IFC today announced an investment in the City of Cape Town Metropolitan Municipality's infrastructure investment program to improve access to quality basic services for its population, especially low-income households, and to scale up infrastructure to foster inclusive economic growth.
IFC's ZAR 2.8 billion local currency senior loan (equivalent to about US$150 million) to the City of Cape Town will support infrastructure upgrades and replacements, including to electrical and transport infrastructure, and the expansion of water, sanitation and wastewater management infrastructure prioritized under the City's 10-year infrastructure investment plan. With a tenor of 18 years, IFC's loan will help the City to invest sustainably in assets with long operational lifespans. Key investments in the City's water and sanitation, wastewater, electricity, and transport infrastructure aim to support improved access to quality services for communities and greater spatial integration across Cape Town, while also improving the City's climate and energy resilience. Over 70 percent of the City's infrastructure spend will benefit low-income areas.
South Africa is urbanizing rapidly, with the population residing in urban areas expected to increase from 67 percent currently to 80 percent by 2050. Further, Cape Town is expected to soon become the country's most populous city. This trend is placing greater pressure on cities, which are already facing persistent socioeconomic and spatial inequality, increasing climate-related risk, and constraints in electricity supply from the national grid.
In response to these challenges, the City of Cape Town has developed a 10-year infrastructure investment plan to rehabilitate, modernize, and expand urban infrastructure and drive inclusivity through greater access to infrastructure. The plan targets a significant increase in infrastructure spending to keep pace with anticipated population growth and ensure that services inclusively meet future demands.
IFC's investment further builds on its partnership with the City. Under IFC's cities initiative, with the support of the State Secretariat for Economic Affairs (SECO) of Switzerland, IFC provided advisory services to the City to identify and assess solutions to improve energy services and climate change mitigation actions.
Geordin Hill-Lewis, the Executive Mayor of Cape Town, said: "With its full suite of financial products and advisory services, IFC has become an important partner for Cape Town. We appreciate IFC's willingness to extend the loan tenor to 18 years. These terms will enable the City to better match the maturity of its liabilities with that of its long-term infrastructure assets".
"We are delighted to announce our collaboration with the City of Cape Town in enhancing the standards of water and sanitation services, wastewater treatment, roads infrastructure, and power supply to boost the City's resilience," said Cláudia Conceição, Regional Director for Southern Africa at IFC. "In general, through the enhancement of infrastructure quality and related services, our partnership aims to establish a more favorable environment for residents and businesses in Cape Town."
Including the investment announced today, IFC has provided a total of almost $400 million in debt financing and guarantees since 2004 to support the City of Cape Town, the City of Johannesburg, the City of Ekurhuleni, and Buffalo City.
