South Africa’s efforts to modernize critical infrastructure and unlock job creation by tackling long-standing bottlenecks in electricity, freight transport, and water and sanitation services, got a boost with support from the World Bank Group. The new financing is expected to help create almost 600,000 new direct and indirect jobs by 2032, according to World Bank Group economic modeling of how the reforms ripple through the broader economy.

The $1.5 billion International Bank for Reconstruction and Development (IBRD) loan is the fourth in a series of stand-alone Development Policy Loans to South Africa since 2022. The operation builds on reforms that are already showing results: load shedding has been virtually eliminated for a year and a half, private investment in renewable energy has increased sixfold, and rail and port freight volumes have risen by more than 50% since 2023. It is the first of these stand-alone operations to extend support to water and sanitation, alongside continued reforms in electricity and freight transport.

Key reforms supported by the operation include the launch of a competitive wholesale electricity market and scaled-up private investment in transmission, with a target of 300,000 new household electricity connections by December 2027. In freight transport, the program supports competition among private rail operators and the country's first-ever port terminal concession in Durban. In water and sanitation, it strengthens regulatory oversight, opens the door to private water service providers, and gives the newly established National Water Resources Infrastructure Agency greater autonomy to invest in bulk water infrastructure.

Most of the nearly 600,000 projected direct and indirect jobs will come from the reforms in the electricity and transport sectors which together are expected to support around 280,000 jobs by 2027, rising to over 560,000 by 2032. Policy reforms will improve management efficiency and scale up private investment in rail, ports, and energy infrastructure, lowering business costs and supporting additional investment and employment in other sectors. Water and sanitation reforms are not expected to directly create large numbers of jobs, as major users like agriculture and mining already rely on alternative sources, but they are projected to bring concrete improvements for millions of households, including less time spent collecting water, lower health risks, and better access for the poorest female-headed households.

"This program reflects our government's determination to remove the infrastructure constraints that have held back growth and job creation for too long," said Enoch Godongwana, South Africa's Minister of Finance. "Working with the World Bank Group, we are deepening reforms already delivering results in energy and transport, while for the first time tackling the governance and investment gaps in our water sector that affect millions of households, particularly the poorest."

"South Africa has shown that sustained reform can turn around even deep-seated infrastructure crises," said Satu Kahkonen, World Bank Group Division Director for South Africa. "By extending this support to water and sanitation for the first time, we are helping ensure the benefits of reform reach every household, while these efforts together are expected to help create almost 600,000 jobs and attract much-needed private investment."

The operation was prepared in coordination with development partners active in South Africa's infrastructure sector, including Germany, Japan, the OPEC Fund, and the African Development Bank.