The World Bank
South Africa : Efficient and low carbon Infrastructure Services and Climate Change DPO(P507031)
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Program Information Document (PID)
Concept Stage | Date Prepared/Updated: 11-Feb-2025 | Report No: PIDIC00173
The World Bank
South Africa : Efficient and low carbon Infrastructure Services and Climate Change DPO(P507031)
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BASIC INFORMATION
A. Basic Project Data
Project Beneficiary(ies) Operation ID Operation Name
South Africa : Sustainable and Low-carbon Infrastructure
South Africa P507031
Services DPL
Region Estimated Approval Date Practice Area (Lead) Financing Instrument
EASTERN AND SOUTHERN Macroeconomics, Trade Development Policy
15-Apr-2025
AFRICA and Investment Financing (DPF)
Borrower(s) Implementing Agency
National Treasury National Treasury
Proposed Development Objective(s)
The Program Development Objectives of the proposed DPL are to support the government’s effort to (i) advance the
restructuring of the power sector to enhance long-term energy supply; (ii) initiate the restructuring of the transport
and logistics sector with a focus on freight transport; and (iii) contribute to the transition toward a low carbon
economy.
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Financing (US$, Millions)
Maximizing Finance for Development
Is this an MFD-Enabling Project (MFD-EP)? Yes
Is this project Private Capital Enabling (PCE)? Yes
SUMMARY
Total Financing 1,500.00
DETAILS
Total World Bank Group Financing 1,500.00
World Bank Lending 1,500.00
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The World Bank
South Africa : Efficient and low carbon Infrastructure Services and Climate Change DPO(P507031)
Decision
The review did authorize the preparation to continue
B. Introduction and Context
Country Context
1. South Africa’s macroeconomic framework is assessed as adequate for the proposed operation. This assessment
is based on the government’s commitment to prudent macroeconomic policies and plans to continue structural reforms,
including those in the energy and transport sectors supported by this operation, key to unleash the private sector’s growth
potential and contributions to job creation. Fiscal risks are further mitigated by the government’s solid track record in
managing expenditure pressures in recent years, and generally strong public financial management. Debt sustainability
risks are also mitigated by the composition of public debt, which makes it less vulnerable to external shocks associated
with the exchange rate and global interest rates. South Africa also benefits from the high credibility of the South African
Reserve Bank (SARB), a flexible exchange rate regime, and its well-developed local financial markets that offers a large
domestic saving base.
2. The government continues to respond to the unprecedented infrastructure crisis faced by South Africa. This
crisis peaked in 2023, when electricity outages, which averaged 8-10 hours per day, costed approximately 2 percent of
GDP growth, and major bottlenecks in railways and ports reduced the country’s export capacity by about 20 percent
(equivalent to 5 percent of GDP), with annual losses in the mineral sector due to poor logistics estimated around US$275
million.1 The infrastructure crisis has also magnified existing income inequalities, by disproportionally affecting the most
vulnerable households and small firms who do not have the financial means to develop alternatives such as off-grid
electricity solutions and road transports. Concurrently, South Africa is one of the largest Greenhouse Gas (GHG) emitters
in the world, with energy and transport counting for about ¾ of these emissions, while energy production (i.e., thermal
efficiency of coal-fired power plants) and an ageing transmission and distribution network are becoming vulnerable to
increasing temperatures and more prevalent weather extremes. The magnitude of these economic and social costs has
motivated policymakers to act decisively on a series of structural reforms, including by requesting the technical and
financial support from development partners, to open these sectors to competition by unbundling dominant state-owned
enterprises (SOEs) and broadening the sources of financing, while moving toward low emitting and more climate resilient
technologies.
Relationship to CPF
3. The proposed operation is aligned with the World Bank CPF for South Africa FY22-FY26, and priorities from the
regional and corporate strategies.2 With its focus on policy and regulatory actions, it complements several WB ongoing
and planned engagement at the country’s level, including with IFC and MIGA, ranging from investments in both hard
infrastructure, such as Municipal Trading Services Program for Results (P173517), and soft infrastructure and technical
assistance, such as establishing a Blended Financing and Risk Sharing Platform (BFRSP) to catalyze and leverage private
1For more details, see the World Bank, South Africa’s Economic Memorandum, Driving Inclusive Growth, November 2024.
2World Bank; International Finance Corporation; Multilateral Investment Guarantee Agency. 2021. Country Partnership Framework for the
Republic of South Africa for the Period FY22-FY26. World Bank, Washington, DC. © World Bank.
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The World Bank
South Africa : Efficient and low carbon Infrastructure Services and Climate Change DPO(P507031)
capital while also reducing the public fiscus exposure. As the corporate level, the priorities of achieving universal access
to electricity and ensuring energy security and affordability, alleviating poverty with a gender focus, and enhancing climate
change mitigation efforts, while being aligned with the goals of the Paris Agreement (see Annex 2). By opening the power
and infrastructure sector to private operators, it is expected to enhance private investment in line with the objective to
Maximizing Finance for Development (MFD).
B. Prior Actions, Triggers, Expected Results and Analytical Underpinnings
C. Proposed Development Objective(s)
4. The Program Development Objectives (PDO) of the proposed DPL are to support the government’s effort to (i)
advance the restructuring of the power sector to enhance long-term energy supply; (ii) initiate the restructuring of the
transport and logistics sector with a focus on freight transport; and (iii) promote a transition to a low carbon economy .
Key Results
5. The reforms included under this operation aims at consolidating the recent results achieved by the government,
including the absence of national load shedding since March 2024 and the unprecedented increase in renewable
projects over the past 18 months. By 2026, the provision of power is expected to be further secured through the improved
management of the grid and the opening of the transmission sector to private investors. Concurrently, with the
introduction of a new performance-based grant, municipalities will be incentivized to collect more revenue and to better
maintain their distribution network. In the (freight) transport sector, the unbundling of Transnet will have advanced with
the separation of its operational and infrastructure responsibilities in the rail sector, whilei the regulatory power of the
state will have been strengthened by the creation of a single Regulatory Agency covering both the rail and port sectors.
These two reforms are expected to translate into the arrival of new private operators. The country transition towards a
low carbon economy will be enhanced by the greater use of fiscal instruments (such as the carbon tax and offset), while
the implementation of the critically important Just Energy Implementation Plan (JET-IP) will be accelerated thanks to a
funding platform focused on unlocking opportunities and providing access to grant finances for smaller-scale projects and
capacity-building initiatives essential for successful transition away from coal dependency. Lastly, workers and
communities in the regions in the most affected region by the climate transition will be protected using nationwide
employment and social protection programs, including the Social Employment Fund (SEF), to mitigate immediate impacts.
D. Concept Description
6. The proposed DPL will be anchored in three mutually reinforcing pillars: to (i) advance the
restructuring of the power sector to enhance long-term energy supply; (ii) initiate the restructuring of the transport and
logistics sector with a focus on freight transport; and (iii) promote a transition to a low carbon economy. This operation
focuses on the power and transport sectors, which have retained the most attention from policy makers due to their
significant and immediate costs not only on the economy and people but also on climate (as they contribute to about 80
percent of the country’s GHG emissions). Such focus is consistent the lessons drawn from the experience of the 2022 and
2023 DPLs, as it should enable the program and proposed reforms to achieve concrete results in the short-term and create
momentum for further reforms in other sectors (such as waste and water) and other challenges (such as the increasing
exposure of infrastructure networks to climate change).
E. Poverty and Social Impacts, and Environmental, Forests, and Other Natural Resource Aspects
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The World Bank
South Africa : Efficient and low carbon Infrastructure Services and Climate Change DPO(P507031)
Poverty and Social Impacts
7. This operation supports South Africa’s aspiration to ensure inclusive growth critical in a country that remains
one of the most unequal in the world with high poverty and unemployment rates. This operation is expected to have
positive impacts on poverty through improvements in the availability of energy and the gradual elimination of bottlenecks
in the transport network. The development of firms, critical to the creation of jobs, and households’ welfare will be
enhanced by progress in these two sectors. This positive impact is expected to be proportionally higher on small firms and
poor households, who were the most affected by the infrastructure crisis in recent years due to their tight budget
constraints and their difficulties to develop alternative solutions. One specific prior action is designed to support a just
transition in the energy sector by creating employment opportunities for the most affected local communities. Such
program focuses on JET-Affected Areas (Eastern Cape and Mpumalanga) with specific gender targets, including the
response to the Decommissioning of Komati Power Station.
Environmental, Forests, and Other Natural Resource Aspects
8. The reforms supported by this DPL are expected to have a positive or neutral impact on the environment,
forests, and other natural resources. Prior Actions (PA) that support the deployment of renewable energy, transmission
and distribution, and carbon pricing mechanisms have generally a positive environmental and climate impact, contributing
to a greener energy mix, efficiency gains, and reduced carbon emissions. Pillar 1 supports renewable deployment by
facilitating their integration into the grid (PA#1) and which may encourage energy conservation and demand management
as part of the envisaged installation of smart electricity meter, are expected to contribute to mitigation. More generally,
as these reforms also aim at diversifying and decentralizing energy supply (PA#1) and modernizing and expanding the
transmission and distribution networks (PA#2 on private sector participation in new transmission capacity and PA#4 in
municipal investments in networks), they also contribute to increasing resilience of South Africa’s energy system. Further,
in Pillar 3, the strengthening of carbon pricing mechanisms (i.e., taxes on fuel and vehicle motor emissions as well as
raising the ambition and impact of domestic carbon offsets, as both envisaged under PA#7) is expected to influence
consumption behaviors and investment decisions toward less carbon-intensive outcomes. As for Prior Actions #8 and 9,
they intend to accelerate the implementation of the Just Energy Transition, by supporting development of JETP (and other)
financing as well as by mobilization of additional resources through synergies with social funds. Finally, PAs# 2, 3, 4, and 6
seek to respectively strengthen transmission and distribution management (including engaging private participation) and
strengthen regulatory capacity in the freight transport sector and are thus expected to generate efficiency and support
shift away from road freight transport, leading to positive climate and environmental impact.
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CONTACT POINT
World Bank
Jacques Morisset
Lead Economist, Program Leader
Mirlan Aldayarov
Lead Energy Specialist, Program Leader
Borrower/Client/Recipient
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The World Bank
South Africa : Efficient and low carbon Infrastructure Services and Climate Change DPO(P507031)
National Treasury
Implementing Agencies
National Treasury
Wanga Cibi
Director
wanga.cibi@treasury.gov.za
FOR MORE INFORMATION CONTACT
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 473-1000
Web: http://www.worldbank.org/projects
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APPROVAL
Task Team Leader(s): Jacques Morisset, Mirlan Aldayarov
Approved By
Practice Manager/Manager: Marco Antonio Hernandez Ore 25-Nov-2024
Country Director: Feyifolu Adeyosola Boroffice 11-Feb-2025
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