verge of collapse.

City Power has become the poster child for the “death spiral” that Yelland described earlier this year. As of August 2026, City Power owed Eskom R3.8 billion in overdue arrears.

$500-million loan to improve electricity reliability

City Power’s system is so constrained that adverse weather can cause numerous simultaneous power outages across Johannesburg.

Weather conditions on the weekend of 10th August 2026 led to nearly 3,700 open outage reports from the city’s residents.

Low temperatures increased electricity demand, straining ailing electrical equipment, while heavy rain delayed repairs and outage restorations.

National Treasury said in its announcement that the R8.1 billion loan programme with the AIIB will address mounting challenges from ageing infrastructure, rapid urbanisation and increasing climate risks.

“The programme will address these pressures by helping reduce non-revenue water and electricity losses, improve solid waste management and strengthen institutional capacity,” it said.

It will mark the AIIB’s first investment in South Africa. The institution is a multilateral development bank headquartered in Beijing, China.

The sovereign investment was conceptualised in June 2025 and approved more than a year later, in June 2026. It will support the South Africa Metro Trading Services Programme.

AIIB said the investment was geared toward improving accountability and the operational and financial performance of water supply, sanitation, and electricity management services.

“These improvements will contribute significantly to climate change mitigation and strengthen climate resilience through sustainable, low-carbon urban service delivery,” the AIIB added.

South Africa’s eight metropolitan municipalities include the Cities of Johannesburg, Tshwane, Ekurhuleni, Cape Town, eThekwini, Nelson Mandela Bay, Mangaung (Bloemfontein), and Buffalo City.

“By 2031, the programme is expected to enable all eight participating metropolitan municipalities to meet the programme’s minimum performance conditions,” National Treasury said.

“This is to reduce non-revenue water from 41% to 28% and lower electricity losses from 22% to 12%, delivering more efficient, reliable and sustainable municipal services.”

Rajat Misra, AIIB’s director general for public sector clients, said the investment marked the beginning of the bank’s partnership with South Africa.

“It reflects our shared commitment to building more resilient, sustainable and well-managed cities,” he said.

“The programme will enhance infrastructure delivery while supporting South Africa’s climate and development objectives.”

Source: https://mybroadband.co.za/news/energy/661967-r8-1-billion-from-china-to-fix-electricity-problems-in-south-africas-largest-cities.html