AFRICAN DEVELOPMENT BANK GROUP

SOUTH AFRICA

MID-TERM REVIEW OF THE COUNTRY STRATEGY PAPER 2018-

2022 AND COUNTRY PORTFOLIO PERFORMANCE REVIEW 2021

RDGS/ECCE

January 2022
 AFRICAN DEVELOPMENT BANK GROUP

SOUTH AFRICA
MID-TERM REVIEW OF THE COUNTRY STRATEGY PAPER 2018-2022 AND COUNTRY
PORTFOLIO PERFORMANCE REVIEW 2021

Carpophore Ntagungira, Chief Country Economist, ECCE/RDGS

Rees Mwasambili, Chief Regional Program Officer, RDGS
Task Managers
Samuel Turay, Consultant, Programme Officer, RDGS
Wolassa Kumo, Principal Country Economist, ECCE/RDGW
Evelynne Change, Chief Governance Officer, RDGS/ECGF
Raymond Besong, Chief Development Economist, RDGS
Jonathan Banda, Investment Officer, PIFD
Seaga Abram Molepo, Senior Power Engineer, RDGS1
Herbert Hungwe, Chief Portfolio Management Officer, PINS.2
Samuel Blazyk, Principal Results Officer, AHWS1
Mohammed Abdullahi, Senior Procurement Officer, RDGS4
Jonathan Nyamukapa, Regional Financial Mgt Coordinator, RDGS
Musole Musumali, Climate Change & Green Growth Officer, PECG2
Anders Pedersen, Chief Regional Power Systems Officer, RDGS1
Jing Li, Principal Investment Officer, PERS2
Richard Malinga, Principal Transport Engineer, RDGS0
Ahmed El Gazzar, Principal Investment Officer, PICU4/RDGS
Walter Odhiambo, Chief Agriculture Economist, SNSP1/ RDGS
Chukwuma Ezedinma, Principal Agricultural Economist, RDGS
Task Team Maria Marealle, Principal Land Officer, AHAI2/ RDGS
Francois Wongue, Principal Social Protection Officer, AHVP/ RDGS
Linet Miriti , Principal Gender Specialist, RDGS4
Jerry Ahadjie, Chief Minerals Officer, ECNR
Philippe Dominique Tous, Principal Fishery Officer, ECNR
Antony Karembu, Renewable Energy Specialist, PERN1
Babatunde Oluseyi Tijani, Investment Officer, PIFD1
Bleming Nekati, Chief Trade Finance Officer, PIFD
Cecil Nundwe, Prin Water Resources Management Officer, RDGS2
Boniface Aleobua, Principal Sanitation Engineer, RDGS2
Rita K. Nakyeyune , Chief Investment Officer, SNVP
Mecuria Assefaw, Chief Financial Analyst, RDGS2
Eskendir Demissie, Principal Water and Sanitation Engineer, RDGS2
Wiseman Vwala-Zikhole, Principal Disbursement Officer, FIFC3
Grace Obeda, Principal Youth Employment Officer, RDGS
Nana Kgosidintsi, Principal Health Analyst, RDGS
Constant Adeniyi, Climate Change and Green Growth, RDGS
 Martha Kinyoho, Senior Civil Society Officer, RDGS

Leila Mokadem, Director General, RDGS,

Emmanuel Pinto Moreira, Director, ECCE
Kennedy K. Mbekeani, Deputy Director General, RDGS
Coordination George Kararach, Lead Economist, ECCE/RDGS
Farai Kanonda, Division Manager, RDGS 1
Neeraj Vij, Division Manager, RDGS 2
Daniel Ohonde, Division Manager, RDGS 4
Abdul Bangura, Principal Country Programme Officer, COLR/RDGW
Philippe Trape, Principal Country Economist, ECCE/RDGS
Vera Kinty Oling, Senior Country Economist, ECCE/RDGS
Peer Reviewers
Caroline Ntumwa, Senior Country Economist, ECCE/RDGS
Joel Muzima, Principal Country Economist, ECCE/RDGW
Eline Okudzeto, Principal Governance Officer, ECGF.

ECCE/RDGS
12 November 2021
 TABLE OF CONTENTS

ACRONYMS AND ABBREVIATIONS ................................................................................................................ ii

EXECUTIVE SUMMARY..................................................................................................................................... v
1. INTRODUCTION ............................................................................................................................................. 1
2. COUNTRY CONTEXT AND PROSPECTS .................................................................................................... 1
2.1 Political Context and Prospects ...................................................................................................... 1
2.2 Economic Context and Prospects ................................................................................................... 2
2.3 Sector Context ............................................................................................................................... 5
2.4 Social Context and Cross-Cutting Themes...................................................................................... 7
2.5 Country Strategic Framework ........................................................................................................ 8
2.6 Aid Coordination Mechanisms, Bank Positioning and Comparative Advantage .............................. 8
2.7 Strengths and Opportunities, Weaknesses and Challenges .............................................................. 9
3. CSP IMPLEMENTATION AND RESULTS ACHIEVED AT MID-TERM ................................................... 9
3.1 Relevance of the strategy ............................................................................................................... 9
3.2 Bank Group Resources................................................................................................................... 9
3.3 Implementation Progress of the Strategy at Mid-Term .................................................................. 10
3.4 Results Achieved at Mid-Term..................................................................................................... 10
3.5 CSP’s Contribution to the High-5s ............................................................................................... 13
3.6 Progress towards the Principles of Paris, Busan and Accra ........................................................... 13
4. PORTFOLIO PERFORMANCE REVIEW ................................................................................................... 13
4.1 Overview of the Active Portfolio.................................................................................................. 13
4.2 Portfolio Quality and Performance ............................................................................................... 14
4.3 Portfolio Monitoring and Evaluation ............................................................................................ 14
4.4 Implementation Status of the 2018/2019 Country Portfolio Improvement Plan (CPIP) .................. 15
4.5 Performance of Stakeholders ........................................................................................................ 15
5. LESSONS LEARNED ..................................................................................................................................... 16
6. STRATEGY FOR THE REMAINING CSP PERIOD 2021-2022.................................................................. 17
6.1 Relevance of the Strategy, Objective and Prioroty Areas (s) for Bank Support .............................. 17
6.2 Expected Results.......................................................................................................................... 18
6.3 Private sector widow .................................................................................................................... 19
6.4 Indicative Lending Program and Non-Lending Program ............................................................... 19
6.5 Country dialogue ......................................................................................................................... 20
6.6 Financing the Strategy ................................................................................................................. 20
6.7 Implementation Arrangements, Monitoring and Evaluation .......................................................... 20
6.8 Risks and Mitigating Measures .................................................................................................... 20
7. CONCLUSIONS AND RECOMMENDATIONS ........................................................................................... 20
 LIST OF FIGURES

Graph 1. South Africa – Real GDP and Sector Growth, 2015-2020 (Percent) ........................................... 2
Graph 2. South Africa - Headline Inflation and Headline CPI Index, 2016-2020 ...................................... 3
Graph 3. South Africa – Fiscal Balance, 2017-2020 ................................................................................. 3
Graph 4. South Africa – Gross Public Debt (Percent of GDP) .................................................................. 4

LIST OF TABLES
Table 1: Assessment of Output and Outcome Indicators by Sector and Pillar. .......................................... 1

LIST OF BOXES

Box 1: Strengths and Opportunities; Challenges and Weaknesses………………………………………..9

LIST OF ANNEXES

Annex 1. CSP 2018-2022 Results Measurement Tool……………………………………………………...I

Annex 2. South Africa Policy Reform Dialogue Matrix………………………………………………….IX
Annex 3. Implementation Status of the Indicative Operational Program and Non-Lending Program
2018-June 2021…………………………………………………………………………….....XII
Annex 4. Actual Lending and Non-Lending Approvals During the CSP Period 2018-June 2021……..XIV
Annex 5. Indicative Operational Program for the Remaining CSP 2021-2022 Period………………….XV
Annex 6. Bank Group Ongoing Operations in South Africa as of 30 June 2021.................................... XV
Annex 7. Key Portfolio Performance Indicators as of 30 June 2021 ............................................ XVIXVII
Annex 8. Outcome of CPPR Consultations ................................................................................ XXVIIIII
Annex 9. Implementation Status of 2018/2019 Country Portfolio Improvement Plan (CPIP) .............. XIV
Annex 10. 2021/2022 Country Portfolio Improvement Plan (CPIP)................................................... XXII
Annex 11. Energy Note ..................................................................................................................... XXV
Annex 12. Climate Change & Green Growth Note………………………………………………….XXVIII
Annex 13. Water Sector Note .......................................................................................................... XXXI
Annex 14. Agriculture And Agri-Business Note ........................................................................XXXIVIV
Annex 15. Gender Note ............................................................................................................... XXXVII
Annex 16. Governance And Public Financial Management Note....................................................... XLIII
Annex 17. Human Capital Note-Jobs, Skills, Social Protection & Health ........................................... XLV
Annex 18. Capital Markets Note .............................................................................................................L
Annex 19. Transport Note .................................................................................................................... LII
Annex 20. Natural Resources Note ....................................................................................................... LV
Annex 21. Regional Integration Note .................................................................................................... LX
Annex 22. South Africa - Selected Macroeconomic Indicators ..................................................... LXIIIIII
Annex 23. South Africa - Comparative Socio-Economic Indicators.................................................. LXIV
Annex 24. South Africa - Progress Towards Achieving the SDGs (2021) .......................................... LXV
Annex 25. Key Findings of the Study on South Africa State Owned Enterprises (SOEs)
Contribution to Economic Transformation and Inclusive growth………………………...LXVII
 FISCAL YEAR
1 January to 31 December
CURRENCY EQUIVALENTS
(October 2021)
UA 1 = 1.00 SDR
UA 1 = EUR 1.21675
UA 1 = USD 1.40887
UA 1 = ZAR 21.2468
USD 1 = ZAR 15.08073
EURO 1 = ZAR 17.46192

WEIGHTS AND MEASURES

1 metric ton = 2,204 pounds

1 kilogram (kg) = 2.204 pounds
1 metre (m) = 3.28 feet
1 millimetre (mm) = 0.03937 inch
1 kilometre (km) = 0.62 mile
1 hectare (ha) = 2.471 acres

i
ACRONYMS AND ABBREVIATIONS
Acronym Name
AfDB African Development Bank
AG Auditor General
ANC African National Congress
BRICS Brazil, Russia, India, China and South Africa
COSATU Congress of South African Trade Unions
COVID Corona Virus Disease
CPIA Country Policy and Institutional Assessment
CPIP Country Portfolio Improvement Plan
CPPR Country Portfolio Performance Review
CRBS Crisis Response Budget Support
CRF COVID-19 Response Facility
CSP Country Strategy Paper
CTF Clean Technology Fund
DA Democratic Alliance
DBDM Development and Business Delivery Model
DP Development Partners
DPL Development Policy Loan
ECGF Governance, Economic and Financial Management Coordination Office
EFF Economic Freedom Fighters
GDP Gross Domestic Product
Government Government of the Republic of South Africa
IFMIS Integrated Financial Management Information System
IMF International Monetary Fund
IOP Indicative Operational Program
IPAP Industrial Policy Action Plan
IPP Independent Power Producers
LHWP Lesotho Highlands Water Project
LOC(s) Line(s) of credit
M&E Monitoring and Evaluation
MDGs Millennium Development Goals
MIC Middle Income Country
MTR Mid Term Review
MTSF Medium Term Strategic Framework
NCOP National Council of Provinces
NDB New Development Bank
NDP National Development Plan
NT National Treasury
PBO Program Based Operation
PEFA Public Expenditure and Financial Accountability Assessment
PFM Public Finance Management
PRDM Policy Reform Dialogue Matrix
RDGS Southern Africa Regional Development & Business Delivery Office
RMC Regional Member Countries
SACRSP South Africa COVID 19 Response Support Program
SACU Southern African Customs Union
SADC Southern African Development Community
SARB South Africa Reserve Bank

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Acronym Name
SDGs Sustainable Development Goals
SMEs Small and Medium Enterprises
SMMEs Small, Micro and Medium Enterprises
SOEs State Owned Enterprises
SRG Social Relief of Distress Grant
SSSA South Africa Social Security Agency
STATSSA Statistics South Africa
TYS Ten Year Strategy
UA Unit of Account
USD United States Dollar
VAT Value-Added Tax
WB World Bank
WEF World Economic Forum
ZAR South African Rand

iii
Map of South Africa

iv
 EXECUTIVE SUMMARY
1. The Country Strategy Paper (CSP) Mid-Term Review (MTR), combined with the 2021 Country
Portfolio Performance Review (CPPR) covering the period June 2018 to June 2021, assesses the extent
to which the objectives and expected results of the Bank’s CSP 2018-2022 for South Africa have been
achieved, and draws lessons for the remaining strategy period. The CSP 2018-2022, which was approved
by the Bank Group’s Board of Executive Directors in July 2018, focuses on two Pillars: (i) Promoting
Industrialization; and, (ii) Deepening Regional Integration. The Pillars are aligned with South Africa’s
National Development Plan and the Medium Term Strategic Frameworks 2014-2019 and 2019-2024, as
well as the country’s Economic Reconstruction and Recovery Plan. The Pillars are also aligned with the
Bank’s Ten Year Strategy (TYS) and the High-5 priorities. Due to the Covid-19 pandemic, the CSP
MTR mission was delayed and was finally conducted from 8-11 June 2021. The review also provided
an opportunity to formulate a strategy for Bank’s engagement for the post-COVID-19 period.
2. Shortly after the approval of the CSP in July 2018, there were important developments on the
political scene in South Africa; elections were held in 2019 and South Africans voted for a new national
parliament in May 2019 through which President Cyril Ramaphosa was elected President of the country.
The African National Congress (ANC) won the election with 57.5% while the official opposition, the
Democratic Alliance (DA), won 20.8%.
3. South Africa’s growth trajectory has been on an overall downward trend in recent years. Real
GDP growth decelerated from an already low 0.8% in 2018 to 0.2% in 2019. Due to the COVID-19
pandemic, GDP further contracted by 7% in 2020. As a result, unemployment worsened from 27.1 % of
the labor force in December 2018 to 32.5% by the end of 2020. The budget deficit widened from 4% of
GDP in 2018 to 14% in 2020 due to lower revenue and additional spending to address the socioeconomic
impact of the Covid-19 pandemic. Fiscal policy continues to focus on short-term economic support, pro-
growth fiscal consolidation, including reduction of the wage bill, and debt stabilization. Total public debt
has increased from 56.6% of GDP in 2018, to an all-time high of 80% in 2020. Debt-service costs are
the fastest-growing item of spending and now consume 19.2% of tax revenue and 13% of the budget.
The current account of the balance of payments increased to a surplus of 2.2% of GDP in 2020 in the
midst of the Covid-19 crisis from a deficit of 3.6% in 2018 due to an increase in commodity prices.
4. The CSP’s Indicative Operational Program (IOP) had envisaged eight new lending projects with
a total value of UA 724.2 million and five non-lending operations with a total value of UA 4.9 million.
From the CSP approval in 2018 to the MTR point (June 2021), the Bank approved five lending operations
(three under Pillar 1 and two under Pillar 2) amounting to UA 601.6 million and two non-lending
operations (both under Pillar 1) amounting to UA 1.3 million. Of the five approved lending operations,
three (representing 66% of the total lending commitments) were sovereign operations while two
(representing 34%) were non-sovereign operations. The energy sector has been the largest beneficiary
with 47.3%, followed by multi-sector operations (comprising policy-based operations) (40.2%),
transport (12.4%), and agriculture (0.1%). All the approved lending operations are at different stages of
implementation. The two non-lending operations were completed in 2020.
5. Despite the challenges in project implementation (in terms of first disbursement delays and
procurement delays), the Bank has achieved tangible results. The CSP envisaged 14 output and 10
outcome indicators. As at MTR point (June 2021), five output targets and three outcome targets have
been achieved, translating to 36% and 30% achievement rates, respectively. In addition, nine output
targets (representing 64% of total outputs) and seven outcome targets (70% of total outcomes) have been
partially achieved, with most of the remaining targets expected to be fully achieved by the end of the

v
Strategy period in December 2022 when the concerned projects are expected to be completed or
substantially completed. There are a number of operations that were not originally planned for in the CSP
and have been recently approved. Most of these operations will commence before the end of the current
CSP in 2022 and results are, therefore, only expected to be achieved during the next CSP cycle (2023-
2027).
6. As of 30 June 2021, the total value of the Bank’s 24 ongoing projects (eight sovereign and 16
non-sovereign operations) was UA 3.87 billion. The operations on the portfolio are funded mostly
(98.7%) through ADB windows (ADB Public 51.8% and ADB private 46.9%) and 1.3% through ‘other’
financing resources including grant resources. The energy sector is the largest beneficiary accounting
for 58.9% of total commitments, followed by the finance sector (22.2%), the transport sector (9.8%),
multi-sector (6.4%), industry/mining sector (2.6%), and lastly water and agriculture sectors (0.1%). This
translates to the following distribution according to the Bank’s High-5priorities: ‘Light Up and Power
Africa’ with 58.9% of total commitments, followed by ‘Industrialize Africa’ (24.3%), ‘Integrate Africa’
(8.4%), ‘Improve the Quality of Life for the People of Africa’ (8.3%), and ‘Feed Africa’ (0.1%).
7. Portfolio performance has improved over the period under review, with all the key indicators
either outperforming or remaining within the corporate KPI thresholds. As of 30 June 2021, the overall
performance of the portfolio was assessed as “satisfactory” with a rating of 3.0 (on a scale of 1-4, with 1
being highly unsatisfactory and 4 highly satisfactory). The proportion of ‘satisfactory’ projects in the
Bank’s Portfolio Monthly Flashlight Reports for South Africa increased from 64% in June 2018 to 82%
in June 2021. The proportion of ‘close watch’ projects marginally decreased from 8% in June 2018
to 7% in June 2021. Equally, the proportion of ‘red flagged’ projects decreased from 18% in June 2018
to 11% in June 2021. The levels of flagged projects (from 2018 to 2021) are below the Bank corporate
target of 20%. The projects-at-risk decreased from 12% in June 2018 to 4% in June 2021.The
disbursement ratio increased from 85% in June 2018 to 89.5% in June 2021. The average age of the
portfolio is 7.5 years old. The portfolio has one aged project, namely the Medupi Power Project which
was substantially completed by MTR and exited the portfolio in September 2021. One of the key lessons
at the strategic level is that owing to South Africa’s shrinking appetite for sovereign operations, especially
with regards to providing sovereign guarantees to SOEs, the Bank should prioritize identifying and
actively pursuing business development opportunities through its non-sovereign window, taking
advantage of the dynamic nature of the private sector in South Africa.
8. The MTR concluded that the challenges affecting economic development identified in the CSP
are still prevailing in South Africa. Economic growth continues to be hampered by structural constraints
including economic duality, electricity shortages, inadequate and poorly located transport and logistics
infrastructure, and skills gap, among others. These challenges have been compounded by the Covid-19
pandemic, which deepened the economic crisis, widening poverty and inequality. The MTR was
conducted in consultation with South African authorities , development partners and civil society
organizations. The Bank and the Government of South Africa agreed that the Bank Group’s strategy for
South Africa remains relevant and the Pillars should be retained for the remaining CSP period.
9. The Committee on Operations and Development Effectiveness (CODE) is invited to consider
and approve the combined CSP 2018-2022 MTR and the CPPR 2021 of South Africa.

vi
1. INTRODUCTION
1. The Bank's Country Strategy Paper (CSP) 2018-2022 for South Africa was
approved by the Board of Directors in July 2018 (ADB/BD/WP/2018/126). The CSP 2018-
2022, which is aligned with South Africa’s National Development Plan “Vision 2030”, and the
Medium-Term Strategic Framework (MTSF) 2014-19 is built around two complementary
Pillars: (i) Promoting Industrialization; and (ii) Deepening Regional Integration. Pillar I aims
to reverse South Africa’s decade-long de-industrialization and boost structural transformation,
while Pillar II seeks to improve cross-border connectivity for increased trade and industrial
productivity.
2. The purpose of this mid-term review (MTR) of the CSP 2018-2022 and the 2021
Country Portfolio Performance Review (CPPR) is to analyze progress towards achieving
the strategy’s objectives and to draw lessons for the remaining strategy period. It also
assesses the performance of portfolio. This review comes at a time when South Africa is facing
the consequences of a decade-long poor economic performance due to structural constraints
including electricity shortages, inadequate and poorly located transport and logistics
infrastructure, and skills gap, among others. These challenges have been compounded by the
Covid-19 pandemic, which has deepened the economic crisis, widening poverty and inequality.
This situation highlights the urgent need for the Government to accelerate structural reforms.
3. The rest of the report is organized as follows: Section 2 speaks to the country context
and prospects; Section 3 discusses CSP implementation and results achieved at mid-term;
Section 4 presents the key findings of the CPPR; Section 5 highlights lessons learned; Section
6 presents the strategy for the remaining CSP period; and Section 7 concludes the report.

2. COUNTRY CONTEXT AND PROSPECTS

2.1 Political Context and Prospects
4. The period since the approval of the CSP was characterized by the transformation
of the national political landscape. South Africans voted for a new national parliament in
May 2019 through which President Cyril Ramaphosa was elected President of the Republic.
The African National Congress (ANC) won the election with 57.5% (lower majority compared
to 62.15% of votes it won in 2014). The Democratic Alliance (DA) won 20.8% as the second
largest party, followed by the Economic Freedom Fighters (EFF) with 10.8%. ANC is now 35
seats short of the two-thirds majority it had enjoyed continuously since 1994. Having lost the
two-thirds majority, the ANC is now required to work across party lines to make any changes
to the Constitution. According to subsection 74 of the Constitution of the Republic of South
Africa, Bills amending the Founding Provisions of the Constitution require a supporting vote
of at least 75% of members of the parliament and at least six provinces in the National Council
of Provinces (NCOP) to agree. Amendments to Chapter 2 of the Constitution (Bill of Rights)
requires a supporting vote of at least two-thirds of members of the parliament and endorsement
of at least six provinces in the NCOP. Other provisions of the constitution may be amended by
a Bill passed by at least two-thirds of the members of parliament and with a supporting vote of
at least six provinces in the NCOP if the bill relates to a matter that affects the Council, the
boundaries, powers, functions or institutions of the provinces; or a provision specifically
dealing with a provincial matter.
5. While South Africa enjoys well-functioning democratic institutions that provide
the framework for general adherence to transparency norms, the perception of
corruption in the public sector remains relatively high. In Transparency International’s
Corruption Perception Index, South Africa ranked 73rd out of 180 countries in 2018, 70th and
69th out of 180 countries in 2019 and 2020 respectively with discernible improvements

1
following the election of the new Government in 2019. South Africa ranked 6th out of 54
countries in Overall Governance, 7th in Participation, Rights and Inclusion, 8th in Security and
Rule of Law, 9th in Human Development and 8th in Foundations for Economic Opportunity in
the Mo Ibrahim Index of African Governance in 2019. Overall Governance marginally
improved between 2017 and 2019.
2.2 Economic Context and Prospects
6. South Africa is an upper middle income country with per capita income of USD
5,624 in 2020, ranking 6th in sub-Saharan Africa. The country enjoys a well-developed
economy and plays a dominant role in Southern Africa as the region’s economic powerhouse,
accounting for about 45% of the region’s output in 2020. Nevertheless, it is characterized by a
dual economy: high poverty, unemployment, income inequality and spatial socioeconomic
disparities. South Africa’s
economy is well diversified, with a Figure 1: Real GDP and Sector Growth, 2015-2020
strong service sector as the main 30 (%)
source of GDP. However, the 20
economy has suffered from a
longstanding process of de- 10
industrialization over the past 0
decades, which needs to be 2015 2016 2017 2018 2019 2020
reversed to effectively tackle major -10

development challenges. During -20

the first period of the CSP the GDP Agriculture Mining
Government launching numerous Manufacturing Finance
reforms and policy measures to Source: Statistics South Africa

boost the economy, create jobs and achieve inclusive growth. To support inclusive economic
growth in the wake of the Covid-19 pandemic, the Government launched the Economic
Reconstruction and Recovery Plan in 2020 which identified nine priority structural reforms,
including modernizing and reforming network industries and associated state owned
enterprises (SOEs), reorienting trade policies, lowering barriers to market entry and supporting
labour intensive sectors.
7. Recent Growth Performance and Outlook: South Africa’s growth trajectory has
been on a downward trend in recent years with real GDP growth declining from 1.3% in
2015 to 0.1% in 2019. South Africa’s GDP growth has weakened to an average of 0.9%
between 2015 and 2019, mainly due to electricity shortages, skills gaps and slow structural
reforms such as the restructuring of state-owned enterprises, policy reforms to boost
competition, improving the regulatory framework, boosting public investment in transport
infrastructure and improving quality of education and skills development. Slow growth in
recent years reflects weaker growth in the industrial sector with growth in the manufacturing
sector worsening from -0.4% in 2015 to -0.8% in 2019 and growth in the mining sector
declining from 3.3% to -1.9% in the same period. GDP contracted by 6.4% in 2020 due to the
impact of the COVID-19 pandemic but is expected to rebound to 3.3% in 2021 and 2.2% in
2022. Except for the agricultural sector, all other major sectors contracted in 2020 (Figure 1).
Risks to the domestic growth outlook remain balanced over the medium-term. Growth is highly
vulnerable to a combination of the COVID-19 pandemic and other factors related to electricity
supply constraints and poor performance of the major state-owned enterprises, such as South
African Airways, Eskom and Land Bank. Between November 2019 and April 2020, the three
major international rating agencies (Standard & Poor's, Moody’s, and Fitch) downgraded South
Africa's sovereign credit rating to sub-investment grade, citing pressure on public finances and
slow economic growth. As a result, from May 2020, South Africa's government bonds were

2
excluded from the FTSE World Government Bond Index. Consequently, South Africa
experienced net capital outflow of 2.7% of GDP in 2020 compared to net inflow of 2.1% in
2019. The capital outflow has since been moderate. The downgrade increased the cost of
borrowing and placed more stress on government finances.
8. South Africa has pursued an expansionary monetary policy stance in recent years
as inflationary pressure eased on account of the Covid-19 related monetary stimulus. The
headline inflation rate declined persistently from 6.4% in 2016 to 3.3% in 2020, remaining
within the monetary policy target range of 3% - 6% between 2015 and 2020. Driven by lower
food and transport prices, the consumer inflation rate of 3.3% in 2020 was the lowest annual
average in 16 years. Due to improved
inflation outlook and in response to Figure 2: Headline Inflation and Headline CPI

Headline CPI Index (Numbers)

120 Index, 2016-2020 8
the economic downturn caused by the

Headline Inflation (Percent)

COVID-19 pandemic, the South 110 6
African Reserve Bank reduced the
100 4
repo rate from 6.5% in 2019 to 3.5%
in early 2020, its lowest level on 90 2
record. The repo rate remained
unchanged in 2021 to support 80 0
2016 2017 2018 2019 2020
economic recovery. The inflation rate
is projected to stay in the central CPI Headline Index Headline Inflation
bank’s target range of 3% - 6% in Source: Statistics South Africa
2022. The nominal exchange rate of the Rand appreciated by 30.4%, from R19.08 against the
US dollar in early April 2020 to R14.62 by the end of December 2020.
9. Fiscal policy continues to focus on short-term economic support in response to the
Covid-19 pandemic, pro-growth fiscal consolidation and debt stabilisation. Government
expenditure increased from 33% of GDP in 2017/18 to 41.7% of GDP in 2020/21 while revenue
declined from 28.7% of GDP to 27.7% in the same period. Consequently, the consolidated
budget deficit reached a record 14% of GDP in 2020/21 due to additional expenditure to
cushion the economy from the impact of the Covid-19 pandemic. Primary fiscal balance
deteriorated from -1% of GDP in 2018
to -7.5% of GDP in 2020. The Covid-19 Figure 3: Fiscal Balance 2017-2020
pandemic and associated lockdowns led 60 (Percent of GDP)
to a severe contraction in GDP and tax
revenue in 2020. The budget deficit is 40
Percent of GDP

projected to narrow to 6.3% of GDP in

2023/24. In the medium term, fiscal 20
policy will focus on the following: (i)
Extending temporary support to the 0
2017 2018 2019 2020
economy in response to COVID-19; (ii)
Narrowing the budget deficit and -20 Revenue Expenditure Budget Balance
stabilising debt; and (iii) Exercising Source: National Treasury
continued restraint in non-interest
expenditure growth while improving the composition of expenditure including reduction in the
wage bill. The wage bill absorbed 41% of government revenues in 2019/20 and 47% of revenue
in 2020/21 Fiscal Year.
10. Current Account Balance: The external sector has weathered the Covid-19
pandemic well. South Africa’s balance on the current account of the balance of payments
increased to a surplus of 2.2% of GDP in 2020 (the first annual surplus since 2002) from a
deficit of 3.6% in 2018 and 3% in 2019. The improvement is attributed largely to a significant

3
increase in the trade surplus due to an improved export performance which was supported by
higher commodity prices. The Rand price of merchandise exports continued to benefit from
the strong increase in international commodity prices, increasing by 2.9% in the fourth quarter
of 2020 despite the appreciation of the Rand. The Rand price of merchandise exports rose on
average by 9.4% in 2020. The depreciation of the real effective exchange rate (REER) of the
Rand by a notable 16.4% from January 2019 to April 2020 also helped improve the
competitiveness for domestic producers. At the same time, weak domestic demand alongside
a sharp decline in crude oil prices weighed down the value of merchandise imports while the
shortfall on the services, income and current transfer account also narrowed. On the other hand,
Foreign Direct Investment (FDI) declined in 2020 to about USD 3.1 billion due to Covid-19
from USD 7.1 billion in 2018 and USD 5.1 billion in 2019. South Africa is also among the top
10 foreign direct investors in Africa, with its FDI stock in Africa rising from USD 22 billion
in 2015 to USD 33 billion in 2019. South Africa’s rising FDI in Africa has boosted trade with
the rest of the continent. South Africa’s foreign exchange reserves stood at USD55 billion in
December 2020 covering 6.1 months of imports compared to USD55.1 billion in December
2019 covering 5.1 months of imports.
11. Public debt reached 80% of GDP in 2020 and is projected to increase to 87% in
2023/24 and gradually decline as fiscal consolidation and structural reforms are
implemented. South Africa’s public debt has been increasing steadily in recent years, from
45% in 2015 to 63% in 2019. However, public debt remains sustainable. South Africa imposed
a statutory ceiling of 15% on foreign debt as a ratio of total public debt. As a result, 90% of
public debt is domestic while foreign debt accounts for about 10%. However, debt
sustainability critically hinges on sustained implementation of policies to address underlying
fiscal and structural weaknesses. Key drivers of public debt accumulation are primary fiscal
deficit as well as automatic debt dynamics
influenced primarily by interest rate and Figure 4: Gross Public Debt (Percent of
growth movements. Primary fiscal deficit is 100 GDP)
driven by limited adjustments in consolidated
80
government accounts and SOE bailouts amid
Percnt of GDP

low economic growth. Debt-service costs are 60

the fastest-growing item of spending, currently 40
consuming 19.2% of tax revenue and 13% of
the budget. Interest payments on the debt has 20
increased from 3.3% of GDP in 2016/17 to 0
4.7% in 2020/21. The Debt Sustainability 2015 2016 2017 2018 2019 2020
1
Analysis (DSA) conducted by IMF in July Source: National Treasury
2020 highlights that public debt, gross financing needs, and contingent liabilities have
expanded in the context of the COVID-19 crisis. The downside risks to debt sustainability
include the uncertain nature of the pandemic and the global recovery; increased contingent
liabilities; and implementation risks to fiscal consolidation and reforms.
12. Private/Financial Sector: South Africa has a vibrant private sector, generating
75% of the country’s GDP. The overall business environment is comparatively well
developed but significant challenges remain, notably in terms of energy access, trading across
borders and red tape. South Africa scored 61.5/100 in incentivizing firms to embrace diversity,
equity and inclusion to enhance creativity in the World Economic Forum’s Transformation
Readiness Performance Index, a sub-component of the Global Competitiveness Report 2020.
As at 31 December 2020, the financial sector comprised 18 registered banks, 5 cooperative

1
International Monetary Fund, South Africa IMF Country Report No.20/226, July 2020.

4
banks, 4 mutual banks and 13 local branches of foreign banks as well as other financial
intermediaries. The financial sector is well developed, yet highly concentrated, with 5 banks
controlling nearly 89.4% of total assets in the sector as at March 2021. Despite the impact of
Covid-19, the financial system continues to function effectively; financial markets have
stabilised and the commercial banking sector remains well capitalized with banks holding
adequate levels of capital at 15.8% as of March 2020, well above the 10.5% minimum
regulatory requirement under Basel III.
13. Financial Governance/ Public Financial Management (PFM): South Africa’s
financial governance/PFM systems are robust, but challenges remain at subnational
government levels and SOEs. South Africa has generally sound PFM systems at the national
level and the country has an impressive record of fiscal discipline. However, there is room for
improvement, specifically at municipal and provincial government levels, given unfavorable
audit reports from the Office of the Auditor General (AG) in recent years. The 2019/20 national
and provincial AG Audit report highlights that only 26% of the audited entities received clean
audits compared to 23% in the previous year. The Audit report found widespread weaknesses
in basic internal controls. SOEs are in a serious financial difficulty. South African Airways is
under business rescue and South African Express is under provisional liquidation. The Land
and Agricultural Development Bank of South Africa is one of the SOEs that disclosed
uncertainty about whether it will be able to continue as a going concern. In July 2020,
following allegations of widespread irregularities in the use of COVID-19 resources, President
Cyril Ramaphosa signed a proclamation authorising the Special Investigating Unit (SIU) to
investigate allegations of corruption in the use of funds allocated to tackle the Covid-19
pandemic. The authorities continue to implement PFM, as well as transparency and
accountability reforms and take judicial action against perpetrators.
2.3 Sector Context
14. Energy: The Electricity Supply Commission’s (Eskom) fleet of coal fired power
stations are – except the two newly built station Medupi and Kusile – 41 years old and
suffer from years of delayed maintenance. In early 2021, the energy availability factor (EAF)
of Eskom fell below 70% against a required EAF in the 80% range (and Eskom’s target of
71.5%) resulting in outages. The economic losses due to electricity load shedding were
estimated to be between ZAR 59 billion and ZAR 128 billion per year before Covid-19 (Annex
10). Based on the nominal GDP of ZAR 5.6 trillion in 2019, the economic losses due to
electricity outages therefore range between 1% and 2.2% of GDP in the same period. The
approval of South Africa's Integrated Resource Plan (IRP 2019) in 2020 entails an ambitious
plan to retire most of the country’s ageing coal-fired power plants. By 2030, almost 12,000
MW of new capacity will be contracted (6,800 MW from photovoltaic and wind sources, 513
MW from storage, 3,000 MW from gas and 1,500 MW from coal). In South Africa, 15% of the
population do not have access to electricity. The government is adjusting policies and its
approach to the use of off-grid solutions in order to achieve universal access by 2030.
15. Transport and ICT: South Africa's road network of about 750,000 km is the 11th
largest in the world and the largest on the continent. South Africa's rail network is
approximately 20,000 km long. The aviation sub-sector is overseen by the Airports Company
of South Africa (ACSA) which owns and operates six international and three local airports.
The main challenge in the aviation sector is the chronic weak performance of the national
carrier, South African Airways (SAA) (Annex 17). The Transnet National Ports Authority is
responsible for the control and management of the eight commercial ports on the South African
coastline. Transnet Pipelines owns, operates, manages and maintains a network of 3,800 km of
high-pressure oil and gas pipelines. South Africa has developed various strategies and policies

5
to address specific elements of the transport sector that are geared and intended to respond to
the National Development Plan (NDP), and the National Infrastructure Plan (NIP), as well as
the Economic Reconstruction and Recovery Plan. The country has a well-developed ICT
sector. South Africa’s mobile phone operators have extensive footprint across the continent.
South Africa ranks 90th out of 224 countries and territories in terms of average broadband
network speeds in the 2021 Worldwide Broadband Speed League Report. The country’s two
large mobile operators, Vodacom and MTN, have called for more wireless spectrum to expand
their data services. Mobile cellular subscriptions marginally decreased to 94 million in 2020
from 96 million in 2019. Smartphone subscriptions increased to 60 million in 2020 from 53
million in 2019.
16. Water and Sanitation: South Africa is a water-scarce country, ranked as the 30th
driest state in the world with a water availability of 830 m 3/capita. Annual rainfall
precipitation ranges from 100 mm to 1,500 mm. According to the joint UNICEF/WHO Global
Monitoring Report 2021, 94% of South Africans have access to a basic water supply while
64% of the population is considered to have a reliable water supply. Access to basic sanitation
is 78% while the hygiene and sanitation indicator is 44%. According to a survey by Statistics
South Africa, in 2019, 88.2% of South African households had access to improved source of
water while 45% had access to piped water in their dwellings. According to the same report,
82.1% of South African households had access to improved sanitation in 2019. The Trans-
Caledon Tunnel Authority (TCTA), a state-owned entity is charged with financing and
implementing bulk raw water infrastructure projects. The provision of water services (water
supply and sanitation) is the constitutional responsibility of local governments (Annex 11).
17. Industry/manufacturing sector: South Africa is the most industrialised country in
Africa with a well-diversified manufacturing base. Nevertheless, the share of manufacturing
value added in GDP has declined from 20% in 1980 to 11.5% in 2020, highlighting de-
industrialization. The main reasons for this are increasing import competition from Southeast
Asia, skills shortages on domestic labour markets, rising labour costs, increasing electricity
prices and the withdrawal of subsidies and tariff protections. South Africa is rich in mineral
resources but with relatively little contribution to GDP (8.1% in 2020) and employment (2.5%
of total in December 2020). South Africa is the largest global producer of platinum, third largest
producer of coal, sixth in gold and seventh in diamonds. The industrial sector employs about
23% of the workforce and contributes to 26% of the country's GDP. Nevertheless, the value
addition in the mining sector remains limited.
18. Agriculture and Blue Economy: South Africa’s agricultural sector accounts for
approximately 2% of the country’s GDP, 12% of export earnings and employs 5% of the
country's workforce. Despite its small share in total output, the sector plays an important role
in the country’s economy given its cross-cutting interlinkages with the rest of the economy.
South Africa has potential in terms of ‘Blue Economy’. Potentials exist in marine transport and
manufacturing activities, including coastal shipping, trans-shipment, boat building, repair and
refurbishment. In addition, potentials exist for offshore oil and gas exploration, aquaculture;
marine protection services and ocean governance, and marine and coastal tourism (Annex 18).
19. Regional Integration and Trade: South Africa is a member of two major regional
economic associations, SADC and the Southern African Customs Union (SACU). At less
than 20%, intra-SADC trade remains low. Intra-SADC exports and imports increased to 19.5%
and 19.15% respectively in 2018 from about 15% and 17% respectively a decade ago. South
Africa was the largest intra-SADC exporter and importer accounting for 66% and 23%
respectively in 2019. Mozambique (USD 11 billion); Zambia (USD 3.5 billion), DRC (USD
2.3 billion) and Zimbabwe (USD 2.2 billion) were the top 4 South Africa FDI destinations in

6
the SADC region by the end of 2017. SACU is a regional trading block consisting of Botswana,
Lesotho, Namibia, South Africa, and Eswatini. South Africa was the largest intra-SACU
exporter (73%) of intra-SACU exports in 2019. Botswana (31%) and Namibia (27%) were the
largest intra-SACU importers in the same period. South Africa ratified the African Continental
Free Trade Agreement (AfCFTA) in 2019. South Africa has been the leading importer and
exporter in inter-Africa trade in the past decade and the AfCFTA provides the country with the
opportunity to expand trade with the rest of the continent. Trading under the AfCFTA
Agreement began on 1 January 2021. The South African Reserve Bank supports financial
integration within SADC, and a payment system—the SADC Integrated Regional Electronic
Settlement System (SIRESS)—is operational in all SADC countries except Madagascar.
2.4 Social Context and Cross-Cutting Themes
20. Poverty: The country continues to struggle with the challenges of high poverty,
unemployment, income inequality and spatial socio-economic disparities. According to the
latest data available, the proportion of the population living in poverty increased from 53.2%
in 2011 to 55.5% in 2015. The 3 million people living in informal settlements and 15.3 million
in townships represent 35% of the total population. Over the past two decades, South Africa
has registered a sharp increase in income inequality, with the country’s Gini coefficient
increasing from 0.63 (2005) to 0.65 (2016) – the highest in the world. The unemployment rate
has remained above 20% for at least two decades; it increased from 27.1% in 2018 to 32.5% in
2020. South Africa has been experiencing persistent high levels of unemployment, reaching
63.2% of youth aged 15-24 in 2020. As a result, social protection coverage increased from 3
million beneficiaries of social grants in 1994 to 18 million in 2019 (31% of the population).
The National Budget has remained highly redistributive, with public expenditure on social
protection increasing from 15.9% of social security funds expenditure in 2017/18 to 16.5% in
2019/20. Social protection will account for 13.6% of the medium term consolidated
government budget from 2021/22 to 2023/24.
21. Gender Equality: The constitution prohibits unfair discrimination on the basis of
gender but various challenges still persist. One of the fundamental challenges that persist in
South Africa is gender-based violence (GBV). In 2020, the Government introduced three new
bills that are designed to bring justice to the victims of GBV. COVID-19 has further pushed
back the growth of women’s businesses, as a result of the stringent lockdowns. Between August
and September 2020, nearly 1.1 million workers (aged 20 and over) dropped out of the labor
force, of which 79% were women according to a National Women's Law Center analysis.
According to World Economic Forum’s Global Gender Gap Report 2021, South Africa ranks
18th out of 156 countries in gender gap index with women in parliament and cabinet accounting
for 45% and 48%, respectively.
22. Climate Change and Green Growth: According to the Global Carbon Atlas, South
Africa emitted 479 MT of CO2 in 2019, ranking 12th highest emitter in the world and the
highest in Africa. The country has established a high level Presidential Climate Change
Coordination Commission (PCCCC) and has improved its climate mainstreaming model by
using a multi-level climate decision-making process, integrating local government
stakeholders. On policy and regulatory framework, the Government has improved its climate
legislation to support both mitigation and adaptation in enhancing its commitment to the Paris
Agreement. On adaptation, South Africa has developed a National Climate Change Adaptation
Strategy, while on mitigation, through a Carbon Act 2019, the Government has introduced a
carbon tax of 120 Rand/tons of CO2 equivalent targeting the carbon-intensive sector. It has also
updated its Nationally Determined Contribution (NDC) 2021 to be informed by a Low Carbon
Emission Development Strategy (LEDS) targeting Green House Gas (GHG) emission

7
reduction in the energy, mining, industrial, agriculture and waste sectors to curve the national
carbon footprint to 398-510 Mt CO2-eq during the period 2021-2025 to an upper limit of 350-
420 Mt CO2-eq by 2026-2030. In addition, the Government has developed a green economy
policy framework for the industrial sector, a Green Transport Strategy, a revised National
Waste Management Strategy, and a yet to be approved Climate Change Bill.
23. Civil Society Organization (CSO) engagement: Established in 1995, the South
African NGO Coalition (SANGOCO) is the largest umbrella body for civil society
organizations. Its objective is to coordinate civil society input into government policy including
land, health, urban and rural development, and to ensure accountability in public institutions.
The perception in civil society is that their voice is significantly diminished given the
difficulties and waning influence of SANGOCO. Most of the demand for accountability is
through the court system (Litigation Avenue). Civil society needs support to conduct advocacy
work and programs particularly in respect of women empowerment and youth employment.
South Africa also has very influential trade unions.
2.5 Country Strategic Framework
24. The National Development Plan (NDP) - “Vision 2030” adopted in 2012, offers a
long-term perspective with the aim to eliminate poverty and reduce inequality by 2030.
The Government’s MTSF 2019-2024 Bi-Annual Monitoring report for April to September
2020 highlights that for NDP priority two, Economic Transformation and Job Creation, the
economic growth target of 2%-3% per annum was not achieved by 2020. Reduction in
unemployment to 20%-24% and investment level target of 23% of GDP by 2024 may not be
achieved due to the Covid-19 shock. In terms of the NDP priority three, Education, Skills and
Health, performance has been positive, with overall pass rate in basic education increasing
from 75% in 2017 to 81% in 2019. Despite, the extra health burden due to the Covid-19
pandemic, life expectancy has increased from 64.6 years in 2019 to 65.5 in 2020. Overall, some
NDP targets are on track while some targets are off-track. The main challenges are weak state
capacity and structural bottlenecks compounded by the Covid-19 pandemic. In 2020, South
Africa adopted an Economic Reconstruction and Recovery Plan and prioritized 9 structural
reforms to stimulate inclusive growth to tackle historical inequalities, unemployment and
poverty. Going forward, the Government should strictly implement these priority structural
reforms to ignite economic growth and create jobs.
2.6 Aid Coordination Mechanisms, Bank Positioning and Comparative Advantage
25. As an Upper Middle Income Country, Official Development Assistance (ODA) is
low, accounting for less than 1% of the government budget. As a result, there is no
institutionalized aid coordination mechanism in South Africa. The National Treasury is the
entry point for dialogue with government. Regular bilateral consultations are conducted with
development partners mainly in the sectors of energy, transport, agriculture and finance since
the opening of the Regional Office in South Africa a decade ago.
26. Key development partners: The Bank is the country’s main partner in energy,
transport, agriculture and finance. There are few development partners operating in South
Africa within the Bank's mandate areas. The key DFIs active in the transport sector include the
Development Bank of South Africa (DBSA), the European Investment Bank (EIB), KfW, the
World Bank, the Japanese International Cooperation Agency (JICA) and the Agence française
de développement (AFD). The European Union’s support focuses on rural areas. GIZ's
activities focus on the management of natural resources, including sustainable land
management, support to land reform, economic growth, and social development. KfW is
helping South Africa in registering land rights and the inclusive preparation of land use plans

8
in communal areas. The FAO is supporting South Africa on sustainable land management,
building resilience and reducing effects of climate change.
2.7 Strengths and Opportunities, Weaknesses and Challenges
27. South Africa enjoys many strengths and opportunities that can be leveraged to unlock its
growth potential, accelerate structural economic transformation, and promote inclusive growth.
However, the country faces several challenges that need to be addressed to enable it to achieve its
development aspirations set forth in its Vision 2030. South Africa’s overarching development
challenge remains as economic duality: high poverty, inequality and spatial socioeconomic
disparity. This overarching development challenge is compounded by various underlying
development challenges, such as infrastructure deficit, skills gaps, barriers to trade, among others
(Box 1). South Africa’s development challenges have remained unchanged since the preparation
of the CSP in 2018 – with the exception of the COVID-19 pandemic.

Box 1: Strengths and Opportunities; Challenges and Weaknesses

Strengths Weaknesses
• Massive mineral resources endowment (world’s • Dual economy and the disconnect between the first
largest reserves of manganese and platinum) and the second segments of the economy
estimated at USD 2.5 trillion. (metropolitan areas vs. townships and rural areas).
• Well-developed private and financial sectors in • Lack of competition in goods and services market.
the first segment of the economy. • High levels of violent crime including gender
• Vibrant multiparty democracy with free press based violence.
and • Weaknesses in SOE governance,
respect to the rule of law. • Weak capacity in local governments.
Opportunities Challenges
• Potential for manufacturing-led industrialization • High inequality, disparities and high (youth)
and job creation. unemployment.
• Largely untapped Blue Economy. • Lack of adequate skills.
• Access to regional markets and global value • Inadequate domestic infrastructure: energy,
chains including AfCFTA. transport, water
• Well developed ICT sector with potential for • Persistent physical and soft barriers to the free
Fourth Industrial Revolution. flow of goods and persons to other countries in the
region.

3. CSP IMPLEMENTATION AND RESULTS ACHIEVED AT MID-TERM

3.1 Relevance of the strategy
28. The main objective of the CSP 2018-2022 is to support South Africa’s economic
transformation and re-industrialization to promote inclusive growth, job creation and
improved equality. To achieve this objective, the CSP is anchored on two complementary
Pillars: (i) Promoting Industrialization; and (ii) Deepening Regional Integration. These areas
of focus remain top priorities of the South African Government for Bank support. The CSP is
still aligned with the government’s development and strategic priorities and the Bank’s
corporate priorities as articulated in the Ten-Year Strategy (TYS) 2013-2022 and the High5s.
The MTR consultations confirmed the continued relevance of the CSP and its Pillars.
3.2 Bank Group Resources
29. From the CSP approval in 2018 to 30 June 2021 (mid-term review point), the Bank
approved five lending operations (three under Pillar 1 and two under Pillar 2) amounting to UA
601.6 million (Annex 4). Of the five approved operations, three were sovereign operations
financed under the ADB public window, accounting for 63.3% of the approved amount while
two (accounting for 33.7%) were non-sovereign operations financed through the ADB private
sector window. The remainder of 3% was financed through other resources including grants.

9
The energy sector was the largest beneficiary with 47.3%, followed by the multi-sector
(40.2%), transport (12.4%), and agriculture (0.1%). On the non-lending program, the Bank
approved two studies (both under Pillar 1) for an amount of UA 1.3 million . Both studies were
completed in 2020. The governance sector has the largest share of total commitments with
92%, followed by the multi-sector (8%).
3.3 Implementation Progress of the Strategy at Mid-Term
30. Indicative Operational Program (IOP): At approval, the CSP had 8 lending
operations (five in Pillar 1 and three in Pillar 2). Annex 3 presents the details on the indicative
lending and non-lending programs envisaged to be approved up to the mid-term review point,
including their implementation status. From 2018 to mid-term review point, two operations in
the CSP were approved (one under Pillar 1 and one under Pillar 2). It is important to also note
that one operation (the Line of Credit to SMEs through National Housing Finance Corporation)
under Pillar 1 was approved in 2019 and later cancelled. This was due to solvency matters
relating to the client, the Landbank. Also, one operation (Medupi Flue Gas Desulphurisation
Retrofit Project) was deferred to 2024 IOP, and the remaining four operations were cancelled
from the CSP IOP. In addition, three operations that were not programmed in the CSP were
approved between 2018 and the mid-term review point. In total, the Bank approved five lending
operations for a total amount of UA 601.6 million.
3.4 Results Achieved at Mid-Term
31. Despite the challenges in project implementation (in terms of first disbursement
delays and procurement delays), the Bank has achieved tangible results. The CSP
envisaged 14 output and 10 outcome indicators. Annex 1 presents the implementation status of
the CSP Results Measurement Tool. As at mid-term review point, five output targets and three
outcome targets were fully achieved, translating to 36% and 30% achievement rates,
respectively. In addition, nine output targets (representing 64% of total outputs) and seven
outcome targets (70% of total outcomes) were partially achieved, and most of them are
expected to be fully achieved by end of the Strategy in December 2022. Table 1 (p. 11) provides
a summary assessment of outputs and outcomes by Pillars and sectors.
Pillar I: Promoting Industrialization
32. Under Pillar 1, 12 output targets and eight outcome targets were envisaged to be
achieved at end of the country strategy in December 2022. As at mid-term review, five
output targets (representing 42% of total outputs) and three outcome targets (representing 38%
of total outcomes) were achieved. With regard to the seven output targets (representing 58%
of total outputs) and five outcome targets (representing 62% of total outcomes) that are
partially achieved, the results are expected to be fully achieved by the end of the strategy in
December 2022.
CSP Strategic Outcome 1 – Enabling higher industrial/manufacturing value addition
through investments in critical industry-enhancing infrastructure.
33. National energy projects: Among other objectives, the CSP Outcome 1 envisages
building critical infrastructure to enhance the domestic industry. Accordingly, the results of the
national energy projects planned in the CSP under Pillar 2 are reported under Pillar 1 of CSP
Outcome I, while the results of regional energy projects are reported under Pillar 2 as originally
planned. Two output targets and one outcome target have been partially achieved at MTR,
resulting from the substantial completion of the following operations that were approved under
the previous CSP (2013-2017): (i) Medupi Power Project (UA 1.3 billion); (ii) Eskom II Power
Project (UA 255.3 million); and (iii) Eskom II A Loan (UA 7.1 million). The ongoing Eskom
Transmission Improvement Project (UA 156.8 million) was envisaged in the current CSP and

10
approved in 2018. Due to start-up delays in fulfilment of prerequisite conditions for first
disbursement, no results can be presented at MTR and are expected to be fully achieved by the
end of the CSP.
34. Water and sanitation sector: Three output targets and two outcome targets were
achieved as a result of the successful completion of the following operations that were approved
under the previous CSP (2013-2017) and have been completed during the current CSP: (i)
Operationalizing Community Driven Multiple Use Water Service (UA 1.1 million); and (ii)
Social Franchising Operation and Maintenance of School Sanitation (UA 1.0 million).
35. Transport sector: Two output targets and one outcome target have been partially
achieved under the ongoing South Africa Commuter Transport Project (UA 74.6 million). The
project was approved in 2018. Implementation is progressing well, and the results are expected
to be fully achieved by the end of the CSP in December 2022. The project closing date is 31
March 2023.

Table 1: Assessment of Output and Outcome Indicators by Sector and by Pillar at MTR
Strategic High 5
Partially Not Total Total
Pillar CSP Priority Sector Indicator Achieved
achieved achieved outcomes outputs
Outcomes Agenda
Enabling higher Improve Water & Outcomes 2 - - 2
industrial / Quality of San Outputs 3 - - 3
manufacturing Life of the Outcomes - 1 - 1
value addition People of
Transport
1 - Promoting Industrialization

through South Outputs - 2 -

investments in Africa 2
critical Light Up & Outcomes - 1 - 1
industry- Power
Energy
enhancing South Outputs - 2 -
infrastructure Africa. 2
Supporting Industrializ Outcomes 1 - - 1
Industry /
industrial e South
Mining Outputs 2 - -
clustering to Africa 2
promote Outcomes - 3 - 3
SME/SMI
Feed South
development Agric
Africa Outputs - 3 -
and job
creation 3
Sub-total achievement of outcomes (8) under Pillar 1 38% 62% 0% 8
Sub-total achievement of outputs (12) under Pillar 1 42% 58% 0% 12
Light Up & Outcomes 1 - 1
Regional Integrat.

Improving
Power
2 - Deepening

cross-border Energy
South Outputs 1 -
connectivity for
Africa 1
increased trade
Integrate Outcomes 1 - 1
and
South Finance
productivity Outputs 1 -
Africa 1
Sub-total achievement of outcomes (2) under Pillar 2 0% 100% 0% 2
Sub-total achievement of outputs (2) under Pillar 2 0% 100% 0% 2

Grand total achievement of outcomes (10) under Pillar 1 and Pillar

30% 70% 0%
2 10
Grand total achievement of outputs (14) under Pillar 1 and Pillar 2 36% 64% 0% 14

11
CSP Strategic Outcome 2 – Supporting industrial clustering to promote SME/SMI
development and job creation
36. Industry/Mining sector: Two output targets and one outcome target have been fully
achieved under the completed Enterprise Development Pilot Project (UA 1.2 million) that was
approved under the previous CSP (2013-2017) and completed during the current CSP.
37. Agriculture sector: Three output targets and three outcome targets have been partially
achieved under the ongoing Line of Credit to the Land and Agricultural Development Bank of
South Africa Project (UA 47.98 million) that was approved under the previous CSP (2013-
2017) with implementation continuing into the current CSP. Only five out of the eight projects
planned at appraisal have been implemented to date.
Pillar II: Deepening Regional Integration
38. Under Pillar 2, two output targets and two outcome targets were envisaged to be
achieved at the end of the CSP. As at MTR in June 2021, two output targets (representing
100% of total outputs) and two outcome targets (representing 100% of total outcomes) have
been partially achieved, withresults expected to be fully achieved by the end of the CSP in
December 2022.
CSP Strategic Outcome 3 – Improving cross-border connectivity for increased trade and
industrial productivity
39. Regional energy projects: The national energy sector investment projects contributed
to increased contribution to the Southern Africa Power Pool (SAPP), from 12,461 GWh in
2017 to 15,189 GWh to date in 2021. This is contributing to enhanced regional power security
in Southern Africa, although enormous challenges remain. One output target and one outcome
target have been partially achieved as at MTR.
40. Financial Services sector: One output target and one outcome target have been
partially achieved as at MTR, resulting from the substantial completion of the UA 21.4 million
Nedbank sub-debt operation and the UA 133.1 million Industrial Development Corporation
(IDC) III operation that were approved during the previous CSP (2013-2017) cycle. Both
operations support regional infrastructure, agribusiness, and industry projects in other countries
, as well as foster South Africa’s trade with these countries thereby deepening regional
integration.
41. Additional operations that were not part of the CSP: From the start of the current
CSP in 2018 to date, five investment operations that were not in the CSP have been approved,
namely: (i) Redstone Concentrated Solar Power Project (UA 128.1 million) approved in
November 2018; (ii) Development of the Bokamoso Ba Rona Agri-Industrial Park operation
(UA 0.5 million) approved in September 2020; (iii) South Africa Agri-park Program (UA 0.5
million) approved in September 2021; (iv) Standard Chartered Bank Trade Finance Risk
Participation Agreement (UA 50 million) approved in September 2021; and, (v) Lesotho
Highlands Water Project (UA 63.0 million) approved in October 2021. Dialogue on these
operations began long before the CSP was approved. However, no requests for financing had
been received at the time of finalizing the CSP, and the operations were subsequently not
included in the CSP. Implementation has not started on the first two operations as they are
experiencing delays in making the first disbursement and delays in rolling out the procurement
respectively. It is therefore unlikely that results can be achieved by December 2022 when the
current CSP cycle comes to an end. The remaining 3 operations are only approved in September
and October 2021, and project start-up activities are underway. The results thereof will be
assessed at the end of the CSP in December 2022.

12
42. Non-lending programme: Out of the five knowledge products that were planned at the
onset of the CSP in 2018, only two with a total value of UA 1.3 million were approved in 2019.
One operation (Study on effective delivery of SOEs development mandate) was approved in
2019. In addition, one operation (Review of the townships and informal settlements in South
Africa) that had not been planned for in the CSP was approved in 2019. Both operations were
completed in 2020. One non-lending operation (National Housing Finance Corporation Study)
was cancelled. Two other operations were deferred to 2022-2023 indicative non-lending
program. Annexes 2 and 3 present further details of the knowledge products including their
implementation status. In addition, the achievements at mid-term in terms of dialogue and
policy reforms is highlighted in Policy Reform Dialogue Matrix (PRDM), Annex 2.
3.5 CSP contribution to the High-5s
43. The Bank has made important contributions to the achievement of the High-5s in South
Africa during the current CSP period throughthe successful implementation of ongoing projects
approved under both the previous and current CSP. Distribution of commitments in accordance
with the High-5 priorities of the Bank, has ‘Light Up and Power Africa’ with 58.9% of total
commitments, followed by ‘Industrialize Africa’ (24.3%), ‘Integrate Africa’ (8.4%), ‘Improve the
Quality of Life for the People of Africa’ (8.3%), and ‘Feed Africa’ (0.1%).Under ‘Light Up and
Power Africa’, the Medupi Power Project and the Eskom Transmission Improvement Project
have improved household access to electricity and increased power exports to SAPP from
12,461 GWh in 2017 to 15,189 GWh to date in 2021. Under ‘Integrate Africa’, rail freight
capacity has increased from 80 million tons per annum in 2012 to 249 million tons per annum
in 2020 under the two Transnet operations. Under ‘Feed Africa’, the Land Bank Project has
generated 1,868 permanent jobs through a timber sub-project and an additional 128 permanent
jobs through a sugarcane sub-project, with at least 50% being women, thereby promoting
inclusivity and gender equity. Under ‘Improving the Quality of Life of the People of Africa’,
the Social Franchising operation and the Maintenance of School Sanitation Project have
provided better access to sanitation facilities in 300 schools, thereby contributing to
improvements to quality of life for their communities.
3.6 Progress towards the Principles of Paris, Busan and Accra
44. South Africa does not have a formal agreement, charter or protocol on the Paris
Declaration, but has endorsed aid effectiveness principles, including the Busan Partnership for
Effective Development Co-operation, the Paris Declaration and the Accra Agenda for Action.
The past decade has witnessed the rise of new actors in the country with different development
cooperation approaches including addressing global and regional challenges and supporting
private sector investments. With this rapid rise of new actors in the country including China,
India, Brazil and Russia, the traditional aid model in reference to the Paris Principles limits
reporting and comparison capacity across the wider development landscape in South Africa.

4. PORTFOLIO PERFORMANCE REVIEW

4.1 Overview of the Active Portfolio
45. As of 30 June 2021, the total value of the Bank’s 24 ongoing projects (eight sovereign
and 16 non-sovereign operations) in the South Africa portfolio was UA 3.87 billion (Annex 6),
accounting for about 40% of the total portfolio amount allocated to the Southern Africa Region.
The active portfolio is 98.7% funded through ADB windows (ADB Public 51.8% and ADB
private 46.9%) and 1.3% through other resources including grants – the Middle-Income

13
Country Technical Assistance Fund (MIC-TAF), the Africa Water Facility (AWF) and the
Africa Growing Together Fund (AGTF).
46. The energy sector is the largest beneficiary accounting for 58.9% of total commitments,
followed by the financial services sector (22.2%), transport (9.8%), multi-sector operations (6.4%),
industry/mining (2.6%), and lastly operations in the water and agriculture sectors (0.1%).
4.2 Portfolio Quality and Performance
47. The performance of the portfolio has improved over the period under review, with all
the key indicators either outperforming or remaining within the corporate KPI thresholds. As
of 30 June 2021, the overall performance of the portfolio was assessed as “satisfactory” with a
rating of 3.0 (on a scale of 1-4, with 1 being highly unsatisfactory and 4 highly satisfactory).
Annex 7 presents key indicators on portfolio performance between CSP approval in 2018 and
CSP MTR in June 2021. The proportion of ‘Satisfactory’ projects in the Bank’s Portfolio
Monthly Flashlight Reports for South Africa increased from 64% in June 2018 to 67% in June
2019to a high of 82% in June 2021. The proportion of ‘Close Watch’ projects increased from
8% in June 2018 to 16% in June 2019 and then decreased to 7% in June 2021. Similarly, the
proportion of ‘Flagged’ projects decreased from 18% in June 2018 to 17% in June 2019, and
further decreased to 11% in June 2021. The average proportion of flagged projects (from 2018
to 2021) is below the Bank corporate target of 20%. The projects-at-risk (PAR) decreased from
12% in June 2018 to 10% in June 2019, and further decreased to 4% in June 2021. The
disbursement ratio increased from 85% on 30 June 2018 to 89.5% on 30 June 2021. The average
age of the portfolio is 7.5 years old. The portfolio had one aged project,the Medupi Power Project
which, at 11.6 years old was categorized as a ‘Potentially Problematic Project’. The physical
implementation of the project was substantially completed by MTR and exited the portfolio in
September 2021. This improved portfolio performance reflects RDGS proactive management
of projects including interfacing with the National Treasury and project Implementing
Agencies.
4.3 Portfolio Monitoring and Evaluation
48. Notwithstanding the positive developments in the implementation of the portfolio, there
is still room for improvement. The main challenges at MTR included the following: (i) poor
quality at entry; (ii) non-fulfilment of prerequisite loan/grant conditions for first disbursement; and
(iii) slow procurement process leading to delays in overall project implementation. An example
of poor quality at entry was the Enterprise Development Resources Pilot Project that was completed
in 2020. The Project faced long implementation delays due to poor design issues. This poor design
coupled with inadequately qualified and experienced procurement staff at the Implementing Agency,
led to delays in implementation. One procurement package, for instance, took a total of 2 years to be
processed. In the case of Development of the Bokamoso Ba Rona Agri-industrial Park operation,
procurement of the Transaction Advisor has taken more than 9 months since signature due to the
Implementing Agency’s limited knowledge of Bank procurement procedures and rules. This is
despite the training conducted at project launch. The Bank procurement team is assisting the
Implementing Agency to ensure compliance.
49. A number of operations approved during the period under review experienced delays in their
first disbursements because of delays in complying with the conditions required for first
disbursement. For example, while the Eskom Transmission Improvement Project was signed
within 90 days of Board approval, it took about 18 months for the conditions required for first
disbursement to be met. Compensation and resettlement were a condition precedent to first
disbursement. The project has since made positive strides and implementation is now
progressing satisfactorily.

14
50. Going forward, plans to ensure projects meet their dates for signature, effectiveness and
first disbursements will include: (i) ensuring that all required project documents (such as
feasibility and environmental safeguards documents) are prepared before the Board considers
loan/grant proposals; (ii) advancing the fulfilment (as far as possible) of loan/grant conditions
prior to Board consideration; and, (iii) government requesting for advance contracting on
certain key procurement processes before Board consideration of proposals. It is also important
to note project challenges were compounded by COVID-19 related travel and procurement
restrictions.
51. Consultations on the CPPR: Due to the COVID-19 pandemic, the Bank held a virtual
CPPR workshop on 10 June 2021 drawing representatives from the National Treasury, line
ministries, SOEs, project implementing teams and the private sector. The objectives of the workshop,
which was attended by over 50 participants, were to: (i) assess the portfolio’s performance and
draw key lessons; (ii) review the 2018/2019 Country Portfolio Improvement Plan (CPIP); and
(iii) develop the 2021/2022 CPIP. Discussions focused on project management, first disbursement
delays, procurement, and untimely submission of audit reports, particularly for smaller-sized
operations. Annex 8 summarizes the key issues raised and agreed actions during the CPPR
consultations.
4.4 Implementation Status of the 2018/2019 CPIP
52. Significant progress was made in implementing the actions agreed in the 2018/2019
CPIP, although further progress has been constrained since 2020 due to COVID-19 lock-down
and travel restrictions that have affected field supervision of projects. A total of 19 actions on
the 2018/2019 CPIP (out of 21 action) were successfully achieved, an overall achievement
rate of 90% (48% fully achieved, and 42% partially achieved and ongoing).The remaining two
actions (representing 10% of total actions) that were not achieved are: (i) organization of
quarterly portfolio review meetings; and (ii) use of Borrower Procurement Systems (BPS) for
low-risk procurements. The former was discussed with the National Treasury during the CPPR
workshop, and an agreement was reached to re-instate portfolio review meetings (virtually)
from Q4 2021 onwards. The use of BPS was not achieved because there were no new projects
with low-risk procurements taken to the Board for consideration. Annex 9 provides detailed
implementation status of the 2018/2019 CPIP.
53. 2021/2022 Country Portfolio Improvement Plan: The 2021/2022 CPIP presented in
Annex 10 aims to address the constrains to improved portfolio performance through the
implementation of 20 concrete actions by the Bank and the government. A follow-up on the
implementation of the 2021/2022 CPIP recommendations will be undertaken routinely by the
Bank Country Program Officer and Task Managers (during supervision missions), and
through quarterly portfolio review meetings between the Bank, National Treasury and
Implementation Agencies.
4.5 Performance of Stakeholders
54. Bank Group performance: Overall, the Bank performance in managing the portfolio is
considered satisfactory. The Bank has played a proactive role in engaging with officials of the
relevant stakeholders including the National Treasury, line ministries and the Implementing
Agencies on a regular basis. This has: (i) ensured timely resolution of issues that impede project
implementation progress; and (ii) enhanced the Bank’s portfolio of investment by building a
healthy pipeline of projects. RDGS has been instrumental in following up on portfolio issues

15
including the smooth flow of communication between the Bank, Government and the
Implementing Agencies.
55. Country performance (Government and Implementing Agencies): The National
Treasury is the Bank’s focal point and coordinates all eight Bank-financed sovereign operations
in the portfolio. The performance of the National Treasury, line ministries and institutions
involved in the implementation of the ongoing Bank operations have been assessed as
satisfactory. It was noted that capacity building support in the form of training on Bank rules
and procedures including regular fiduciary clinics will go a long way in addressing the lengthy
procurement delays in the portfolio. Project audits are generally undertaken timeously for large-
sized operations, with audits of small-sized operations sometimes delayed. Part of the continued
dialogue between the Government and the Bank has been on governance issues around SOEs,
in particular Eskom and Transnet. The Government, together with the SOEs, have shown
commitment to address challenges facing their specific projects and the portfolio in general. This
includes addressing capacity constraints of contractors and consultants/supervising engineers to meet
deadlines as well as weak procurement and fiduciary management. During the CSP MTR mission,
the Bank and National Treasury agreed to hold more frequent joint meetings with project
implementing staff, especially for projects facing implementation challenges.
56. Development partners / co-financiers’ performance: Overall, the performance of
development partners in terms of parallel financing is considered satisfactory. The World Bank,
EIB, KfW and AFD are currently financing parallel Eskom energy operations with the Bank, with
their operations assessed as satisfactory. Significant progress has been achieved in harmonizing
activities between the Bank and development partners. For instance, joint supervision missions with
development partners are carried out for the Eskom, Medupi and renewable energy projects. The
South Africa COVID-19 Response Policy Based Operation, financed by the Bank, has been
designed in collaboration with other donors including the IMF, World Bank and New
Development Bank. The Bank conducted joint dialogue with the World Bank on the policy
matrix in order to align support and optimize the development impact of the interventions.
Notwithstanding these joint efforts, some challenges remain in respect to procurement. With each
financier using their own rules and procedures, better coordination is needed going forward to
improve the timing of activities.

5. LESSONS LEARNED
57. Lessons at the Strategic Level:
• The key lesson is that while the CSP’s two priority areas remain relevant to addressing
South Africa’s most pressing development challenges, the priority areas can only be
delivered if the operations designed to meet them are implemented.
• During the past three years South Africa has shown a shrinking appetite for sovereign
operations, especially with regards to providing sovereign guarantees to SOEs. This means
that going forward, the Bank should prioritize identifying and actively pursuing business
development opportunities through its non-sovereign window, taking advantage of the
dynamic nature of the private sector in South Africa. The Bank has, more recently,
employed innovative financing mechanisms and lent directly to businesses and industries
engaged in highly productive and transformative activities in South Africa. This has
included financial institutions and South Africa taxi projects. For the remaining period of
the CSP, the Bank is exploring using loan syndication, partial credit and risk guarantees,
private equity participation and local currency bond issuances as possible financing
mechanisms.

16
58. Lessons for the Bank:
• The achievements of the CSP at MTR have demonstrated the Bank’s responsiveness to
South Africa’s evolving development financing needs by adopting a flexible approach to
its programing. A recent example of the Bank’s adaptability and flexibility is the timely
approval of the COVID-19 Budget Support Facility and its immediate disbursement. The
Bank will, therefore, continue to tailor the design and modalities of its support to the
dynamic needs of South Africa as a middle-income country with peculiar development
challenges.
• While maintaining flexibility, the Bank will strive for selectivity in the choice of pillars of
intervention within broadly defined pillars and draw lessons from other development
partners’ interventions in the country. South Africa will increasingly rely on the private
sector for funding of key projects, particularly in infrastructure development through PPPs.
Going forward, the Bank should continue to actively pursue private sector financing
window opportunities.
59. Lessons for the Government: The Government is making significant progress in
implementing the 2018-2022 CSP and the corresponding 2018/19 CPIP, although in some
cases the capacity of implementation agencies has been weak. Strengthening the capacity of
these agencies coupled with improved oversight of projects by the National Treasury is needed
to ensure stronger accountability of implementation performance and results. The Government
has also demonstrated strong commitment to reforms. PFM and public sector reform, however,
have seen slower progress than envisaged, due largely to weak capacity for policy execution
and coordination, as well as delays in legislative processes.
60. Lessons for the Government and the Bank: Maintaining a high-level policy dialogue
between the institutions has helped orient the Bank’s operations towards strategic projects for
the country. Regular training on the Bank’s fiduciary rules and procedures have been vital in
reinforcing implementation efficiency. Since 2020, the introduction of an electronic Bank
disbursement information system, and real time tracking of pending disbursements through the
disbursement reports has substantially improved the processing time and the level of
disbursement. Going forward, the Government and the Bank should continue to strengthen and
further promote inter-partner joint processes (joint portfolio reviews, joint project supervision
missions and common reform matrix for budget support operations).

6. STRATEGY FOR THE REMAINING CSP PERIOD 2021-2022

6.1 Relevance of the Strategy, Objective and Priority Areas for Bank Support
61. South Africa’s main development challenges have remained unchanged since the
preparation of the CSP in 2018 – with the exception of the COVID-19 pandemic. These include
high levels of poverty, inequality and spatial socioeconomic disparity, which are compounded
by infrastructure deficits in energy, transport, water and sanitation and ICT as well as skills
gap, among others. The Government of South Africa and the Bank have agreed that the Bank
Group’s strategy remains relevant and that the CSP Pillars should be retained as: Pillar 1:
Promoting Industrialization; and Pillar 2: Deepening Regional Integration for the remaining
period of the CSP. The proposed strategy for the remaining period is fully consistent with South
Africa’s NDP-Vision for 2030, and the Bank’s TYS and the High-5s. In this context, the overall
objective of the CSP 2018-2022 remains to support South Africa’s economic transformation
and re-industrialization for inclusive growth, job creation and sustainably reduce poverty and
inequality. In addition, emphasis will be placed on cross-cutting issues including gender,

17
climate change and green growth, youth employment and governance in the remaining CSP
period.
6.2 Expected Results
Pillar I: Promoting Industrialization
CSP Strategic Outcome 1 – Enabling higher industrial/manufacturing value addition
through investments in critical industry-enhancing infrastructure.
62. National energy projects: The ongoing Eskom Transmission Improvement Project is
expected to be completed at the end of the CSP period while Redstone Concentrated Solar
Project will be completed during the next CSP cycle (2023-2027). The Bank is working closely
with other development partners to support the Eskom Distributed Battery Storage Project with
an amount of UA 40 million under the Clean Technology Fund (CTF). The project objective
is to increase efficiency and reliability of electricity supply through dispatchable battery energy
storage systems from clean energy to the grid as well as to reduce greenhouse gas emissions.
The proposed project, which is scheduled for Board approval in 2021, will bring substantial
benefits to Eskom to overcome the utility’s financial and technical challenges.
63. Transport: The ongoing Commuter Transport Project is expected to be completed by
the end of the CSP period. The proposed South Africa Road Network Improvement Programme
is included in the Indicative Operational Programme for 2022. The project consists of two
components: (i) improvement and preservation of national, provincial and local road
infrastructure; and (ii) improvement of road to rail freight. The project estimated cost is
equivalent to UA 240 million with the Bank to support through ADB Loan financing of UA
150 million. The intervention is tentatively scheduled for Board consideration in Q2 2022. To
ascertain readiness, engineering, economic and environmental studies have been conducted for
the various sub-projects identified under the proposed program. Once completed, these projects
will improve level of service (time savings), road condition, as well as increase capacity of the
upgraded sections of the road network. Moreover, it will reduce overall cost of transport on the
corridors (with 40% reduction on vehicle operating costs and 50% savings in travel time).
CSP Strategic Outcome 2 – Supporting industrial clustering to promote SME/SMI
development and job creation
64. Agro-Processing: The output and outcome targets for the 2 Agri-park operations that
were not initially planned in the CSP have not been achieved at mid-term. These will be
achieved during the next CSP cycle (2023-2027). The Bank is currently collaborating with the
Government on the Agri-parks Program and has supported the prioritization of 9 out of the
original 44 agri-parks for development. The Bank is taking a phased approach towards the
development of Agri-Parks in each of the 9 provinces in South Africa. The specific objectives
of the South Africa Agri-Parks Program (SA-APP) are to: (i) provide Technical Assistance that
will enable project preparation, packaging, and phased infrastructure development for two of
the agri-parks; and (ii) promote the establishment of an implementation management structure
for private sector investments in the Agri-Parks. The Bank has supported the Government with
a MIC TAF Grant of UA 0.50 million to provide a comprehensive governance and operational
management structure that will enable the provision of the required infrastructure in the agri-
parks ecosystem. The Grant was approved in September 2021. The SA-APP, when fully
implemented, is expected to: (i) increase the number of private sector investments in SA-APP
to 10 in 2024: and (ii) establish 2 strategic/anchor investors by 2024.

18
 Pillar II: Deepening Regional Integration
CSP Strategic Outcome 3 – Improving cross-border connectivity for increased trade
and industrial productivity
65. Water and Sanitation: The regional Lesotho Highlands Water Project Phase II
(LHWP II) was approved on 06 October 2021 with a loan financing of ZAR1.3 billion (UA63
million). It should be noted that the Board of New Development Bank (NDB) has already
approved a loan amount of ZAR3.2 billion (UA155 million) loan for the project. The total
estimated cost of the project is equivalent to UA 1.57 billion. The LHWP II, when completed
by end of 2027, is expected to increase the annual water transfer capacity from Lesotho to
South Africa by 480 million cubic meters per annum resulting in an additional potential royalty
for Lesotho estimated at UA 27 million per annum. The additional water transfer from LHWP
is critical in ensuring job security for more than 120,000 people in South Africa and generation
of employment for 6,000 people in Lesotho during the construction period.
66. Trade Finance and Financial Services: The planned projects under this sector have not
been achieved at mid-term. The Standard Chartered Bank (SCB) Trade Finance Risk
Participation Agreement (RPA) was approved in September 2021. The results are expected to be
fully achieved during the next CSP cycle, 2023-2027. This unfunded guarantee instrument will
enhance SCB’s confirming abilities to offer trade finance support to African issuing banks
including those in transition states. The expected outcome of the SCB RPA is increased intra-
Africa trade by guaranteeing critical trade assets boarder to boarder, and regional integration and
resilience through facilitating up to USD 500 million trade transactions over its 3-year tenure. To
facilitate trade, the Bank will engage the Government on the identification and development of
initiatives to address bottlenecks at the borders.
6.3 Private Sector Window
67. To meet the envisaged CSP objective and outcomes, the Bank will continue to use a
combination of funding instruments from its public and private sector windows, including a
lending program of investment projects, technical assistance, analytical work and policy
advisory services. Given South Africa’s upper MIC status, special emphasis will be given to
Bank support from its private sector window, both in terms of financing and advisory services.
6.4 Indicative Lending Program and Non-Lending Program
68. The indicative lending program for the remaining CSP period 2021-2022 comprises 4
operations (3 under Pillar 1 and 1 under Pillar II) for an indicative amount of UA 554.0 million.
Of the 4 operations, 2 are sovereign operations to be financed under the ADB public window
accounting for UA 340 million, and 1 is a non-sovereign operation accounting for UA 214.0
million and financed through the ADB private sector window. The remaining 1 operation
accounting for UA 40 million will be financed under CTF resources. From a sectoral viewpoint,
the transport sector will become the largest beneficiary accounting for 65.7% of total indicative
amount, followed by industry (27.1%), and energy (7.2%). The indicative non-lending program
for the remaining CSP period 2021-2022 comprises 2 operations under Pillar 1 for a total
indicative amount of UA 1 million. Both non-lending operations are multisectoral: (i)
Socioeconomic Diagnostics of South Africa Townships; and (ii) Promotion of Private Sector
Development to Improve Access to Nutrition. They were originally planned to be approved in
2019 and 2020, respectively, but have been postponed to 2022 IOP due to lack of resources.
Annex 5 presents a summary of the indicative lending and non-lending operations for the
remaining CSP period (2021-2022). The total value of the potential operations is UA 555.0
million.

19
6.5 Country Dialogue
69. The Bank will continue its close dialogue with the Government, development partners
and other country stakeholders on key areas including macroeconomic management (notably
public debt management), public sector governance (particularly governance of SOEs and
PFM reform at the municipal level as outlined in the Bank’s Policy Reform Dialogue Matrix
(PRDM; Annex 2), as well as gender mainstreaming, climate change, portfolio performance,
PPPs and co-financing.
6.6 Financing the Strategy
70. For the remaining CSP period 2021-2022, the Bank will continue to mobilize resources
to finance the Strategy and its indicative operational programs under both Pillars. South Africa
will only be eligible to access the ADB window. In addition, the country will continue to access
grant resources from MIC-TAF, AGTF and other trust funds to finance non-lending activities
including knowledge work, feasibility studies, as well as capacity building. The choice of
financial products will take into consideration the need to preserve the country’s debt
sustainability especially in terms of loan currency denomination and maturity profile. The Bank
will actively pursue opportunities to leverage other financial sources with private lenders and
other development partners to support implementation of the 2021-2022 indicative program.
6.7 Implementation Arrangements, Monitoring and Evaluation
71. The updated CSP Results Measurement Tool presented in Annex 1 will be the main
instrument for tracking results during the remaining period of the CSP. Project implementation
agencies as well as project stakeholders and beneficiaries will support monitoring and
evaluation of the results achieved which will be facilitated by the revised 2021-2022 CPIP
(Annex 9). The implementation of the CSP will continue to be strongly aligned to the NDP, MTSF and
Economic Reconstruction and Recovery Plan implementation arrangements.
6.8 Risks and Mitigating Measures
72. Risks identified in the CSP remain relevant. These include: (i) subdued global economic
environment, now compounded by slow global economic recovery due to the Covid-19
pandemic, which could impede growth in demand for South Africa’s manufactured goods; (ii)
macroeconomic risks, particularly rising public debt levels; and (iii) Risks related to slow
implementation of reforms especially in the energy sector and other network industries. The
weaknesses in governance particularly in SOEs continues to pose fiduciary risk.

7. CONCLUSIONS AND RECOMMENDATIONS

73. Conclusion: The MTR has found that the challenges affecting South Africa’s economic
development identified in the CSP are still binding. As a result, the Bank and the Government
have agreed that the Bank Group’s strategy for South Africa remains relevant and the Pillars
should be retained for the remaining CSP period. The Bank recognizes the new challenges
posed by the COVID-19 pandemic and the need for more effort to be made to address the
country’s overarching development challenges of high poverty, unemployment and income
inequality, as well as spatial socio-economic disparities in the remaining CSP period.
74. Recommendation: CODE is invited to consider and approve the South Africa CSP
2018-2022 MTR and CPPR report.

20
ANNEX 1: CSP 2018-2022 RESULTS MEASUREMENT TOOL
A.1.1. Strategic Alignment Matrix: This matrix demonstrates alignment of the CSP’s Pillars with both the Government’s National Development Plan ‘Vision 2030’ and the
Bank’s own priorities. It is not intended to assess performance of the Bank’s support.
Pillar I: Promoting Industrialization
South Africa National Development Plan Bank’s Corporate Policies
• National Development Plan 2012-2030: Eliminate income poverty by reducing the proportion of - TYS 2013-2022: Operational priorities: Private sector development; Infrastructure
households with a monthly income below R419 per person (in 2009 prices) from 39 percent to zero; and development – energy, water and transport; governance and accountability; skills and
reduce inequality – The Gini coefficient should fall from 0.69 to 0.6. technology.
• Medium Term Strategic Framework, MTSF, 2019-2024: aims to achieve economic transformation - Areas of special emphasis: gender, climate, agriculture, and food security
and job creation through rapid and inclusive growth. - High 5s: Feed Africa; Improve the quality of life for the people of Africa; Industrialize
• Sustainable Development Goals: Good health and well-being (SDG 3); Gender Equality (SDG 5); Africa.
Affordable and clean energy (SDG 7); Decent Work and Economic Growth (SDG 8); Industry,
Innovation, and Infrastructure (SDG 9)
Country Sector Strategy Bank Sector Strategy
• National Transport Masterplan (2050) aims to achieve an integrated, smart and efficient transport
system supporting a thriving economy that promotes sustainable economic growth and provides safe and
accessible mobility options and preserves the environment. - Bank CSP 2018-2022 for South Africa: Pillar 1- Promoting Industrialization; and Pillar
• Renewable Energy Independent Power Producer Procurement ((RE-IPPP) Programme: A strong 2 – Deepening regional Integration.
demonstration of the country’s commitment to reducing CO2 emissions and promoting private sector - New Deal on Energy for Africa 2016-2025: Aims at universal access to energy by 2025.
participation in the sector. - Bank Group Policy on Water (2021): Aims at increasing water security for Africa, where
• National Industrial Policy Framework: plays a fundamental role in achieving the Accelerated and transformed water resources foster sustainable, green and inclusive socio-economic growth
Shared Growth Initiative of South Africa’s goals of accelerating GDP growth to over 6% by 2010 and to and development.
halving unemployment and poverty by 2014 and the further intensification of industrialization towards a - Bank Transport Policy (1993)
knowledge economy beyond 2014. - Bank Group’s Industrialization Strategy for Africa (2016–2025): enterprise
• National Climate Change Adaptation Strategy (2019): aims to increase resilience and adaptive development along value chains.
capacity achieved in human, economic, environmental, physical, and ecological infrastructure. - Strategy for Agricultural Transformation in Africa (2016-2025): become a net
• Low Carbon Emission Development Strategy (2020-2050): aims to reduce the country GHG emission exporter of agricultural commodities; move to the top of the key agricultural value
in the energy; mining and industrial; AFOLU and waste sectors to curve the national carbon footprint to chains.
212 Mt CO2-eq by 2030 and to an upper limit of 428 Mt CO2-eq by 2050. - Bank Group Gender Strategy 2021-2025: seeks to strengthen gender mainstreaming in
• National Strategic Plan on Gender-Based Violence & Femicide ( 2020): sets out to provide a all the Bank’s operations.
cohesive strategic framework to guide the national response to the hyper endemic GBVF crisis in which - Jobs for Youths in Africa (2016-2025) Interventions: integration and innovation
South Africa finds itself. It seeks to provide a multi-sectoral, coherent strategic policy and programming - Non-Sovereign Operations, 2020: aims at improving investment and business climate
framework to ensure a coordinated national response to the crisis of gender-based violence and femicide and strengthening private sector enterprises.
by the government of South Africa and the country as a whole. - Strategy on Economic Governance in Africa 2021-2025: Ensure the sound management
of public resources at the national and sub-national levels to achieve or maintain
• Just Energy Transition' (JET): The program will involve the decommissioning of old power stations
(equivalent to retiring 11GW by 2030). As part of JET, Eskom will establish / are proposing Special macroeconomic stability and the delivery of the High Fives.
-
Economic Zones (SEZs) to assist the affected communities as part of the transition process.
• Integrated Youth Development Strategy 2021-2024: Aims to enhance the economic participation of
young people through targeted programmes initiated by government, business and civil society, as well
as support for programmes that encourage youth innovation, entrepreneurship development and skills
development, including income-generating and wealth-creating activities.

I
 Country Development Results Bank Interventions and Resources
Indicators Baseline (2018) Targets (2026) Generic areas of interventions or Actual at 30 Sept Target Amount in
instruments 2021 (UA m) Dec. 2022 (UA m)
Energy Investment: 75.6 415.6
Renewable Energy Capacity (MW) 3,134 4,024 - Sovereign Operations 1.0 341.0
New installed capacity to replace coal-fired plant( (MWH) 0 (2021) 800 (2024) - Non-sovereign operations 74.6 74.6
Water and Sanitation Policy Based Operations 241.6 241.6
Access to basic water supply (% population) 93 100 (2030) Knowledge work 1.3 2.3
Access to basic sanitation (% population). 76 100 (2030) Total 318.5 659.5
Transport
Total fatalities per 100,000 population. 24 22
GHG emissions (CO2 reduction). 34 42
Rural Accessibility (Transport accessibility) <50 50
Agriculture and agro-processing
Additional Jobs created (50% women, 60% youth) (million). 0 1
Additional land under production (million ha). 0 1
Reduce rural unemployment (%). 49 40
Industry/Mining
Increase labor force participation rate (%). 54 (2021) 61 (2030)
Increase in Jobs created (#). 0 11 (2030)
Governance
National:19.6%
Functional, Efficient and Integrated Government (% reduction Provincial: 24.4% 75% for each
of qualified audits in national, provincial, local government and Local: 40.8% level.
public entities). Public entities.:
27%
Green Growth and Climate Change
Enhancing Low Carbon Emission Development Pathways
through the LEDs (metric tonnes of CO2 equivalent) 380 614
Gender
Government departments and entities complying with the 30%
procurement directive of which a minimum target of 40% 0 100
women, 30% youth and 7% for persons with disabilities (%).
GBV Management Information Systems across government
are integrated and strengthened to maximize service delivery No Yes
and programming efficiencies (Yes/No).
Reduction in Women’s unemployment (%). 48.7 40
Youth Employment
Increased youth employed (million). 0 (2021) 0.275 (2024)
Skills priority plan developed (Yes/No). No (2021) Yes (2024)

II
 Pillar II: Deepening Regional Integration
South Africa National Development Plan Bank’s Corporate Policies
• National Development Plan 2012-2030: Eliminate income poverty by reducing the proportion of - TYS 2013-2022: Operational priorities: Private sector development; Infrastructure
households with a monthly income below R419 per person (in 2009 prices) from 39 percent to zero; and development – energy, water and transport; governance and accountability; skills and
reduce inequality – The Gini coefficient should fall from 0.69 to 0.6. technology.
• Medium Term Strategic Framework, MTSF, 2019-2024: Aims to achieve economic transformation - Areas of special emphasis: gender, climate, agriculture, and food security
and job creation through rapid and inclusive growth. - High 5s: Feed Africa; Improve the quality of life for the people of Africa; Industrialize
• Sustainable Development Goals: Good health and well-being (SDG 3); Gender Equality (SDG 5); Africa.
Affordable and clean energy (SDG 7); Decent Work and Economic Growth (SDG 8); Industry,
Innovation, and Infrastructure (SDG 9)
Country Sector Strategy Bank Sector Strategy
• National Transport Masterplan (2050) aims to achieve an integrated, smart and efficient transport - Bank CSP 2018-2022 for South Africa.
system supporting a thriving economy that promotes sustainable economic growth and provides safe and - Bank Group Regional Integration Strategy for Southern Africa:
accessible mobility options and preserves the environment. - New Deal on Energy for Africa 2016-2025: Aims at universal access to energy by 2025.
• National Water and Sanitation Master Plan: sets out prioritized actions for the period to 2030 that will - Bank Group Policy on Water (2021): Aims at increasing water security for Africa, where
create a water and sanitation sector that can meet national objectives as set out in the National transformed water resources foster sustainable, green and inclusive socio-economic growth
Development Plan (NDP) and the internationally agreed Sustainable Development Goals (SDGs). and development.
• National Climate Change Adaptation Strategy (2019): aims to increase resilience and adaptive - Bank Transport Policy (1993):
capacity achieved in human, economic, environmental, physical, and ecological infrastructure. - Bank Group Gender Strategy 2021-2025: seeks to strengthen gender mainstreaming in
• Women Empowerment and Gender Equality Strategy for the Energy Sector (2021 – 2025): seeks all the Bank’s operations.
to increase women’s empowerment and achievement of gender equality in the energy sector through - Jobs for Youths in Africa (2016-2025) Interventions: integration and innovation
improved policy, legislation, leadership, support, and action at the macro and micro levels of the sector. - Non-Sovereign Operations, 2020: aims at improving investment and business climate
• National Strategic Plan on Gender-Based Violence & Femicide ( 2020): sets out to provide a and strengthening private sector enterprises.
cohesive strategic framework to guide the national response to the hyper endemic GBVF crisis in which - Financial Sector Development Policy & Strategy (2014-2020, extended to 2021): seeks
South Africa finds itself. It seeks to provide a multi-sectoral, coherent strategic policy and programming to broaden and deepen Africa’s financial systems.
framework to ensure a coordinated national response to the crisis of gender-based violence and femicide - Strategy on Economic Governance in Africa 2021-2025: Ensure the sound management
by the government of South Africa and the country as a whole. of public resources at the national and sub-national levels to achieve or maintain
• Low carbon emission development strategy(LEDs) targeting Green House Gas (GHG) emission macroeconomic stability and the delivery of the High Fives.
reduction in the energy; mining and industrial; AFOLU and waste sectors to curve the national carbon
footprint to 212 Mt CO2-eq by 2030 and an upper limit of 428 Mt CO2-eq by 2050.

Country Development Results Bank interventions and resources

Indicators Baseline (2018) Targets (2026) Generic areas of interventions or Actual at 30 Sept Target Amount in
instruments 2021 (UA m) Dec. 2022 (UA m)
Water Investment: 397.9 611.9
Access to basic water supply (% population) 93 100 (2030) - Sovereign Operations 219.8 219.8
Access to basic sanitation (% population). 76 100 (2030) - Non-Sovereign operations 178.1 392.1
Trade and Finance Policy Based Operations - -
Increased Bank intermediated trade financing in Africa (%). 0 45 Knowledge work - -
Increased Intra-African Trade to overall African trade (%). 0 25 Total 397.9 611.9

III
A.1.2. Performance Matrix
The performance matrix measures a wide range of results that should be regularly tracked during CSP period. This does not only include operational results that will be
delivered by the projects approved in the previous period, but also other essential elements of the CSP including cross-cutting issues, financial leveraging, harmonization,
portfolio performance.

Performance Sample Monitoring Indicators Baseline Actual Target Data Source

Area (2018) (June (Dec 2022)
2021)
Operational results (from projects)
PILLAR I: Promoting Industrialization
- Outcomes Energy: Bank IPR and PCR
▪ Increased household access to electricity under Medupi power project (%). 84 (2016) 85 91.2 reports / Eskom
▪ Permanent jobs added during the operation phase of Xina Proj (30% women) (#). 0 80 80 Integrated Reports /
▪ Green jobs created annually at Xina Project (30% women) (#). 0 92 92 Dept of Minerals &
▪ Annual clean energy generated under Redstone Conc Solar Project (GWh). 80 620 650 (2024) Energy reports /
▪ Reduced GHG emissions under Redstone Concentrated Solar Power (%). 0 80 15 (2024) Redstone Project
▪ Jobs created during construction Redstone CSP (30% women) (#). 0 0 2,178 (2024) annual reports / Xina
▪ Jobs created during operation Phase Redstone CSP (30% women) (#) 0 0 1,460 (2024) annual reports
Water and Sanitation
▪ Beneficiaries served by multiple water use services (#). (2017=0) 20,000 (65% 20,000 (65% Bank IPR/PCR
females) females) reports /SDG country
▪ School sanitation facilities properly maintained by franchisees (#) (2017=0) 302 300 assessment reports
Transport
▪ Net financial flows paid to African governments (USD m). 0 10.75 16.62 Bank IPR/PCR
reports / SANRAL
annual reports

Industry/Mining
▪ Public and private sector professionals trained on SNMRD (#). 0 26 26 Bank IPR/PCR
▪ Household income through jobs created under Kalagadi Beneficiation (ZAR bn). 0 0 3.3 reports /
Agro-Processing
▪ Jobs created by agriculture sector project (50% women) (#). 0 7603 9,169
▪ Permanent jobs created by sugarcane sub-project (50% women) (#). 0 1128 2,000 Dept. of Agriculture,
▪ Permanent jobs created by timber sub-project (50% women) (#). 0 1168 2,850 Land Reforms and
▪ Private sector investments in Bokamoso Ba Rona (BBR) region (#). 0 0 40 Rural Development
▪ Agri-parks established in BBR region (#). 0 (2020) 0 1 (2023) Reports / Bank IPR
▪ Strategic/anchor investor in place in BBR by 2023 (#). 0 0 1 (2023) and PCR reports.
▪ At least 2 new agri-parks established under SAAPP(#) 0 0 (2021) >=2 (2024)
▪ Strategic/anchor investor in place by 2024 under SAAPP (#) 0 0 2 (2024)
Potential jobs created (50% women, 60% youth) (m). 0 0 1 (2024)

IV
Performance Sample Monitoring Indicators Baseline Actual Target Data Source
Area (2018) (June (Dec 2022)
2021)
- Outputs Energy
• Installed generated capacity commissioned under Medupi Power project (MW) . 0 2,382 3,382 Bank IPR and PCR
▪ Transmission lines built under Eskom Transmission project (km). 0 276 552 reports / Eskom
▪ Substations constructed or refurbished under Eskom transmission (#). 0 9 60 Integrated Reports /
▪ Solar power generated under Xina project (MW). 0 100 100 Dept of Minerals &
▪ Cum GHG emissions reduced under Xina (tons CO2 equivalent). 0 814 814 Energy reports /
▪ Annual GHG Emissions due to diesel fuel) under Xina (tons CO2 equivalent). 0 315,000 315,000 Redstone Conc.
▪ Jobs during the construction phase of Xina Solar Project (#). 0 1,300 1,300 Solar Power Project
▪ Installed capacity of Ingula pumped-storage hydroelectric (MW). 0 1,332 1,322 annual reports/ Xina
▪ Kusile Power plant constructed (MW). 0 2,400 4,800 Solar Power project
▪ Installed generation capacity under Redstone CSP (GWh /year). 0 0 466 annual reports.
Guaranteed generating capacity under Redstone CSP (MW). 0 0 (2020) 100
Water and Sanitation
• Quantity of water used per household per week (liters/week). 600 1,200 1,200 Bank IPR/PCR
• Learners (50% girls) received health and hygiene education (#). 0 100,000 100,000 Bank IPR/PCR
• SMMEs social franchisees sustainably operating school sanitation maintenance in
East London (#). 0 5 5 Bank IPR/PCR
Transport
• "Full-time equiv." African employees at the level of SA Commuter Taxi (#) 0 948 1,250
▪ "Full-time equiv." female African employees at the level of SA Commuter (#). 0 374 464 Bank IPR/PCR
Industry/Mining
▪ SA students completed three short courses on specific SNMRD topics (#). 0 20 20 Bank IPR/PCR
▪ SNMRD professionals completed field and practical training (#). 0 30 30 Bank IPR/PCR
▪ Manganese ore produced under Kalagadi Industrial Beneficiation (mt per annum). 0 0.12 3 Bank IPR/PCR

V
Performance Sample Monitoring Indicators Baseline Actual Target Data Source
Area (2018) (June (Dec 2022)
2021)
Agro-Processing
▪ Emerging farmers benefitting from ongoing loans to commercial farmers and
Government Jobs Fund (#). 0 1,106 2,460 Bank IPR/PCR
▪ Land developed for sugarcane growing (ha). 0 4,594 10,600 Bank IPR/PCR
▪ Land developed for timber growing (ha). 0 34,000 79,414 Bank IPR/PCR
▪ Transaction Adviser procured (#). 0 (2020) 0 1 (2023) Bank IPR/PCR
▪ Gender analysis undertaken and action plan developed (No/Yes). No (2020) No Yes (2023) Bank IPR/PCR
▪ Skills Gap Assessment and requirements for each of the Prioritized Agri Parks
concluded in Bokamoso Ba Rona region (Yes/No). No (2020) No Yes (2023) Bank IPR/PCR
▪ Transaction Adviser procured under SAAPP (#). - 0 (2021) 1 (2024) Bank IPR/PCR
▪ Detailed project feasibility studies validation and report updated (#). - 0 (2021) 2 (2024) Bank IPR/PCR
▪ Comprehensive Contract Management Plan developed (#). - 0 (2021) 2 (2024) Bank IPR/PCR
▪ Training of Trainers Program for small farmers & entrepreneurs developed (#). - 0 (2021) 2 (2024) Bank IPR/PCR

PILLAR II: Deepening Regional Integration.

- Outcomes Energy:
▪ Power exports to Southern Africa Power Pool (SAPP) under Medupi Power 12,461 (2017) 15,189 86,375 Bank IPR and PCR
(GWh). reports / Eskom
Integrated Reports
Transport IPR/PCR / Transnet
▪ Increased general freight capacity (mt per year). 80 (2014) 176 176 (2022) annual reports
Water and Sanitation
• Water transfer capacity from Lesotho to S.A. (million m 3 / annum). 780 (2018) 780 1,260 (2030) Project Progress
• Revenue generated from royalty for Lesotho (ZAR m). - 918 (2019) 1,600 (2030) Reports / Bank IPR
• Reduce or eliminate the risk of water restrictions in Vaal River System for and PCR / Annual
irrigation, municipal and industrial supply Yes/No). No No Yes (2030) LHDA reports
Trade Finance and Financial Services
• Robust trade financing operations in Africa (Yes/No) No Yes Yes Bank IPR and PCR
• Bank intermediated trade financing in Africa (%). - 40 (2020) 45 (2024) reports / SCB reports
• Intra-African Trade to overall African trade (%). - 20 (2020) 25 (2024) / WTO reports

- Outputs Energy
• Installed generated capacity commissioned under Medupi Power project (MW) as 0 2,382 3,382 Bank IPR and PCR
input to Southern African Power Pool (SAPP). reports / Eskom
▪ Integrated

VI
 Performance Sample Monitoring Indicators Baseline Actual Target Data Source
Area (2018) (June (Dec 2022)
2021)
Transport Bank IPR/PCR /
• Additional locomotives acquired (#). 0 101 100 Transnet Reports
Water and Sanitation
• Access roads rehabilitated, upgraded & constructed (km.). - 0 (2020) 169 (2026)
• Length of power transmission 133kv/33kv built (km.). - 0 (2020) 48 (2026) Quarterly Project
• Optical overhead ground wire installed (km.). - 0 (2020) 118 (2026) Progress Reports /
• New storage capacity created by the Polihali Dam (million m3). - 0 (2020) 2,400 (2027) Bank IPR and PCR /
• New transfer tunnel built (#) - 0 (2020) 38 (2024) Annual LHDA
• New mini-hydropower at Polihali Dam installed capacity (MW). - 0 (2020) 4 (2027) reports
• Two major bridges over Khubelu and Senqu rivers (#) - 0 2
Trade Finance and Financial Services
• Increase in Trade Financing Issuing Banks in Africa supported by Nedbank (#). 46 (2017) 56 56 Bank IPR/PCR /
• RMCs impacted (#). - 14 17 (2024) Standard Chartered
• Volume of trade transactions (USD m). - 100 500 (2024) Bank Ltd. reports
• IBs with increased trade (LC) confirmations (#). - 56 66 (2024)
CROSS-CUTTING ISSUES: climate change, gender, youth skills development, and job creation
Climate change & ▪ Enhancing Low Carbon Emission Development Pathways through the LEDs (mt IPR/PCR
green growth CO2 equivalent). 398 583 (2020) 614 (2025) AfDB Climate
▪ Enhancing Climate Change Adaptative Capacity (%) 0 50 80 (2025) Finance Reports
Gender • Government departments and entities complying with the 30% procurement TBD TBD 100
directive of which a minimum target of 40% women, 30% youth and 7% for Bank IPR/PCR
persons with disabilities (%). reports and annual
• Gender-Based Violence Management Information Systems across government No No Yes gender reports.
are integrated and strengthened to maximize service delivery and programming
efficiencies (Yes/No).
• Reduction in Women’s unemployment (%). 48.7 - 40

Youth skills ▪ Number of jobs created for Youth 5,700 TBD 10, 349 IPR/PCR and
development ▪ Number of TVET institutions supported to improve quality of skills Dev 4 - - National bureau of
▪ Youth accessing Business Dev. Services and finance (incl SME dev) (#). 0 200 statistics.
▪ Youth unemployment rate reduced (%) 52.85% 55.97% 40%
OTHER AREAS
Financial Amount of co-financing (UA m) / Parallel financing
leveraging ▪ World Bank - - - RDGS.1 IPR/PCR
▪ AFD - - -
▪ EU - - -
▪ Other DPs - - -

VII
 Performance Sample Monitoring Indicators Baseline Actual Target Data Source
Area (2018) (June (Dec 2022)
2021)
▪ AGTF 17.0 17.0 17.0
▪ CTF 0 40.0 40.0
▪ PPP transaction - - -
Portfolio ▪ Overall Portfolio performance rating (1-4) 2.8 3.0 3.5
performance and ▪ Timely PCRs posting (average % of projects) 50 100 100 AfDB Portfolio
monitoring ▪ Projects at Risk (% of portfolio) 12 0 0 Flashlight Reports
▪ Time from approval to signature (months) 4 2 3
▪ Time of approval to first disbursement (months) 20 12 6
Knowledge ▪ ESWs prepared (# of Gender/Transport/Economic Growth model) 0 2 3 Diagnostic/analytical
work/Policy advice study reports
Development ▪ Use of country procurement systems (% of AfDB project) 2.5 5.0 10.0 DP meeting minutes;
coordination/ ▪ Joint donor missions per year (#) 0 1 2 Aid coordination
harmonisation reports; IPR/PCR

VIII
ANNEX 2. SOUTH AFRICA POLICY REFORM DIALOGUE MATRIX
SOUTH AFRICA POLICY REFORM DIALOGUE MATRIX
Reform/Activity GCI-VII High-5(s) Technical Expected Key expected results and timelines Support ESW/TA Status/progress Comments
supported high-level supported Bank timeline Instrument required ? & Key Milestones
commitmen department(s) for (PBO/RBF/I (title/purpose, achieved
t in charge completio nvestment cost
n of Project/ISP/ secured/not
reform(s) ESW/TA/etc secured,
.) timelines)

Economic and Governance

Reform of State Objective 3: Light up and ECGF/ENERG 2022 (1)Adoption of Policy Recommendations ESW/Techni ESW title : The study has been There continues to
Owned Increase Power Africa Y for Reform of SOEs Legal (12/2020). cal Linking State- completed. The be need for
Enterprises policy Assistance Owned National Planning continued support
dialogue Integrate (2) Functional separation of Generation, enterprises to Commission issued a for SOE reforms. A
effectiveness Africa Transmission and Distribution of Eskom Economic Position Paper for TA or instrument
(12/ 2020). transformation Public Comment. such as PBO/RBF
Policy and Inclusive Following public may help monitor
reforms | (3) Legal Separation of Eskom 12/ 2022 Growth : Case consultations, the report reforms.
Develop a study : Eskom, would be presented by Coordination or
systematic (4) Participation of independent Transnet and the NPC to Parliament collaboration with
approach to electricity producers in terms of Gwh Prasa. and other stakeholders other DPs is
identifying delivered increases from 5% in 2020 to ESW Timeline with a view to important
and 30% in 2022 and 50% in 2025. (5) Jan 2019/ April contributing to the
supporting Increase Eskom Electricity generating 2020 ESW national dialogue on the
policy capacity form 10'750 MW (2019) to amount: reform options for SOEs
reforms 18'000 MW (2022). 200,000 UA.
(Action 11)
PFM Reform at Objective 3: Improve ECGF/ENERG 2022 1.Greater lending to municipalities under MIC grant TA to undertake The project closed end Elsewhere dialogue
the Municipal Increase Quality of Y, the new Financing Guidelines for provided to feasibility 2019. PCR being has commenced
level policy Life for the TRANSPORT Municipalities (at least 2 by 2022) 2. support PFM studies on 2 undertaken to inform with at least 2
dialogue people of Enhanced PFM capacity for efficient at Municipal municipalities further intervention municipalities on
effectiveness Africa and equitable delivery of infrastructure Level, suitability to use the new Municipal
and social services at municipal 683,527 UA, Municipal Financing
government - Expenditure outturn of Timeline Financing Guidelines
budget Between 95% and 105% of the 2016-2019. Guidelines
approved & budgeted expenditure 2021); Possibility
Revenue Outturn of budget ( being
actual revenue between 97% and 106% explored to
of budgeted revenue (2021) use new
adopted
Municipal
Finance
Lending
instrument

IX
 Energy
Reform South Objective 3: Light up and PEVP/RDGS/E 2025 (1) Unbundling of Eskom – (a) Policy Based No Ongoing Deadline are highly
Africa’s Power Increase Power Africa CGF Functional separation into Generation, Operation dependent on
sector policy Transmission and Distribution of /Result actions to be taken
dialogue energy's entities by Sept 2020 (ongoing) Based by 3rd parties,
effectiveness and; Financing outside of the
(b) Legal separation by Dec 2021. Investment control of Eskom.
Governance Project/ For instance, the
and policy Technical new Transmission
reforms Assistance entity would require
a license from
NERSA.
Additionally,
amendments would
need to be made to
the Eskom
Conversion Act of
2001 and the
Electricity
Regulation Act of
2006.
(2) Reduce Eskom's long-term debt from No Ongoing. Debt reduced
ZAR440 billion in 03/2019 at least by to ZAR400 billion as of
10% each year from 2021. 03/2021
(3) Support implementation of Just No Embedded generation USD58 million
Energy Transition – (a) Increase South legislation liberalized, - (Clean Technology
Africa’s renewable electricity generating no requirement for Fund) approved by
capacity by about 4,300MW by 2025 generation license for board in Q3 2021 to
(5,027MW: 2020). up to 100MW. support
(b) Support the decommissioning of implementation of
about 6,000MW of coal fired generation the Battery Energy
by 2025. Storage System

(3) Support the development by the No NERSA document out

National Energy Regulatory Authority of for public consultation
South Africa (NERSA) of a new price
determination methodology

X
 Land
Land Objective 3: Feed Africa AHAI/RDGS 2025 (1) One Land Stop CENTER - National Technical 1) ESW title : TA title: Project on
Information Increase land information system created by law assistance Study on South Land Governance
system reform policy Improve by 2023 project Africa Land TA amount: 30 million
dialogue Quality of (2) Law approved by the parliament on governance UC
effectiveness Life for the the harmonization of property valuation 2) ESW amount TA timeline: May/2021
People of & taxation system by 2024 : 50.000 UA - May/2023.
Africa (Looking for
Trust Fund)
ESW timing:
Sept
2020/March
2021

XI
ANNEX 3. IMPLEMENTATION STATUS OF THE INDICATIVE OPERATIONAL PROGRAM AND NON-LENDING PROGRAM
2018 - JUNE 2021
Grants Planned Planned Actual Actual High 5 Priority
ADB ADB Implementation
# Name of Project & Total in CSP Approval Approval Amount Sector on Approved
Private Public Status
Others IOP? Year Year Approved Operations
Indicative Operation Programme - Lending
Pillar 1: Promoting Industrialization
1 Kathu Industrial Park 8,6 8,6 Yes 2019 Industry Not Done
2 Gas to Ethanol 22,8 22,8 Yes 2019 Industry Not Done
3 Dehydrated Vegetables 18,8 18,8 Yes 2019 Industry Not Done
Approved &
4 LoC to SMEs (through NHFC) 40,0 40,0 Yes 2019 2019 Finance cancelled
Improve Quality
5 Support to S.A. Commuter Transport 74,6 74,6 Yes 2018 2018 74,6 Transport Ongoing
of Life
Mokolo Crocodile Water Supply &
6 150,0 150 No 2019 Water Not Done
Sanitation Phase II
COVID-19 Response Support 100% disbursed. PCR Improve Quality
7 241,6 241,6 No 2020 241,6 Multisector in Q4 2021
Programme (PBO) of Life
Development of Bokamoso Ba Rona Feed South
8 0,5 0,5 No 2020 0,5 Agriculture Ongoing
Agri-industrial Park Africa
Development of South Africa Agri- Approved Sept. Feed South
9. 0,5 0,5 No 2021 0,5 Agriculture
Parks Program 2021 Africa
4 Not Approved; 1 Cancelled; 4
Sub-total (9 operations) 164,8 391,6 1,0 557,4 317,2
Approved and Ongoing
Pillar 2: Deepening Regional Integration
Light Up and
128,1 128,1 Ongoing
1 Redstone Concentrated Solar Power 128,1 No 2018 Power Power Africa
Light Up and
156,8 156,8
2 Eskom Transmission Improvement 139,2 17,6 Yes 2018 2018 Power Ongoing Power Africa
3 Medupi FGD Retrofit Project 284,0 284,0 Yes 2019 Power In 2024 IIOP
4 Dev. of the PWV15 freeway 150,0 150,0 Yes 2019 Transport Not Done
5 Bostwana-S.A Interconnector 50,0 50,0 Yes 2020 Power Not Done
6 Standard Chartered Bank TF RPA 50,0 50,0 No 2021 50,0 Finance Approved Sep 2021 Integrate Africa
7 Lesotho Highlands Water Project II 63,0 63,0 No 2021 63,0 Water Approved Oct 2021 Improve Quality

XII
 3 Not Approved; 4 Approved and
Sub-total (9 operations) 662,1 202,2 17,6 881,9 397,9
Ongoing\
7 Not Approved; 1
Cancelled; 8
Total - Lending IOP (16 operations) 826,9 593,8 18,6 1439,3 715.9
Approved and
Ongoing

Indicative Non-lending Programme

Pillar 1: Promoting Industrialization
National Housing Finance
1,0 1,0 Yes 2018 Finance Not Done
1 Corporation
Effective Delivery of SOE Improve Quality
1,2 1,2 Yes 2018 2019 1,2 Governance Completed 2020
2 developmental Mandate of Life
3 Growth Diagnostic Study 1,2 1,2 Yes 2019 Multisector Not Done
Study on ICT Services Affordability
0,2 0,2 Yes 2019 ICT Not Done
4 Benchmark
25-yr Review of Townships/Informal Improve Quality
0,1
5 Settlements in S.A. 0,1 0,1 No 2019 Multisector Completed 2020 of Life
Promotion of PSD to Improve
1,2 1,2 Yes 2020 Social Not Done
6 Access to Nutrition
4 Not Approved; 2
Total Non Lending IOP (6 operations) 0,0 0,0 4,9 4,9 1,3 Approved and
Completed

11 Not Approved; 1
Cancelled; 10
Grand Total (Uam) - Lending and Non-
826,9 593,8 23,5 1444,2 716.4 Approved (8
Lending IOP
ongoing and 2
Completed)

XIII
 ANNEX 4. ACTUAL LENDING AND NON-LENDING APPROVALS DURING THE CSP PERIOD 2018 – JUNE 2021
Actual Source Set out in Planned
Operations Amount of Funds Initial Year of Sector High Five Priority Status
(UA m) CSP IOP? approval Action
LENDING PROGRAM
Pillar 1 – Promoting Industrialization
Support to S.A Commuter Transport 74.6 ADB- Yes 2018 Transport Improve Quality of Life Ongoing (42.8% disbursed)
Private
COVID-19 Response Support Programme 241.6 ADB No 2020 Multi-sector Improve Quality of Life Ongoing (100% disbursed)
Public
Dev of Bokamoso Ba Rona Agric-Industrial Park 0.5 MIC No 2020 Agriculture Feed Africa Ongoing (first disbursement delays)
Development of South Africa Agri-Park Program 0.5 MIC No 2021 Agriculture Feed Africa Approved in Sept. 2021.
Sub-total lending approvals 2018- June 2021 316.7 3 approved as of 30 June 2021 and
ongoing
Pillar 2 – Deepening Regional Integration
139.2 ADB
Eskom Transmission Improvement Project Public Yes 2018 Power Light Up & Power Ongoing (8.9% disbursed)
17.6 AGTF Africa Ongoing (2.2% disbursed)
Redstone Concentrated Solar Power 128.1 ADB No 2018 Power Light Up & Power Ongoing (first disbursement delays)
Private Africa
Standard Chartered Bank TF RPA 50.0 ADB No 2021 Finance Integrate Africa Approved in Sept. 2021.
Private
Lesotho Highland s Water Project II 63.0 ADB No 2021 Water Improve Quality of Life Approved in October 2021.
Public
Sub-total lending approvals 2018-June 2021 284.9 2 approved as of June 2021 and
ongoing
Total for Lending Program as of June 2021 601.6 5 approved as of June 2021 (MTR
point) and ongoing
NON-LENDING PROGRAM
Pillar 1 – Promoting Industrialization
South Africa SOEs Contribution to Economic 1.2 TF Yes 2019 Governance Improve Quality of Life Completed in 2020.
Transformation and Inclusive Growth.
Review of Townships and Informal Settlements in 0.1 ESW Yes 2019 Multi-sector Improve Quality of Life Completed in 2020
South Africa
Sub-total non-lending approvals 2018 - June 1.3 2 approved and completed
2021.
GRAND TOTAL as of 30 June 2021 602.9 5 lending approved and ongoing and 2
studies completed.

NOTE: Projects approved after CSP MTR in June 2021 are highlighted in yellow and they are not included in the MTR analysis.

XIV
ANNEX 5. INDICATIVE OPERATIONAL PROGRAM FOR THE REMAINING CSP 2021-2022 PERIOD

Source
CSP High 5 Priority Amount
No Project Name Type Sector of Readiness Status
Pillars* Action (UA m)
Finance
Eskom Distribution Battery Energy Light Up & Power Approved 27
1 1 SO Energy South Africa
40,0 CTF
Storage October 2021.
Subtotal 2021 IOP 40.0
Improve the Quality of
ADB
2 S.A Road Network Improvement Program 1 SO Transport Life of the People of 150,0 Public Pre-PCN
South Africa
Industrialize South ADB
3 Industrialization Project 1 SO Industry Africa
150,0 Public
Pre-PCN
ADB
4 Transnet Corporate Loan III 2 NSO Transport Integrate Africa 214,0 Private
Pre-PCN

Subtotal 2022 IOP 514.0

Total Lending 554
Improve the Quality of
Socioeconomic Diagnostics of South Africa
1 Townships
1 ESW M/sector Life of the People of 0,3 Admin Pre-PCN
South Africa
Promotion of Private Sector Development
2 1 ESW M/sector Feed Africa 0,7 TF Pre-PCN
to Improve Access for Nutrition
Total Non-Lending 1.0
Grand Total 555.0
4 Lending Operations (UA 554 m): 3 SOs (61% of total amount) and 1 NSO (39%); and 2 Non-Lending Operations (UA 1.0m). Total UA = 555 million
CSP Pillars: Pillar 1 - Promoting Industrialization (61% of total amount)); and Pillar 2 - Deepening Regional Integration (39%).
Financing Sources: ADB Public (54%); ADB Private (38.6%); CTF (7.2%); and Others (Trust Funds and Admin Budget) (0.2%).
Sector Distribution: Transport (65.6%); Industry (27.0%); Energy (7.2%); Multisector (0.2%).
High 5s: Integrate Africa (38.6%); Improve Quality of Life (27.1%); Industrialize Africa. (27.0%); Light Up & Power Africa. (7.2%); Feed Africa (0.1%)

XV
ANNEX 6: BANK GROUP ONGOING OPERATIONS IN SOUTH AFRICA AS OF 30 JUNE 2021

Flag Alert
Instrument
Disburse

Financing
Amount
Project
ment Approval Signature Closing Age
Project Name Sector Approved Remarks

s
Ratio Date Date Date (yrs.)
(UA)
(%)
1 1 STD. BANK OF SOUTH AFRICA PROJECT (LOC) Finance 153 967 824 100 2008/09/11 2008/11/10 2011/12/31 12,8
2 2 NEDBANK GROUP LINE OF CREDIT Finance 69 985 376 100 2008/09/11 2008/11/27 2018/06/06 12,8
3 3 INDUSTRIAL DEV. CORPORATION (IDC) LOC II Finance 139 970 752 100 2010/05/19 2011/05/26 2022/12/31 11,1
4 4 NEDBANK LTD – RISK PARTICIPATION AGREEMENT Finance 20 995 612 0 2017/11/08 2020/02/20 2023/12/04 3,6
5 5 NON-SOVEREIGN GUARANTEE. LOC TO IDC Finance 8 789 312 100 2004/11/05 2004/11/26 2010/12/31 16,7
6 6 FOURTH LINE OF CREDIT TO DBSA Finance 69 985 376 100 2006/07/21 2007/06/21 2008/12/31 14,9
7 7 FIFTH LINE OF CREDIT TO DBSA Finance 209 956 112 100 2011/02/03 2011/10/17 2013/10/17 10,4
8 Finance 69 985 376 100 2017/09/27 2018/11/07 2027/12/31 3,8
8 INDUSTRIAL DEV. CORPORATION LOC III
9 Finance 63 922 272 100 2017/09/27 2018/11/07 2027/12/31 3,8
9 10 KALAGADI INDUSRTRIAL BENEFICIATION Ind/Mining 103 651 136 100 2011/05/18 2014/01/07 2016/01/07 10,1 WATCH//Recovery Loss
10 11 ESKOM HOLDINGS LIMITED Power 349 926 880 100 2007/06/28 2008/11/10 2010/11/10 14,0
12 Power 41 334 376 100 2014/06/23 2015/02/13 2018/02/28 7,0
11 XINA SOLAR ONE PROJECT
13 Power 29 043 930 100 2014/06/23 2015/02/13 2015/06/30 7,0
12 14 REDSTONE CONCENTRATED SOLAR POWER Power 130 602 208 0 2018/11/29 2019/07/31 2021/11/29 2,6 First Disbursement Delay
13 15 TRANSNET LIMITED Transport 132 909 152 100 2010/06/23 2011/10/05 2013/10/05 11,0
14 16 Transport 68 839 368 42,9 2018/10/18 2020/03/16 2023/03/16 2,7
SA COMMUTER TRANSPORT
15 17 Transport 6 998 538 0 2018/10/18 2020/03/16 2023/03/16 2,7
16 18 TRANSNET EXPANSION CORPORATE LOAN II Transport 172 098 416 100 2014/12/18 2016/02/10 2020/03/18 6,5
SUB-TOTAL NON-SOVEREIGN OPERATIONS 1 842 962 016 89,3% 8,5
17 19 LAND & AGRICULTURAL DEV. BANK OF S.A. Finance 49 170 976 100 2012/06/20 2012/09/10 2015/11/10 9,0
18 20 ESKOM II POWER PROJECT Power 260 230 224 100 2015/12/15 2016/07/06 2020/04/30 5,5
21 Power 776 870 980 92,2 2009/11/25 2009/12/11 2021/06/30 11,6 Potentially Problematic
19 MEDUPI POWER PROJECT
22 Power 522 687 488 100 2009/11/25 2009/12/11 2021/06/30 11,6 Project - Aged Operation
20 23 ESKOM II - A LOAN Power 6 998 538 100 2015/12/15 2016/07/06 2020/07/31 5,5
24 Power 141 907 440 8,9 2018/09/25 2018/11/27 2023/12/31 2,8
21 ESKOM TRANSMISSION IMPROVEMENT
25 Power 17 496 344 2,2 2018/09/25 2018/11/27 2023/12/31 2,8
22 26 S.A. COVID 19 RESPONSE SUPPORT PROG. Multi-sector 246 256 320 100 2020/07/22 2020/09/09 2021/06/30 0,9
23 27 COMM-DRIVEN MULTIPLE-USE WATER SERVICE Water 1 119 363 100,0 2014/07/22 2014/11/05 2021/06/30 6,9
24 28 DEV. OF BOKAMOSO BA RONA AGRI-IND. PARK Agriculture 500 000 0,0 2020/09/11 2021/01/19 2022/09/03 0,8 First Disbursement Delay
SUB-TOTAL SOVEREIGN OPERATIONS 2 023 237 672 89,7% 5,7
GRAND TOTAL 3 866 199 688 89,5% 7,5
Flashlight: 11% 7% 82%
Flagged Close Watch Satisfactory

XVI
 ANNEX 7: KEY PORTFOLIO PERFORMANCE INDICATORS AS OF 30 JUNE 2021

Performance Indicator CSP June 2019 June 2020 CSP MTR

June 2018 June 2021
Active and Recently Approved Projects (#) 22 25 21 24
Active & Recently Approved Financing Instruments (#) 25 30 26 28
Average Loan/Grant Size (UA million) 131 123 132 98
Cumulative Disbursement Ratio (%) 85 82 88 90
Average Age of Portfolio (years) 5.3 5.5 7.0 7.5
Sovereign Operations Financing Instruments (#) 10 11 8 10
Avg. Sovereign Operations Loan Size (UA million) 165 163 202 202
SO Cumulative Disbursement Ratio (%) 90 85 88 90
Non-Sovereign Financing Instruments (#) 15 19 18 18
Avg. Non-Sovereign Operation Size (UA million) 109 100 100 102
NSO Cumulative Disbursement Ratio (%) 79 80 89 89.3
Ageing Sovereign Operations (#) 2 2 2 1
Flagged (Red) (%) 18 17 12 11
Close Watch (Yellow) (%) 8 16 7 7
Satisfactory (Green) (%) 64 67 81 82
Signature Delays (# projects) - - 1 1
First Disbursement Delays (# projects) - 2 - 2
Projects-at-Risk, PAR (%) 12 10 8 4
Commitments-at-Risk, CAR (%) 40 35 33 34
Time Lapse: Approval to Signature (months) 4 2 2 3
Time Lapse: Approval to First Disbursement (months). 20 20 3 12
Overall Portfolio Rating (1- Highly Unsatisfactory and 4- 2.8 3.1 3.1 3.0
Highly Satisfactory).

XVII
 ANNEX 8: OUTCOME OF CPPR CONSULTATIONS

To enrich the Bank’s future engagement with South Africa and to take the CSP MTR processing forward, the
Bank mission and the government agreed on the following main takeaways from the discussions.
• Priority Areas for the remaining period of the CSP (2021 – 2022): The two sides agreed to maintain the
current two CSP pillars: Pillar 1: Promoting Industrialization; and Pillar 2: Deepening Regional
Integration. All Bank support up to the end of the Strategy in December 2022 will be aligned and supportive
of these two pillars.

• Reinstatement of Quarterly Portfolio Review Meetings: One action that was not implemented under the
2019 CPIP involves the challenge of not organizing quarterly portfolio review meetings during the 2020
period to date due to COVID-19 restrictions. All parties were supportive of the proposal that portfolio
review meetings should be reinstated (virtually) from Q4 2021 onwards.
• Portfolio Performance: The meeting agreed that there is a need to address all the weaknesses that prevent
projects from becoming effective on time and being expeditiously implemented and adequately comply with
all applicable Bank procedures and requirements throughout the project cycle, as identified in the 2021/2022
CPIP.

• Delays in procurement: This partly arises from delays by implementing agencies in initiating procurement
processes; and non-compliance of evaluation reports with bidding documents, hindering the timely
clearance of the reports by the Bank. It was agreed to have a closer monitoring of procurement plans and
regular training of project staff on Bank’s procurement policies and procedure.

• Project Preparedness to the level of Bankability: Capacity needs to be built in project preparation, project
selection, project implementation, and project oversight. The strict due diligence tied to the access to several
loan facilities requires up-to-date information on the lined-up projects and high-quality feasibility studies.

• Better engagement on sovereign and non-sovereign requests: The Bank was requested to involve the
implementing agencies at the start of such operations, especially for those that require letters of approval/no
objection and/or sovereign guarantees. is the meeting also underscored the need for continuous coordination
and collaboration and sharing of documentation between the Bank and the project implementing agencies
throughout the lifespan of the project. The Bank should also address the issue raised by National Treasury
on the need to sensitize government departments on the procedure for applying for Bank assistance.

XVIII
 ANNEX 9: IMPLEMENTATION STATUS OF 2018/2019 COUNTRY PORTFOLIO IMPROVEMENT PLAN (CPIP)
Major Issues Action Required Responsible Measurable Indicators Timeline Current Status/Progress
Quality at Entry
Achieved: Projects and PIUs duly sensitized at
project launch but start-up delays continue.
Sensitize the PIUs and the MoF during the launching During the period under review, 1 out of 3
of the project on the importance to speed up the projects approved (33%) in 2020) experienced
Letter of Agreement signed and the
signature process to avoid delay and cancellation of start up delays at both the loan signing and
project declared effective within 6
the project. fulfilment of first disbursement stages. The loan
months.
agreement for Redstone Concentrated Solar
Power was signed 8 months after approval and is
Start-up delay (especially signature not yet effective for over 12 months from
delay for SO and NSO). This is approval.
mainly due to (i) lack of clarity on Ensure all PIU staff/experts are recruited before Qualified and experienced project Achieved: All projects had the requisite staff.
project commencement. staff are recruited within 3 months Immediately
the procedures for the review and
Govt./Bank after signature. for new
approval of the letter of agreement;
projects
(ii) absence of skill-mix at project Provide guidance to the PIU to work, in parallel, on Achieved: The Bank continued to support
commencement, (iii) long approval the ToRs, EOIs, the procurement plan and conditions projects on fast tracking meeting conditions for
procedures, and (vi) poor design. for first disbursement while waiting for signature of effectiveness and first disbursement. An outlier,
the letter of agreement. Provide guidance on Conditions to first disbursement due to situations outside the Bank’s control, the
disbursement applications, procurement and financial met, Procurement launched. Redstone Concentrated Solar Power despite
management requirements. being signed 8 months after loan approval had
still not disbursed for over 12 months from
approval.
Less than 10% of new projects
Ensure that high quality and comprehensive feasibility
delayed because of poor feasibility Partially Achieved: This continues to be met.
studies were conducted before project approval.
studies/designs.
Management and Monitoring of the Portfolio
Delays in project implementation Organize project review/ monthly meetings with At least four project reviews / Achieved: Two implementation support
due to: (i) poor coordination / contractors. coordination meetings organized missions undertaken per year to most projects. In
oversight of contractors; (ii) weak annually. Immediately addition, here are continuous desk follow-ups to
Govt./PIU/
PIU capacity; (iii) limited for existing / projects with issues, particularly during COVID
Bank
knowledge of Bank's procedures; new projects restrictions.
and (vi) poor communication
between different stakeholders.

XIX
 Annex 9 (Cont’d)

Major Issues Action Required Responsible Measurable Indicators Timeline Current Status/Progress
Management and Monitoring of the Portfolio (cont.)
Delays in project implementation due Partially Achieved: Some meetings are held with
to: (i) poor coordination / oversight Task Managers, RDGS experts, including fiduciary, to PIUs but not frequently. TMs and fiduciary
of contractors; (ii) weak PIU continue organizing regular meetings with the PIUs to At least three meetings held annually. Ongoing continue to undertake regular follow-ups on
capacity; (iii) limited knowledge of follow-up closely with them and resolve constraints. individual projects with issues.
Bank's procedures; and (vi) poor Provide training on the Bank's procedures. Govt./PIU/ At least one training session held Ongoing Partially achieved: Some trainings conducted
communication between different Bank annually. during launching of new projects. Also other
stakeholders. clinics are arranged individually for some
ongoing projects during supervision missions.
Improve communication by organizing frequent Not Achieved: No meetings held in 2020 and
meetings (quarterly) between the Bank, the MoF and 2021 due to COVID-19 restrictions including
Four quarterly review meetings held
the line ministries/PIUs. Immediately lockdowns. The matter will be discussed with
per annum.
National during CSP MTR mission on possibility
of virtual meetings in Q3 and Q4 2021.
Procurement
Absence of a unitary Procurement
Law in the Country, very complex Review of existing Procurement legal framework and Partially Achieved: Procurement law drafted in
Adoption of new unified public
procurement legal framework, drafting of a unified Public Procurement Law. Govt. 2018 the process of review
procurement law.
indented with several legislative
instruments
Regular training sessions for PIU staff in Bank Rules Partially Achieved: Trainings conducted during
Limited procurement experience and and Procedures; launching of new projects
One training organized for each new
knowledge of Bank Bank Ongoing
Consider use of Borrower Procurement Systems operation. Not Achieved: No new projects with low-risk
Procurement Rules & Procedures
(BPS) for low-risk procurements. procurements, therefore BPS was not used.
Project start up and delays in Achieved: Recent project with complex
50% reduction in procurement lead
commencement of Systematically use of Advance Contracting
Govt./PIU time targeted compared with Immediately procurement that require early start time
procurement activities and lengthy procedures especially for complex infrastructure incorporated Advance Contracting.
present.
processes for complex procurement. projects.
Submission of updated procurement Partially Achieved: Procurement Plans not
Disconnect between the Procurement
Systematic synchronization of updates for both plans. Govt./PIU and work plans every 6 months. Immediately regularly updated and submitted. They are only
& Work plans.
submitted after series of follow ups.
Number of new projects with Achieved: Procurement arrangement for new
simplified procurement projects is simplified. Advance Contracting
arrangements: Half of new employed for activities that require early start-
Complex procurement arrangement Simplify the procurement arrangement for low-risk
PIUs/Bank operations should have less than 5 On-going ups.
for low-risk projects contracts.
procurement activities. All new
projects should use advance
contracting.

XX
 Annex 9 (Cont’d)

Major Issues Action Required Responsible Measurable Indicators Timeline Current Status/Progress
Financial Management
Delays in project implementation due Bank Fiduciary experts to and undertake fiduciary Achieved. Trainings arranged individually for all
to limited knowledge of Bank's FM clinics/training to resolve constraints as well At least three meetings held annually ongoing projects (Eskom, PIDA, Enterprise
Govt./PIU/ Ongoing
procedures and/o 1 fiduciary clinic per annum. Pilot, Bokamoso, and Orange River)
strengthen PIU capacity. Bank
Enhance the review of the project work plans and their Partially Achieved. Not all projects submitting
Delays in project implementation planning and budgeting to ensure that they are realistic Project Timely implementation of work quarterly IFRs and TMs continue to sensitize and
and use of funds advanced to the aimed at facilitating project implementation and Implementing plans within the stipulated Ongoing follow up
Project timely use of funds. Agency timeframes.

Inclusion of financial information in Additional financial information relating to the actual At least three quarters of projects Partially Achieved. Not all projects submitting
periodic project reports submitted to and planned expenditures by project components Project submit comprehensive project quarterly IFRs and TMs continue to sensitize and
Ongoing on a follow up
the Bank to facilitate their proper together with the variances during the period in Implementing quarterly progress reports to the
quarterly basis
understanding to enable project addition to counterpartcontributionsshould be Agency Bank for loans and semi- annually
monitoring. included in periodic reports submitted to the Bank. for grants.
Project Implementation Teams to properly plan for Within 6 Achieved. Approximately 90% of projects are
the external audit including timely recruitment of the Project months after now submitting project audit reports on time.
auditors. Implementing the end of the
90% of projects submit project audit
Delays in submission of Annual Agency respective
reports timely (i.e., before the due
Project Audit Reports. period end
date).
Bank to continuous monitor and follow up on the Achieved.
arrangements for the project audits as part of project Bank Continuous
supervision missions.
Justifications of the special account Justifications of the special account expenditures need Semi-annual follow up report Partially achieved. While the larger projects are
expenditures not submitted to be submitted every semester. prepared on SA justification status. performing well, the smaller projects (MIC
Govt/PIU
frequently enough. grants and AWF grants) sometimes delay
justifications.
Disbursement
Slow disbursements (NB: low
disbursement rate is not as such an
implementation challenge but often a
Justification of disbursement needs to be submitted on Gov't/Bank Disbursement rates increased. Immediately
result of delayed implementation due Achieved.
time to be able to submit the following request and
to low quality at entry, delay in
avoid delays.
signing/disbursement effectiveness,
inadequate knowledge of PIUs on
the Bank’s rules and procedures).

XXI
 ANNEX 10: 2021/2022 COUNTRY PORTFOLIO IMPROVEMENT PLAN (CPIP)
Major Issues Action Required Responsible Measurable Indicators Timeline

Quality at Entry

Sensitize the PIUs and the MoF during the launching of Letter of Agreement signed and the project
the project on the importance to speed up the signature declared effective within 6 months.
process to avoid delay and cancellation of the project.
Start-up delay (especially signature
delay for SO and NSO). This is Ensure all PIU staff/experts are recruited before project Qualified and experienced project staff are
mainly due to (i) lack of clarity on the commencement. recruited within 3 months after signature.
procedures for the review and National Treasury/
Provide guidance to the PIU to work, in parallel, on the Immediately for new projects
approval of the letter of agreement; RDGS
ToRs, EOIs, the procurement plan and conditions for first
(ii) absence of skill-mix at project
disbursement while waiting for signature of the letter of Conditions to first disbursement met,
commencement, (iii) long approval
agreement. Provide guidance on disbursement Procurement launched.
procedures, and (vi) poor design.
applications, procurement and financial management
requirements.

Ensure that high quality and comprehensive feasibility Less than 10% of new projects delayed
studies were conducted before project approval. because of poor feasibility studies/designs.
Management and Monitoring of Projects and Portfolio
Organize project review/ monthly meetings with At least four project reviews / coordination
Delays in project implementation due contractors. meetings organized annually. Immediately for existing / new projects
to: (i) poor coordination / oversight of
contractors; (ii) weak PIU capacity; Task Managers, RDGS experts, including fiduciary, to
(iii) limited knowledge of Bank's continue organizing regular meetings with the National Treasury /
procedures; and (vi) poor Implementing At least three meetings held annually. From 2022 onwards
Implementing Agencies to follow-up closely with them
communication between different and resolve constraints. Agencies /
stakeholders. Improve communication by organizing frequent RDGS (TMs and
meetings (quarterly) between the Bank, the National CPO)
Four quarterly review meetings held per
Treasury and the line ministries and implementing From Q3 2021 onwards
annum.
agencies.

XXII
 Annex 10 (Cont’d)
Major Issues Action Required Responsible Measurable Indicators Timeline
Procurement
Absence of a unitary Procurement Law
in the Country, very complex Review of existing Procurement legal framework and
Adoption of new unified public procurement
procurement legal framework, drafting of a unified Public Procurement Law. National Treasury 2022
law.
indented with several legislative One training organized for each new operation.
instruments
Regular training sessions for Project staff in Bank Rules One training organized for each new
Limited procurement experience and Q3 2021 and onwards
and Procedures; operation.
knowledge of Bank RDGS
Consider use of Borrower Procurement Systems (BPS)
Procurement Rules & Procedures # of projects with low-risk procurement On-going
for low-risk procurements.
Project start up and delays in
National Treasury /
commencement of Systematically use of Advance Contracting procedures 50% reduction in procurement lead time
Implementing Immediately
procurement activities and lengthy especially for complex infrastructure projects. targeted compared with present.
Agencies
processes for complex procurement.
National Treasury / Submission of updated procurement and work
Disconnect between the Procurement
Systematic synchronization of updates for both plans. Implementing plans every 6 months. Immediately
& Work plans.
Agencies
# of new projects with simplified procurement
RDGS / arrangements: Half of new operations should
Complex procurement arrangement Simplify the procurement arrangement for low-risk
Implementing have less than 5 procurement activities. All On-going
for low-risk projects contracts.
Agencies new projects should use advance contracting.

Financial Management

Delays in project implementation due Bank Fiduciary experts to and undertake fiduciary National Treasury /
At least three meetings held annually and/o 1
to limited knowledge of Bank's FM clinics/training to resolve constraints as well strengthen Implementing fiduciary clinic per annum. Ongoing
procedures implementing agency capacity. Agency/
RDGS

Enhance the review of the project work plans and their Project
Delays in project implementation and Timely implementation of work plans within
planning and budgeting to ensure that they are realistic Implementing Ongoing
use of funds advanced to the Project the stipulated timeframes.
aimed at facilitating project implementation and timely Agencies
use of funds.
Inclusion of financial information in Additional financial information relating to the actual
periodic project reports submitted to and planned expenditures by project components At least three quarters of projects submit
Project
the Bank to facilitate their proper together with the variances during the period in addition comprehensive project quarterly progress
Implementing Ongoing on a quarterly basis
reports to the Bank for loans and semi-
understanding to enable project to counterpart contributions should be included in Agencies
annually for grants.
monitoring. periodic reports submitted to the Bank.

XXIII
 Annex 10 (Cont’d)

Major Issues Action Required Responsible Measurable Indicators Timeline

Financial Management (cont.)

Project Implementation Teams to properly plan for the Project
Within 6 months after the end of the respective
external audit including timely recruitment of the Implementing
period end
Delays in submission of Annual auditors. Agencies 90% of projects submit project audit reports
Project Audit Reports. Bank to continuous monitor and follow up on the timely (i.e., before the due date).
arrangements for the project audits as part of project RDGS Continuous
supervision missions.
Justifications of the special account Justifications of the special account expenditures need to National Treasury/ Semi-annual follow up report prepared on SA
expenditures not submitted frequently be submitted every semester. Implementing justification status. Continuous
enough. Agencies
Disbursement
Slow disbursements (NB: low
disbursement rate is not as such an
implementation challenge but often a Project
Justification of disbursement needs to be submitted on implementing Disbursement rates increased. Immediately
result of delayed implementation due
time to be able to submit the following request and avoid Agencies / RDGS
to low quality at entry, delay in
delays.
signing/disbursement effectiveness,
inadequate knowledge of PIUs on the
Bank’s rules and procedures).

XXIV
ANNEX 11. ENERGY NOTE

1. Context

Like many sectors of the economy, the electricity system has not been spared by the ravages of the
Covid 19 pandemic, which resulted in a dramatic drop in demand for electricity. The economic losses
due to outages were estimated by the CSIR to be between ZAR 59 billion and ZAR 128 billion per year
before Covid-19. The unstable supply of electricity poses a major threat to the mining sector and reduces
South Africa's attractiveness as a manufacturing destination. As the economy begins to gain momentum
and as the easing of the freeze takes shape, the power utility Eskom is struggling to 'keep the lights on'.
Its EAF (energy availability factor) recently fell below 60% against a required EAF in the 80% range
(average of 85% in 2010). Eskom faces a debt of ZAR 401 billion (for reference, Soweto and
municipalities serviced by Eskom have accumulated about ZAR 31 billion of debt to Eskom), which is
equivalent to 14% of the national debt. Two new coal power plants, Kusile and Medupi, have been taken
into operation after years of construction delays. Both stations, however, are still not performing to the
expected design capacity figures.

Important reforms have been instigated within Eskom. The most significant in the longer term is the
separation of the utility into three separate entities generation, distribution and transmission. Initially the
separation is functional but in the longer run the entities will have independent legal status with
transmission spearheading the plan.

Government has made progress in restructuring the country’s electricity sector illustrated by three
significant developments. The Eskom reform program includes a plan to unbundle the company into
three eventually independent companies representing generation, transmission and distribution with an
independent system operator. The transmission unit will be functionally independent by December
2021. This year, 2021, a fundamental liberalisation was initiated allowing embedded generation (self-
generation) of 100 MW. The reform includes the right to develop generation off-site and wheel the
power using Eskom’s network (for a fee). It is anticipated that this reform will bring 5000-6000 MW
into operation and that it will significantly improve the attractiveness of investing in South Africa’s
mining sector. Government continues its financial support via the fiscus to Eskom and this in
combination with reforms within the utility has reduced the debt from close to 500 billion ZAR to 420
billion ZAR.

South Africa's Integrated Resource Plan (IRP 2019) sets out an ambitious plan to meet future demand
with less reliance on the country's ageing coal-fired power plants. By 2030, almost 12 000 MW of new
capacity will be contracted (6 800 MW from photovoltaic and wind sources, 513 MW from storage, 3
000 MW from gas and 1 500 MW from coal).

The so-called 'emergency energy programme', which aims to acquire 2,000 MW, is also being
implemented by the office of independent renewable energy producers, which also has restarted issuing
recurrent bids round in support of the IRP. Bid window five of the REIPP called for proposals from
Independent Power Producers (IPPs) to develop new generation capacity of 2 600 MW, including 1 600
MW from onshore wind energy and 1 000 MW from Solar Photovoltaic (Solar PV) power plants. In
parallel a window for coal is being opened and the DMRE has issued a request for information in relation
to building nuclear power capacity. However, the government is already significantly behind on
procurement to meet the Integrated Resource Plan 2019 schedule for new power. Emergency power
from the 2GW Risk Mitigation Independent Power Producer Procurement programme has made
progress in early 2021, with power scheduled to enter the grid in 2022

In parallel DMRE has changed the country’s approach to embedded generation and now allows everyone
to build up to 100 MW generation for their own use. This policy change is expected to expand generation
in the country by as much as 5000 MW.

South Africa’s coal fleet is one of the largest single polluters in the world and there are on-going
discussions with selected governments and DFIs to design a transition programme by which South
XXV
Africa will retire coal-fired power stations in return for concessional financing to accelerate building
low polluting generation. The status of the discussions might materialize at COP26 in November 2021.

In addition to electrical energy, the expansion of natural gas supply is a priority both for power
generation, industrial uses and potentially for transport. South Africa has an advanced industrial sector
and a well-developed mining sector, and the need for non-electric power is significant. As such, South
Africa has advanced plans to build a regasification import terminal at the ports of Richards Bay or
Coega. It also has opportunities to work with Mozambique in the area of natural gas.

2. Challenges / opportunities / gaps

In South Africa, approximately 10% of the population (as of 2018) still lacks access to electricity and
the government is adjusting policies and its approach to the use of off-grid solutions in order to achieve
universal access by 2030. Given the Covid-19 pandemic, Government's ability to provide continued
financial support to Eskom will be even more limited in the future. However, the government needs to
strike a balance between allowing tariff increases and injecting capital into the company, while requiring
and encouraging reforms and improvements in corporate governance within the company.

South Africa has no overarching policy that offers an integrated approach to the energy sector. An
integrated energy plan, or a gas plan are yet to be finalized making it impossible to align these with other
key policies, including the Integrated Resource Plan (IRP), the country’s revised Nationally Determined
Contribution (NDC) on decarbonization and the emerging just energy transition plan, mainly driven by
Eskom.

The result is high levels of uncertainty in the market and discouragement of investments (foreign and
local), exacerbated by unclear decision making, which allows parochial interests to slow progress. This
means that South Africa’s limited economic resources are sparsely distributed across too many
initiatives, some of which are not viable or scalable.

South Africa has a very significant renewable energy potential which, as the potential is developed,
makes it well placed to develop Green Hydrogen projects.

The embedded generation reform involving a simplified procedure for constructing up to 100 MW
potentially entail very significant opportunities for the Bank in terms of NSO projects and sub-national
lending.

South Africa is implementing the Just Energy Transition (JET) Strategy aimed at supporting the
country’s transition to cleaner energy. The strategy focuses on repurposing of power stations, the
introduction of more renewable capacity, mitigating the socioeconomic impacts of the transition
including shutting-down coal-fired stations, and medium to long-term technology requirements and
financing needs. Eskom plans to decommission 12000MW of old coal-fired power stations by 2030.

The JET programme entails activities all over South Africa but with the large majority of existing coal
powered stations in the province of Mpumalanga. The JET will have a regional focus which needs to be
accommodated. The JET is not only an investment plan for new-built renewable generation but also
involves de-commission of existing coal power stations, creating new jobs in new sectors and reusing,
primarily water and land, resources for other purposes productively.

3. Recommendations and the Bank's response

The bank should further support the various energy projects such as the flue gas desulphurisation project,
the battery storage project and all other IRP projects.

XXVI
The Bank should support the Government in the JET to find funding to support the process of analysis
and strategy development. The Bank should endeavour to design responsive projects in support of the
accelerated phasing in of renewable energy generation.

The JET process is likely to involve a very large group of DFIs and bilateral and the Bank should
continue to engage with traditional and non-traditional stakeholders and donors.

The Bank should seek to target the use of additional GCF and CTF funds to projects in South Africa.
Early preparatory work can enable innovative projects that fit well with the JET. The Bank has long
listed Green Baseload proposals with the CTF, and SEFA is developing concepts that will be relevant
to South Africa.

The Bank needs to engage in a dialogue with the Government to consider energy solutions based outside
the country. In particular, hydropower and natural gas opportunities beyond the South African border
could play an important role in South Africa's future energy system.

At the same time, the Bank should continue to play a leading role in the Eskom Lenders Group and,
through this mechanism and wider engagement with the Government in the AEMP and other fora,
maintain its position as a trusted partner.

4. Donor Mapping

Donors Sector or theme

World Bank and IFC Co-financing of Eskom's battery storage project.
IFC role in supporting the 2000 MW emergency power supply
AfDB Co-financing of Eskom's battery storage project
DFID Co-financing of Eskom's battery storage project
European Union Intervention not determined
Kreditanstalt für In a holding position for Eskom support.
Wiederaufbau & GIZ Technical support from GiZ.
Pending support on energy and JET.
French Development AfD has a transmission project. Social dialogue in the context of
Agency the TJ and renewable energy project.
European Investment Intervention not determined
Bank
The New Development Eskom's battery storage project
Bank
China Development The transmission projects and the flue gas desulphurisation project.
Bank
Development Bank of Manager of the Infrastructure Fund
South Africa

XXVII
ANNEX 12. CLIMATE CHANGE & GREEN GROWTH NOTE

1) Context
Climate Change and vulnerability context: South Africa due to its location is characterized by diverse
climate conditions ranging from a sub-tropical climate in the southeast; Mediterranean climate in the
cape; and semi-arid to arid climate in the inland regions. South Africa is frequently affected by floods
often caused by tropical cyclones and droughts caused by El Niño affecting the eastern and west cape
(GERIC2s,2017; P. T. Mahlalela3 et al,2020). Meanwhile mean annual rainfall is 494mm/year while the
mean annual temperature is 18°C; the intensity of heavy rain is 23mm/days; mean duration of dry spells
is 34 days; mean duration of heat waves is 5 days and cold spells is 6 days and mean water balance is -
86mm/year. Overall, between 1901 and 2013, the average temperature increases by +0.14°C across the
country while in terms of rainfall pattern, the central and southern parts experience an increase in
precipitation intensity and a decrease in the number of wet days. Perhaps over the reference period, the
eastern part experienced a decrease in rainfall partners. The future projection indicates a very likely
increase of +0.9 to +1.8°C of mean annual temperature by 2030 and a very likely increase of +1.2 to
+2.9°C of mean temperature by 2050. Meanwhile heatwave to very likely increase by +1 to +4 days by
2030 and by +2 to +7 days by 2050. In addition, cold spells are very likely to decrease by 2 to 1 day by
2030 and by 3 to 1 day by 2050. In contrast, dry spells to very likely increase by 0 to +2 days by 2030
and increase by 0 to +3 days by 2050 while the change in rainfall to very likely range from -3 to +7%
by 2030 and from -3 to +9% by 2050. This very likely will results in a change of -72 to +47 mm/year of
the country's water balance by 2030 and a change of -115 to +49 mm/year of water balance by 2050. As
a consequence, the agriculture sectors, the coastal zone; the health; the terrestrial ecosystem; urban and
rural settlements, and the water sector are very likely to be more vulnerable. For instance, crops yield is
very likely to decrease while flooding and drought events increase and will result in an increase in water
deficits for agriculture, power generation, and human consumption or settlement (MEFF,2019). This
also includes an increase in soil erosion and infrastructural damage. Over the period of 2000-2019,
average climate loss in South Africa account for 93% of its GDP.

Anthropogenic emissions and drivers: South Africa is the largest emitter of greenhouse gases in
Africa and 2019 accounts for 1.9% of global GHG emissions (EDGAR4,2020). South Africa GHG
emission is dominated by the use of fossil fuels such as coal. Total fossil fuel emission in South Africa
increase from 312.4965 MtCO2eq in 1990 to 494.8626Mt CO2eq in 2019 representing 58.35% of
increase over 1990-2019(EDGAR7,2020). This includes 77% increase in the power sector; 82% increase
in the industrial sector; 118% increase in the building sector; 89% increase in the transport sector while
emissions from the non-combustion sector decrease by 26%. Meanwhile, its emission per capita increase
from 8.320tons of CO2eq in 1990 to 8.523tons CO2eq in 2019, representing 2.44% increase.

National Adaptation priorities vs mitigation priorities: To enhance South Africa's transition to a

climate-resilient country and mitigate the impact of recurrent drought and flooding, the country has
elaborated its national climate change adaptation strategy NCCS 2020-2030(2019). The NCCS is
aligned with the National Development Plan 2030 aiming to eliminate poverty, deliver environmental
protection and promote economic development by 2030. More specifically ensuring environmental
sustainability and resilience to future shocks. Furthermore, the strategy aimed to strengthens South
Africa capacity to fulfill its commitment to the Paris agreement and has prioritized building climate
resilience and adaptive capacity to mitigate climate risk and vulnerability especially; promoting the
integration of climate change adaptation response into development objectives, policy, planning, and
implementation; improving knowledge on climate risks, impacts and response capacity; and ensuring

2
German Climate Service Centre
3
Climate Dynamics volume 55, pages2743–2759 (2020)
4
Emissions Database for Global Atmospheric Research
5
Of which building (10.76%); power sector (40.95%); transport (1.80%); other industrial sector (28.85%) and
non-combustion sector (17.63%).
6
Of which building (6.32%); power sector (51.27%); transport (11.27%); other industrial sector (20.79%) and
non-combustion sector (10.33%).
7
Emissions Database for Global Atmospheric Research
XXVIII
adequate resources and systems to enable its implementation. Its priorities sectors include the agriculture
and forestry sector; coastal zone; health; terrestrial ecosystem; urban and rural settlement; and water
resources. Meanwhile, on mitigation, South Africa through its Integrated energy resource Plan
(IRP,2019) and the Green Transport Strategies (2018-2050) anchor in its updated National Determined
Contribution (NDC,2021) aiming to curve the national carbon footprint to 398-510 Mt CO2-eq for the
period 2021-2025 to an upper limit of 350-420 Mt CO2-eq by 2026-2030. The IRP (2019) makes
provision of the country priorities of actions for the energy transition. This includes the shift to
renewable energy technologies and the participation of independent power producers. On strengthening
institutional capacity for implementation, the country has developed a sectoral guideline to enhance
safeguards compliance for the Waste Sector; Climate-Smart Agriculture, and urban sectors. On climate
finance, the country's updated NDC implementation needs R860-920 billion over the period 2020-2030.
However, despite the progress made, the country is still below the annual targets and private sector
contribution accounts for 45% of the total climate finance against 55% from public participation.

2) Challenges / opportunities / gaps

Despite the strong climate change governance and intuitional capacities in South Africa, the country is
still facing technical and financing constraints which are conditional to enable effective implementation
of its climate priorities. On technical constraint, enhancing South Africa's renewable energy capacity
will likely depend on the country's capacity to cost-effectively improve the national energy mix supply
and demand technology and technical efficiency. Solar and wind have a good potential in South Africa
however, the cost of solar and wind technologies is still high for the average South African household
while addressing intermittence associate with solar and winds, the country also need to improve its
transmission and distribution networks. Coal is one of the major GHG emission sources in South Africa,
perhaps coal has multiple usages and the development of the coal value chain for instance in the
construction material and agricultural sector could also support the country's transition to a low carbon
economy as well as enhance circularity. In addition to technical barriers, there is a need to enhance
awareness and build SMEs capacities to foster the development of local skills to reduce the cost of
operationalization and maintenance of RE; developing a non-carbon intense coal value chain, and scale
up the adoption of climate-smart agricultural technologies. Meanwhile on the financial constraint, for
instance, for the Period 2017-2018, total climate finance in South Africa was estimated at R62.2 billion
(Climate Policy Initiative,2021) of which public climate finance account for R12billion (55%) and
private finance account for R 35.5 billion (45%). Private sector finance is mainly to enhance mitigation
and has targeted clean energy, energy efficiency & demand-side management. Of the private sector
climate finance, commercial investors account for the majority of the investment with R19.3 billion
(55%) while Corporates, philanthropists/donors, NGOs, and households accounted for 45%. This
illustrated the private sector engagement in the country's climate finance landscape and provide an
opportunity for AfDB to strengthen the country's private sector participation in the energy; mining and
industrial; AFOLU and waste sectors. Furthermore, on financing the country energy transition, the state
utility company ESKOM is constraint by its level of debt reducing its capacity to effective
implementation the proposed power purchase agreement. This call for the need to restructure its
corporate governance and opportunities for the Bank to support the country to explore innovative climate
finance instrument to enhance ESKOM financial balance sheet. To date from multi-lateral development
climate finance, SA has mobilized $ 826,869,806 USD (7,280,035,616 as co-financing) from Global
environment Facility (GEF) financing and $ 152,800000 USD from Green Climate Funds (GCF).

South Africa has a robust environmental management framework, which is anchored on the
National Environmental Management Act (NEMA). Most of the environmental regulations governing
EIA for development projects that were applicable since the approval of the CSP (2018-2022) are still
in force. The country started the revision of the National Biodiversity Framework (NBF) for the period
2019 – 2024. It has been released in March 2021 for public consultations and will be finalized in the
course of this year 2021. The NBF aims at coordinating and aligning the efforts of the various
stakeholders involved in conserving and managing South Africa’s biodiversity in support of sustainable
development.

XXIX
 3) Recommendations and the Bank's response

• The Bank should continue to actively support renewable including solar energy and storage systems
(such as Battery Energy Storage System (BESS)) projects.
• The Bank should support integrated energy and transport project to accelerate South Just Energy
Transition program and enable the development low cost low carbon transport system.
• The Bank should explore opportunities to support the development of a non-power coal value chain
such as fertilizer; steel and building material.
• The bank should support skills development and SMEs capacity building to empower the country's
private sector to scale up local technical capacities for R&D in renewable energy technologies and
coal value chain, and enable the creation of green jobs to
• The Bank should support the implementation of adaptation projects or programs and promote
ecosystem-based adaptation and contribute to action that will enhance land restoration.
• The Bank should contribute to scale up the climate finance landscape in South Africa and enable
private sector climate finance investment. This may include contribution/supporting an
establishment of an energy transition trust fund for South Africa and contribute to restructuring
ESKOM balance sheet.
• Ensure that all Bank investments are consistent with the Paris Agreement8 while contributing to
national economic/social development objectives.
• The Bank should support innovative financing for low carbon and climate change resilient projects
and programmes, and interventions for the health of lakes, rivers and oceans respectively.
• Seizing the opportunity to intervene in the climate/gender/agriculture/water nexus.

4) Donor Mapping
Lessons Areas of intervention
Climate Investment Fund Climate change and the extractive (mining) sector
The technologies
African Climate Change Fund Climate change and gender - (projects, capacity building,
project preparation)
Green Climate Fund (GCF) and other blended funding Green and blue bonds
Green credit lines
Low carbon and climate change resilient
Interventions for the health of lakes, rivers and oceans
World Bank Climate Change, Infrastructure sector, SMEs, Private sector
AfDB Renewable energy
Solar project
Adaptation programme
GIZ Energy and Climate Change both at national and municipality
level
EIB Climate Change , infrastructure and private sector

8
http://pubdocs.worldbank.org/en/784141543806348331/Joint-Declaration-MDBs-Alignment-Approach-to-
Paris-Agreement-COP24-Final.pdf . Work on a common approach to alignment is ongoing and is led by the
heads of the MDBs concerned.
XXX
ANNEX 13. WATER SECTOR NOTE

1) Context

South Africa is a water-poor and unevenly distributed country, ranked as the 30th driest state in the
world with a water availability of 830 m3/capita9. Annual rainfall ranges from 100 mm in the western
part of the country to 1500 mm in the Drakensberg.

South Africa has been promoting an ambitious programme of water infrastructure for several decades
with the objective of meeting the increasing water demand of irrigated agriculture, urban areas and the
mining industry which respectively represented 63%, 27% and 10% of the water consumption.
However, supply has now reached its limits since, according to recent studies, total water requirements
represent 97%10of available surface water yield on a reliable basis11.

94% of South Africans have access to a basic water supply, according to the joint UNICEF/WHO Global
Monitoring Report (2021), while 64% of the population is considered to have a reliable water supply.
Access to basic sanitation is 78% while the hygiene and sanitation indicator is 44%. Survey data released
in 2018 shows that 89% have access to water and 83% have access to improved sanitation.

The water sector is governed by two pieces of legislation, the National Water Act (1998) and the Water
Services Act (1997). Together with the NWRS2 and governance and regulatory frameworks, these
provide an enabling environment for efficient water use and management. The government, through the
Department of Water and Sanitation (DWS), leads and regulates the water sector, develops policy and
strategy, and develops investment programmes for water resources infrastructure.

The provision of water services (water supply and sanitation) is the constitutional responsibility of local
governments (metropolitan, local or district municipalities) who act as water service authorities (WSAs)
and often also as water service providers (WSPs) for all communities in their areas of jurisdiction (both
urban and rural).

2) Challenges / opportunities / gaps

a. Issues and challenges

Climate change and drought: The 2014-2016 drought and the near-catastrophic situation in Cape Town
have brought to the forefront discussions about the vulnerability of the country's water resources.
Average dam levels dropped to a low of 48% in November 2016, compared to 93% in March 2014.
More than 60% of South Africa's waterways are currently overexploited according to studies.

Growing demand: Demand forecasts for the three main water-using sectors - irrigation, municipalities,
and industry and mining - are expected to increase until 2035 due to a combination of population growth,
urbanisation, rising incomes, irrigation expansion, non-renewable electricity generation and irrigation
expansion. If current trends continue, the water deficit will reach 17% in 2017, up from about 3%
currently.

Inequalities: 36% of South Africans say their water supply is unreliable and needs to be improved.
Access to piped indoor water is twice as high in urban areas as in rural areas. In terms of provincial
disparity, the Eastern Cape and Limpopo have the lowest access to piped indoor water at less than 50%,
while Gauteng, the Western Cape and the Free State have access of almost 90%12. Access for the
population in the lowest income quantile is 52% compared to 96% for the highest income quantile group.

9
World Bank database, 2014
10
National Water Resources Strategy 2, 2013, Department of Water Affairs.
11
Defined in South Africa as 98% assurance of occurrence.
12
Inequality trends in South Africa, 2019
XXXI
Deterioration of water quality: Water quality is threatened by Acid Mine Drainage (AMD), agricultural
and urban pollution.

Institutional constraints: Only 2 of the 9 planned catchment management agencies had been established
by 2013 and the transfer of irrigation management to WUAs was still in progress. Reform of water
licensing has not progressed as planned, and inequalities inherited from the apartheid regime in this area
are not yet fully eradicated.

Financing constraints: The country needs to invest close to R90 billion each year over the next decade,
according to the National Water Investment Framework (2017). However, resources are limited and the
current investment trend is clearly lagging behind, meeting only 30-40% of the need. Current tariffs are
not sufficient to close the funding gap, and non-revenue water represents a direct loss for most water
utilities.

b. Strengths and opportunities

Despite all these constraints, the water sector has the following strengths and opportunities:

(i) The country benefits from the existence of strong and competent institutions with planning
capacity, capable of developing and implementing effective policies and major infrastructure
programmes;
(ii) The existing infrastructure, although sometimes in need of renovation, is still a major asset for
the country;
(iii) In terms of water balance, groundwater is still under-used and the reuse of treated wastewater and
AMD also has significant potential;
(iv) There is close collaboration and cooperation with Lesotho, and Phase 2 of the Lesotho Highlands
Water Supply Project, as well as other phases, will increase supply, particularly to the country's
industrial capital, Gauteng Province;
(v) The agricultural systems that consume 60% of water withdrawals are based on large intensive
farms with the financial and technical capacity to modernise their irrigation systems.

3) Recommendations and the Bank's response

As part of the government's strategy to ensure water security, the Bank and the New Development Bank
are partnering with the South African government to support the implementation of Phase 2 of the
flagship LHWP project to boost the economy in the Vaal River system, which covers five provinces in
South Africa with a combined population of 26 million and 60% of the economy. Water delivered and
transferred to the Vaal River system will ensure the availability of water for domestic consumption,
irrigation, industries and mining. The project has been approved with a loan financing of ZAR1.3 billion
(equivalent to UA63 million). In addition, AWF is exploring the possibility of providing grants for
master planning and feasibility studies for the rehabilitation, expansion and management of the
Vaalharts water supply system. The Vaalharts water system is the largest water system in South Africa.
It was built in the 1930s by hand and supplies water to municipalities, farms and communities through
canals and rivers. The system has reached the end of its life and is in need of major renovation.

The Bank should continue to engage with the government to (i) improve the management of limited
water resources by upgrading/rehabilitating existing facilities, promoting water demand management,
conservation and reuse, and (ii) develop priority water augmentation projects.

The following are potential projects on which discussions/dialogue should continue:

• Mokolo Crocodile Water Augmentation Project, Phase II (estimate: ZAR12 billion).

• UMKHOMAZI Water Project (estimate: ZAR23.2 billion)
XXXII
 • Support to municipalities to improve their water and sanitation systems.
• Non-sovereign financing could also be mobilised to help fill the infrastructure financing gap, in
particular to improve the efficiency of water facilities and support PPP projects.

4) Donor Mapping

Development partners in the sector

1 African Development Bank
2 Agence Française de Développement’ (AFD)
3 Development Bank of South Africa (DBSA)
4 Department for International Development (DFID) UK
5 European Investment Bank (EIB)
6 German Finance Corporation (KFW)
7 New Development Bank (NDB)
8 World Bank (WB)

XXXIII
ANNEX 14. AGRICULTURE AND AGRI-BUSINESS NOTE

I Introduction

1.1 The purpose of this Brief is to provide highlights of key challenges and opportunities in the
agriculture and agri-business sector in South Africa. The aim is to identify possible areas of policy
dialogue and intervention through programs and project and to guide the Bank in its contribution to the
implementation of South Africa’s development plans and strategies.

II Sector Context and Challenges

Agriculture in South Africa has a central role to play in building a strong economy and, in so doing,
reducing inequality by increasing incomes and employment opportunities for the poor, while conserving
natural resources. A numbers of factors make agriculture suitable for this role, including strong urban-
rural linkages, high labour and factor productivity, high multipliers due to extensive linkages with the
rest of the economy, and high export-led growth. South Africa's agricultural sector accounts for about
2.5% of the country's GDP and about 12% of its export earnings.

South Africa has a market-oriented agricultural economy that is highly diversified and includes the
production of all the major grains (except rice), oilseeds, deciduous and subtropical fruits, sugar, citrus,
wine, and most vegetables. Livestock production includes cattle, dairy, hogs, sheep, and a well-
developed poultry and egg industry. Value-added activities in the sector include slaughtering, processing
and preserving of meat; processing and preserving of fruit and vegetables; dairy products; grain mill
products; crushing of oilseeds; prepared animal feeds; sugar refining and cocoa, chocolate, and sugar
confectionery amongst other food products.

The agriculture sector in South Africa is quite diverse compared to other African countries and consists
of corporate and private intensive and extensive crop and livestock farming systems The sector has
strong backward and forward linkages with other sectors of the economy. There are therefore contagious
effects in that what happens in the agriculture sector will affect other sectors and vice versa. South Africa
has a well-developed agricultural sector, which will stand the country in good stead in the face of
continuing uncertainty both economically and in terms of the weather. There are many factors impacting
on the industry – including credit ratings downgrade, land reform concerns, volatile exchange rate,
ongoing weather concerns and the latest Covid-19 pandemic. Despite a contraction in the South African
economy due to the pandemic, the sector that outperformed other sectors was agriculture. This sector
grew by over 10% over the previous quarters due to increased production of animal products,
horticulture and field crops amid favourable weather conditions. South Africa is self-sufficient in all
major agricultural products and plays a major role in international and regional exports but is
experiencing a decline as a net exporter of food products. As the agricultural sector is largely export
driven, it is hedged against the negative impact of a major credit downgrade, but farmers are susceptible
to higher borrowing costs, depressed local demand and foreign animal and plant health import approvals.

There are approximately 32,000 commercial farmers in South Africa, of which between 5,000 and 7,000
produce approximately 80% of agricultural output. Food processing in South Africa is an important
component of the manufacturing economy. Food processing companies contribute about 2.4% to total
GDP, 3.2% to exports and 2% of total employment. At the same time, the sector is fairly heavily
dependent on imports, especially of agricultural technologies (e.g., machinery, chemicals, planting
materials and some fertilisers). Although own production for own consumption exists in some cases,
most households in South Africa depend on market food supplies (formal, informal or social) for
household food security.

The National Development Plan (2012 - 2030), which is the South African government's overall
development programme, identifies agriculture as the main economic activity in rural areas, with the
potential to create one million jobs by 2030. The plan proposes several approaches to land reform
(including bringing one million hectares of land into production by 2030). The NDP calls for increased
investment in (i) the agriculture and agribusiness sectors, (ii) small, medium and micro enterprise growth
XXXIV
areas to create jobs and redress skewed ownership patterns, and (iii) fruit and vegetable production to
better align the sector with nutritional intake guidelines.

Structural reforms to address the root causes of some of these problems are more urgent than ever. Land
reform offers this potential. If successful, it could play an important role in reducing the vulnerability
and food insecurity of the rural population, which accounts for one-third of the population, as well as
that of some urban residents. Access to land is fundamentally crucial for efficient agricultural
production, food security and poverty reduction where rural households have limited access to
productive land. The vital role of land in food production is linked to social, political and economic life,
where agriculture, natural resources and other land-related activities are essential for livelihoods, food
security, income and employment. Despite the current economic downturn, farmers appear to be upbeat
about current agriculture conditions. Sporadic rains and prevalent dry weather conditions associated
with climate change are an increasing concern.

III Policy Options, Opportunities and Recommendations

South Africa's commercial agricultural sector is well developed and globally competitive. The country
is able to produce a wide range of agricultural products. These products support a sophisticated and
competitive agri-food industry that accounts for 23% of the country's manufacturing sector and makes
it the largest sub-sector of manufacturing industry. The South African government has recognised the
need to consider agriculture for multiple benefits, which would involve optimising the most desirable
set of ecosystem services from food production activities.

Export Processing Zones: South Africa plays a major role in the export of agricultural commodities in
the southern African region. In order to fulfil its role as a regional economic hub, South Africa needs to
increase its investment in agro-industrial development to meet the demand that is likely to emanate from
the SADC region post-Covid-19. In the light of the impact of Covid – 19 Pandemic on the economy,
South Africa needs, greater inclusive and sustainable investments in the agricultural and agro-processing
sectors; that will accommodate small, medium and micro-enterprise growth to create jobs, redress
inequities and capitalize on the strengths of small towns. The Bank in collaboration with the Department
of Agriculture, Land Reforms and Rural Development (DALRRD) prioritized nine of the 44 Agri-parks
for development. The Bank has provided MIC TAF grants to support technical assistance for three of
the nine Agri Parks namely: Bokamoso Ba Rona Agri Park in the West Rand District of Gauteng
Province, Tsiame Agri-Park located in the Free State Province and Springbokpan Agri-Park, located in
the North West Province. The goal of the MIC TAF is to graduate the South Africa Agri Park program
to the Sustainable Infrastructure Development System (SIDS) methodology at the Infrastructure and
Investment Office (IIO) in the Presidency for coordination, and provide an operations and management
structure that will enable investors such as AfDB, Public Investment Corporation (PIC), Development
Bank of South Africa (DBSA), other International Financial Institutions (IFI’s) to provide investment
funds for infrastructure development and attract private sector investment to the SA-APP sites in the
respective provinces. The Bank has also secured MIC-TAF grants to develop two other priority parks
in the country.

Digitalization and technology: The integration of digital technology into agriculture presents a major
opportunity for south Africa and indeed the whole continent. The emergence of the mobile phone as a
popular communication tool, coupled with internet-based solutions, could significantly boost access to
financing for agricultural inputs across the value chain. Digitalization, as well as the effective use of
fertilizer and seeds, will become increasingly important in unlocking agriculture prospects in Africa.
Trending technologies in agriculture include data management, machine learning, artificial intelligence,
automation, and drone-based applications.

To stem the tide of youth unemployment and enhance economic growth in the region, the Bank will
work with government and other stakeholders to establish the Thuma – Mina- Southern Africa Regional
Digital Platform for Youth Entrepreneurs Ecosystem Development Project. The aim of the platform is
to address the fragmentation and inefficiencies in the business development ecosystem, and at the same

XXXV
time participate actively in the ecosystem by building a robust, sustainable pipeline of scalable youth-
led projects

Regional Trade: South Africa’s export oriented agricultural sector heavily relies on the African
Continent, accounting for over 40% of the annual exports. The coming int being of the AFCTA is
expected to further boost south Africa’s exports to these markets. This will however depend on whether
existing barriers to trade between South Africa and the rest of the continent are adequately addressed.
Among the major barriers include a range of Non-tariff barriers that these countries impose, fragmented
value chains due to poor infrastructure and connectivity between South Africa and some of the countries
and poor business environment. A priority going forward is therefore to make AfCFTA work through
addressing some of these constraints.

Land: Addressing land concerns is absolutely crucial. Access to land is fundamentally crucial for
efficient agricultural production, food security and poverty reduction where rural households have
limited access to productive land. The vital role of land in food production is linked to social, political
and economic life, where agriculture, natural resources and other land-related activities are essential
for livelihoods, food security, income and employment. Land-related areas where the bank can provide
support

(i) Consolidated integrated land use planning and land information system (this is included in
the SOP 2022)
(ii) Policy reform framework, institutional support and capacity building

To support the Government of the Republic of South Africa in achieving its objectives in the sector, the
Bank is proposing loan and non-loan interventions under the current Country Strategy Paper for the
period 2018-2023. The interventions are in line with the Bank's 10-year strategic plan (2013-2022)
agenda for inclusive growth and transition to green growth and are aligned with two High-5 Priority
Areas. The proposed interventions are also in line with the government's 10-year strategic plan.

IV Donor Mapping

Development partners in the sector

1 Development Bank of South Africa (DBSA)
2 European Delegation (EU)
3 Deutsche Gessellschaft für Internationale Zusammenarbeit (GIZ)
4 German Finance Corporation (KFW)
5 Food and Agriculture Organization of the United Nations (FAO)

XXXVI
ANNEX 15. GENDER NOTE

1. Context
Policy and Legislative Frameworks for Gender Equality:

South Africa has made significant progress towards attaining gender equality. The Constitution of South
Africa in Section 9 promotes the equality of all persons and freedom from discrimination. It prohibits
unfair discrimination by the state or another person against anyone on the ground of gender, race and
other factors. Despite these advances in the legislative and policy frameworks, life experiences of most
women in South Africa have remained unchanged and difficult since independence. Women continually
bear the triple jeopardy of poverty, unemployment and inequality.

The South African National Policy Framework for Women’s Empowerment and Gender Equality
approved in 2002 establishes a clear vision and framework for gender mainstreaming across laws,
policies, procedures and practices. It requires that Director-Generals and Ministers implement gender
mainstreaming within their departments and institutions, report on progress made, and use the
recommendations outlined within the policy to enhance the socio-economic empowerment of women.
Gender Focal Points (GFPs) have been placed in the offices of the Director-Generals to support gender
mainstreaming in all programmes and ensure that the strategic plans of their departments have gender
indicators.

2. Socioeconomic Context
2.1 Employment of Women

The COVID-19 pandemic has disrupted livelihoods in South Africa putting millions of women and men
at risk of losing their incomes. South African labour market is more favourable to men than it is to
women and men are more likely to be in formal paid employment than women, making the later more
vulnerable as a result of the COVID-19. Significant numbers of women, mainly Black African women,
remain in low-productivity jobs, often in informal sector enterprises13. They are also more likely than
men to be involved in unpaid work. Female employment in South Africa is concentrated in four main
industries: community, social and personal (CSP) services (31.4%); wholesale and retail trade (22.1 %);
private households (14.6%); and finance (13.2 %) Together, these four industries account for 81.3 % of
total female employment14. Domestic service is one of the largest sources of employment for black
women in South Africa. These sectors where most women are employed, with the exception of the
finance sector are adversely affected by the COVID-19 lockdowns.

Furthermore, while a significant number of women report to be self-employed, their businesses are not
registered for tax. Without registration, they are ineligible to apply for support. The Government of
South Africa is implementing several relief schemes for business, such as the Debt Relief Finance
Scheme and the Business Growth/ Resilience Facilities benefitting SMMEs. While these schemes give
priority to “businesses owned by Women, Youth and People with Disabilities” they also require that
those applying for support are registered. Without registration, women in informal trade are likely to
miss out from these schemes. It is also likely that women owned businesses might not be aware of the
existing schemes given lower levels of financial literacy by women compared to that of men These two
factors mean that women may be unable to recover from the economic impacts of the COVID- 19
pushing them deeper into poverty. Therefore, it is vital to improve financial literacy for women in order
to empower them to use financial assistance schemes available due to COVID- 19 effects.

13
. Department of Labour: The Commission for Employment Equity: The Employment Equity Report 2017-18;
Pretoria
14
Department of Women, Youth and Persons with Disabilities: A gender analysis of government’s incentives
schemes administered by the department of trade and industry (dti) (2018)
XXXVII
2.2 Gender Dimensions of Poverty

There is a significant gender disparity in poverty levels in South Africa15. Black African females, women
in rural areas, and those with no education are majority poor. Female headed households also have a
greater probability (48%) of being poor compared to a 28% probability for a household headed by a
male. Female headed households remain more vulnerable, with these households continuing to
experience higher levels of poverty than male-headed households regardless of the poverty line used.
Four reasons are given for this: (1) female-headed households are more likely to be in rural areas were
poverty is concentrated; (2) female-headed households tend to have fewer adults of working age, (3)
female unemployment rates are higher and (4) there is a gap between male and female wages16.

The current social security system in South Africa reaches a wide sector of society that is poor and at
the margins of the economy. Millions of people benefit from a variety of social grants ranging from the
Old Age Pension, Disability Grant and Child Support Grant (CSG) amongst others. The Support Grant
has had wide-reaching and positive impact on the lives of poor people, especially poor black African
women. By 2021, over 18 million people received social grants an increase from about 17 million in
2018, majority of whom were women. According to Statistics SA, 71.3% of poor households headed by
females received child support grants whereas only 50.7% of poor male-headed households are
supported by child support grants. The 20.6 %-point difference highlights the increased pressure on
female headed households and their need for child support. Recently the government has announced
increases to some of these schemes to protect South Africans from the economic effects of COVID-19.

2.3 Women in Agriculture

Agriculture is an important engine of growth and poverty reduction in South Africa. South African
women who want to go into farming face a range of obstacles, including limited access to information,
technology, and financial services. Access to land for women is still limited. The Land Audit Report
2017 showed that women continue to struggle with regard to ownership and access to land even though
the Extension of Security of Tenure Act gives women, the same rights in land as men and the White
Paper on Land Reform emphasizes the government’s intention to target women in its land reform policy.
Statistics on individual land ownership indicates that only 34% of individual landowners are female and
that males own the largest size of farms and agricultural landholdings17. Data indicates that males and
females own a total of 37 078 289 ha farms and agricultural holdings land in the country, with 26 202
689 ha or 71% owned by males; followed by females at 4 871 013 ha or 13%.

2.4 Women and Energy

Equitable distribution and access to energy services directly contributes to fostering gender equality and
women’s empowerment by reducing women’s time constraints due to chores and drudgery. Moreover,
the energy sector has the potential to open up opportunities to work in the energy sector, set up
enterprises or be engaged in educational activities. While there is no significant difference between
female headed household and male headed household with access to electricity women’s deeper poverty
renders them more energy poor. Energy poverty also impacts women more severely than it does men
because women tend to do the domestic chores and care for children in the household.

In terms of employment, the energy sector remains one of the least gender diverse sectors. The
percentage of women in the industry's workforce drops over time and falls particularly sharply—from

15
Statistics South Africa, (2017) The 2017 Poverty Trends Report. An examination of absolute poverty between
2006 and 2015
16
Ibid
17
Department of Rural Development and Land Reform (2017) Land Audit Report phase II: Private Land
Ownership by Race, Gender and Nationality.
XXXVIII
25% to 17% - between the middle-management and senior-leadership career stages 18. Employment of
women as well as entrepreneurship in the renewable energy sector has also remained low. The
Independent Power Producers (IPP) data from December 2017, shows that procurement from women-
owned vendors lags with only 3% achieved for construction and 5% for operations.

Eskom the power utility has set itself a target of 45.7 percent of women representation at both middle
and senior management level by 2020. Currently 36 percent of Eskom’s professional and middle
management are women and 30 percent at senior management. Challenges that women face in
qualifying as technical experts in the energy sector begin at secondary and tertiary education levels,
where young boys and girls do not always have similar opportunities to pursue science, technology,
engineering and math (STEM) subjects. STEM education is therefore key in feeding the pipeline of
women who can lead in the energy sector.

In August 2021 the Minister for Mineral Resources and Energy launched the Women Empowerment
and Gender Equality (WEGE) Strategy for the energy sector which is aimed at ensuring that women
become active participants in the Energy Sector. The Strategy will ensure equal rights, opportunities,
and economic empowerment of South African women in the energy sector.

3. Access to Water and Sanitation

Women carry the biggest burden of household chores, including cooking, washing, cleaning and caring
for the young, elderly sick and frail. More women than men are still without water on site and more
women than men spend time on water collection and more women than men have to travel far to access
water. According to recent data from Statistics South Africa, in households which collect water,
irrespective of the distance from the source, women and girls were more likely than men and boys to be
responsible for the task. COVID-19 prevention measures call for heightened hygiene which includes
hand washing, have further increases the household roles for women in water provision.

2.5 Gender and Health

In 1994 South Africa introduced the Policy on Universal Access to Primary health, which formed the
basis for healthcare delivery programmes. Pregnant women and children under the age of six years
receive free health care. Access to reproductive health care programmes and antenatal care services are
amongst the achievements of the health care system. In 2018, women were outliving their male
counterparts. However, women within the age group of 15-49 years bear the greatest brunt of the HIV
pandemic. The HIV prevalence rate for women in this age group is higher than that for all adults in that
same age group and when measured against the prevalence rate for the entire population. Teenage
pregnancy rates are also significantly high in South Africa and in 2016 16% of young women aged 15 -
19 years in South Africa had begun childbearing, 12% have given birth and 3% were pregnant with their
first child. The COVID-19 pandemic has had differential impacts on women and men. Women typically
assume the responsibility of taking care of the sick in the household and this increased their burden of
work as caregivers and put them at higher risk of contracting the infection themselves.

2.6 Gender Trends in Education

Despite near-universal enrolment in primary and secondary education, many adolescents are failing to
complete secondary schooling successfully, with inadequate pass rates in science and mathematics a
cause for serious concern for girls. At the secondary level, even though more girls are registered to sit
for the National Senior Certificate examinations at the end of Grade 12, evidence shows that more boys
than girls pass the National Senior Certificate exams. The gendered pattern is also evident in the subjects
that girls pass as compared to boys i.e. fewer girls pass math, physical science and technology subjects.

Department of Women, Youth and Persons with Disabilities, (2019) South Africa’s Report on the Progress
18

made on the Implementation of the Beijing Platform For Action 2014-2019

XXXIX
More than half of the students enrolled in public higher education institutions in 2016 were women.
Although the gendered inequalities and context in education have greatly changed in recent years with
women outnumbering men, fields of study taken by girls and boys continue to mirror gender-typical
patterns. The enrolment trend for the two years indicates higher enrolment in Business & Commerce
and Humanities for women while higher enrolments for men are in Science, Engineering & Technology
and Business & Commerce. Higher numbers of women are awarded diplomas, certificates, under-
graduate degrees up to honours degrees. However, the trend changes from Masters and Doctoral degrees
in favour of men. Overall, women outnumber men in the number of graduates but sex segregation in
fields of study persists. This could reflect persistent gender stereotypes which still remain strong.

2.7 Gender-based Violence

One of the fundamental challenges that persist in the country is that of patriarchal and gender stereotyped
thinking. This results in misogyny and gender-based violence. Women and girls are subjected to high
levels of rape, sexual offences, femicide, domestic violence and intimate partner violence. The
government has enacted legislative reforms, approved progressive policies and implemented
programmes that give expression to the constitutional rights of women and girls to equality, human
dignity, freedom and security of the person. However, the scourge of violence against women and girls
persists, however, as a result of the persistence of patriarchal norms and of the failure to effectively
implement laws, policies and provision of services to victims and survivors. Some of the actions the
country prioritized in the last five years to address violence against women and girls focused on
enforcement and implementation of legislation and policies to address violence against women and girls,
hosted a Presidential National Summit on Ending Gender Based Violence and Femicide; initiating a
National Strategic Plan to address gender-based violence and femicide as well as reviewing the National
Action Plan 2013-2018 on Addressing Gender Based Violence. The government also established an
Inter-Ministerial Task Team on Addressing the Root Causes of Violence against Women and Children.
While the lockdowns and curfews in South Africa due to COVID -19 may have contributed to a decrease
in crime in general, the risk and incidence of gender-based violence (GBV) increased significantly.
3 Key Challenges and Opportunities

A policy analysis indicates that South Africa has sufficient policy and legislative frameworks for the
advancement of women’s empowerment and gender equality. This is also confirmed by the Department
of Women which in its action plan prioritizes policy implementation and monitoring. South Africa has
also made an effort to establish an architecture across government institutions with responsibilities to
advance gender equality. Gaps however remain in translating policies into actions and mechanisms to
track progress. Opportunities exist to strengthen government agencies capacity to advance gender
equality and monitoring these.

i. Land ownership is critical to the women’s empowerment, yet little data exists with respect to
ownership of land and property amongst women. A diagnostic on women’s land ownership is
an opportunity to identify the gaps and entry points for gender responsive land policies.

ii. The intersection of race, sex and poverty particularly contributes to increased vulnerability of
women. Women and young people constitute two-thirds of all unemployed particularly high in
the rural areas. Targeting the economic participation of women in terms of women
representation in places of employment and across all sectors will contribute to the
reduction of the disproportionate levels of poverty, unemployment, and inequality among
women.

iii. It is recognized that public procurement can serve as important policy instrument for
advancing marginalized groups, such as women-owned business. Women entrepreneurs and
business owners have been largely unable to benefit from government spending and
XL
 international sourcing despite the existence of affirmative procurement policies. Whilst South
Africa has made progress in making procurement more inclusive for women owned business
gaps still exist. There is therefore a need to support growth for women’s businesses as well
as government’s ability to track and report on these affirmative procurement policies.

iv. Access to finance is one of the most critical barriers for women’s enterprise growth. Women’s
financial inclusion in South Africa is relatively higher compared to other countries, however
financing to transform and grow women’s enterprise remains a challenge. Opportunities exist
to support capacity building and technical advisory services for women focused on enhancing
productivity, entrepreneurship and market access. Of importance are initiatives to incentivize
financial intermediaries to lend to women, and direct investment in women owned
businesses. South Africa has over ten state owned DFIs well placed to promote access to credit
for women. Strengthening the capacities of financial institutions to develop and implement
lending products that reach out to women is a strategic opportunity.

v. Education, skills development and training are central to gender equality. Education and training
improve access to the labour market, specifically to higher skilled occupations that receive
higher remuneration. Women are less represented in sectors such as construction, engineering
and mining. As seen in the analysis earlier, even though females outnumber males in the higher
education system, they dominate enrolment for lower-level degrees while men dominate within
higher level degrees. Efforts will be needed to promote the enrollment of young women in
science and technology domains and promote their participation through mentorship
programmes and internships.

vi. Investment in gender inclusive infrastructure is critical for the promotion of gender
equality. As noted earlier on, because of gendered social norms women typically spend
disproportionately more time on unpaid care work than men. This is in addition to their paid
activities, thus creating the “double burden” of work for women. Access to efficient and clean
energy and water systems will improve women’s productivity, health and safety. This frees up
women’s time to engage in paid work or educational opportunities and participate in community
life and decision-making. Infrastructure development also creates new job opportunities for
women and is a critical conduit for the promotion of women’s participation in traditionally male-
dominated sectors.

vii. The productivity of the South African women is significantly threatened by a high incidence of
Gender Based Violence. The high incidence and severity of GBV is too costly and therefore
cannot be ignored. KPMG estimates that based on prevalence rates of, between 20% and 30%
of women experiencing gender-based violence within a given year, the minimum economic
impact of that violence is between at least R28.4 billion and R42.4 billion for the year
2012/2013, representing 0.9% and 1.3% of GDP respectively.19 Addressing gender-based
violence therefore needs to be prioritized across all areas of work.

4 Potential Bank Response

The Country Strategy Paper for South Africa 2018-2022 did not contain any specific measures to address
gender inequalities which are a challenge for inclusive growth in South Africa. A key lesson learnt from
this is that while the Bank operations have a gender mainstreaming approach, lack of a policy
commitment at the strategic level could weaken gender mainstreaming approaches. In the midterm
review of the CSP there is therefore a need for specific interventions with indicators and targets clearly
articulated in the CSP and ultimately project log frames.

19
KPMG (2014), Too Costly to Ignore – The Economic Impact of Gender-Based Violence in South Africa KPMG
XLI
A focus on gender mainstreaming in operations will still be the main response, however, gender
mainstreaming will only be successful if specific indicators and targets are identified. Six areas have
been proposed below that could cut across different operations to advance gender equality and
empowerment of women.
• Strengthening the capacity of government institutions to implement government’s
policies and commitments to gender equality
• Promotion of employment opportunities for women through Bank interventions.
• Skills development for women especially in STEM sectors through apprenticeships and
mentorship programmes.
• Promotion of women’s empowerment through affirmative procurement policies.
• Innovative financing products and support Financial institutions capacities for gender
responsive lending.
• Building a body of knowledge on strategies that work to advance gender equality in
South Africa.

XLII
ANNEX 16. GOVERNANCE AND PUBLIC FINANCIAL MANAGEMENT NOTE

1. Background

South Africa has strong democratic institutions established under Chapter 9 of the Constitution and an
independent judiciary. The media is vibrant and opposition parties are very active and enjoy full political
freedom. South Africa's civil society and trade union formations are strong. Although South Africa is
among the top-ranked countries in the Mo Ibrahim Index in 2018 (7 out of 54), the report notes that the
country has seen a marked deterioration in transparency and accountability between 2008 and 2017 (-
14.3) with a steady decline each year. Despite the existence of comprehensive anti-corruption laws and
several anti-corruption agencies, their enforcement remains insufficient.

The overall status of the PFM in South Africa is considered satisfactory, with fiduciary risk assessed as
moderate. Budgeting and budgetary control are exercised in accordance with the Public Financial
Management Act (PFMA) of 1999, as updated.

South Africa does not have a stand-alone procurement law that covers all aspects of public procurement.
The PFMA No. 1 of 1999 is one of the most important pieces of legislation passed by South Africa's
first democratic government. In addition, there are over 80 different legal instruments governing public
sector supply chain management (SCM). The country's Constitution provides principles governing
public procurement, with a clause that states that 'organs of the state' (procuring entities) must respect
the principles of fairness, transparency, competitiveness and cost effectiveness. Public procurement is
highly decentralised, with about 600 procurement institutions (state bodies and thousands of supply
chain management (SCM) units).

The authorities continue to implement PFM, transparency and accountability reforms and take judicial
action against perpetrators. Significantly, in August 2018, the government established the Judicial
Commission of Inquiry known as the Zondo Commission whose mandate is to investigate allegations
of state capture, corruption, fraud and other allegations in the public sector. On 11 June, President Cyril
Ramaphosa appointed the members of the Presidential Council on State-Owned Enterprises (PCOSE),
which is tasked with developing a more robust framework for the governance of the country's state-
owned enterprises.

In July 2020, following allegations of widespread irregularities in the use of COVID-19 resources,
President Cyril Ramaphosa signed a proclamation authorising the Special Investigating Unit (SIU) to
investigate, in any state institution, allegations of corruption during or in connection with the state of
national disaster COVID-19. On 5 August 2020, the President further appointed a Committee of
Ministers to look into issues of corruption in the procurement of goods and services provided in order
to contain and respond to the COVID-19 pandemic.

Since the transition to democracy in the 1990s, the South African government has embarked on a
sustained programme of PFM reforms at national, provincial and local levels. The PFM reform strategy
was well sequenced, emphasising fiscal discipline, strategic resource allocation and efficient service
delivery. The PFMA, first promulgated in 1999, codified agreed PFM practices and has since been
regularly amended to address identified performance gaps. The period over which the 'new' law has been
implemented–twenty years–means that the human capital to run the system and the supporting
infrastructure (information technology (IT), rules and regulations) have been refined repeatedly and
accordingly. The system is now considered to be working as intended. The medium-term expenditure
framework (MTEF) is also fully operational. A bill to create a single regulatory framework for public
procurement to eliminate fragmented procurement requirements has been drafted and submitted for
consideration. The draft law provides for the establishment of a public procurement regulatory body,
whose functions include ensuring that institutions comply with the law and prudently spend public
procurement funds, and guiding officials and institutions to ensure compliance with the new law. The
new law provides for the establishment of a procurement unit in each purchasing institution, with
different committees responsible for the respective processes of the procurement cycle.

XLIII
2. Challenges / opportunities / gaps

The State Capture Report published by the Public Protector in 2016 highlights a number of governance
deficiencies relating to conflicts of interest and the awarding of contracts to politically connected
persons, particularly in state-owned enterprises. These allegations are being investigated by various
state bodies. Public discontent has also been visible in several service delivery protests and industrial
actions particularly at decentralized levels as well as sporadic waves of xenophobic attacks, mainly
driven by the underlying socio-and economic dynamics.

The Bank's current fiduciary risk assessment identifies areas for improvement, including:

(i) Lack of proper demand management and supply planning, leading to large gaps and price
escalation;
(ii) Problems of transparency as some tenders are not opened in public and published, the whole
evaluation process is not open to scrutiny, and progress and performance reports are not made
public;
(iii) Some use of discretion and subjective awarding of contracts by applying preferences;
(iv) Slow implementation of internal and external audit recommendations;
(v) Some donor project reports are not integrated.

The role of the OCPO within the National Treasury in regulating, professionalising and controlling the
country's public procurement system is not clearly defined. The OCPO does not have significant
sanctioning, auditing or investigative powers. With regard to building the capacity required to
implement and oversee the institutions' SCM system, training courses are offered to procurement
practitioners, but no specialised courses are offered to oversight institutions, the private sector or the
public.

In terms of portfolio performance, projects continue to face significant implementation delays due to
low capacity of implementing agencies.

3. Recommendations and the Bank's response

The Bank should continue to engage with the South African government to promote the initiative of
establishing a procurement unit in each procuring institution, with different committees responsible for
the respective processes of the procurement cycle. The creation of a procurement regulator is also
important, whose functions are to ensure that institutions comply with this law and spend procurement
funds prudently, as well as to guide and support officials and institutions to ensure compliance with the
new law.

4. Donor Mapping

Development partners in the sector

1 Development Bank of South Africa (DBSA)

XLIV
ANNEX 17. HUMAN CAPITAL NOTE-JOBS, SKILLS, SOCIAL PROTECTION &
HEALTH

1. Context
Human capital in South Africa has been facing many challenges for several years. The social protection
system was inefficient and fragmented, threatened by exclusion and racial, gender and spatial
inequalities. This situation has improved considerably over the years thanks to various state
interventions. Public spending on social protection has been and remains a priority for the South African
government (10.1% of GDP in 2015). Social security coverage has expanded from only 2.9 million in
1994 to 17.9 million (31% of the country's total population) beneficiaries of social grants in 2019
through child support grants, followed by old age allowances, disability allowances and old age
pensions. However, financial resources are limited by economic contractions20 and the expected
deceleration (-4% of GDP in 2020). In 2015, just over half (55.5%) of South Africa's population was
living in poverty and almost 13.8 million people (an increase of 2.8 million from 2011) were living in
extreme poverty.
South Africa has a working-age population of almost 40 million people, of which only 15 million are
employed, including 3 million in the public sector. The pandemic has increased unemployment by more
than 1 million to 7 million, which means that South Africa now has a record high unemployment rate of
33 percent.21 Unemployment rates, are particularly high among township and informal settlement
dwellers, recording as high as 29.1% (or 6 726 000 people) in the fourth quarter of 2019. While the
youth (aged 15-34 years), constitute a third of South Africa’s population, they are the most affected by
the triple challenge of unemployment and under-employment, poverty and inequality. High
unemployment, especially among the youths remains South Africa’s overarching development
challenge. Overall unemployment stood at 29.1% in the fourth quarter of 2019. The unemployment rate
among youth aged 15-24 years was much higher at almost twice the overall unemployment (58.1%)
during the same quarter. Though considered a source of ingenuity and a potential engine of productivity
and growth, more than 20.1 million young South Africans lack economic opportunities and face a
gloomy future of poverty and increased inequalities. Of the 1.2 million young people entering the labour
market each year, more than 65% remain outside of employment, education and training. More than 1
in 2 youths are unemployed, particularly those living in townships and informal settlements. The high
levels of unemployment continue to contribute to criminal activity concentrated in low-income, high-
density neighborhoods, where service delivery is inadequate, and poverty remains rife. If carefully
harnessed, however, South Africa’s youth could ignite a new wave of inclusive prosperity.
According to Business for South Africa (BSA), the number of jobs in the formal and informal sectors
are at risk as a result of the COVID-19 crisis. More than 60% of South Africans have suffered a loss of
income,22 and up to 1/3 of total employment could be destroyed, according to McKinsey modelling.
Moreover, the poor remain the most affected by shocks such as the COVID-19 pandemic. Public
spending on social assistance increased by 15% by the end of the 2019/2020 financial year, due to the
measures to combat COVID-19.

South Africa has a low Human Capital Index (0.43 23in 2018) with challenges of skill shortages and
limited capacity to nurture talent through education, training and employment of its youth. Education
levels remain comparatively low, with 59% of 25–64-year-olds having upper secondary education as
their highest qualification. There is also a strong mismatch of qualifications and fields of study (skills
mismatch) as well as skills shortages in some critical sectors of the economy. There is a gap between
the skills of the current workforce and the skills that businesses need to achieve their growth plans; in
2016, 31% of employers reported difficulties filling positions. The COVID-19 pandemic disrupted
education and training and highlighted the need for changes to address future pandemics. It also
highlighted the digital skills shortage and the urgent need to improve the skills of the workforce, with

20
South Africa's economy contracted by 1.4% in the fourth quarter of 2019, following a 0.8% contraction in the third quarter
21
World Bank 2021: Building Back Better from Covid-19 with a special focus on Jobs
22 May
McKinsey & Company: "Survey: South African consumer sentiment during the coronavirus crisis"; 5 2020.

23
https://databank.worldbank.org/source/human-capital-index
XLV
some companies offering online apprenticeships.

In the health sector, the country faces a quadruple burden of disease resulting from communicable
diseases such as HIV/AIDS and tuberculosis, maternal and infant mortality, and non-communicable
diseases (NCDs). Nevertheless, life expectancy has been increasing since 2007 and the infant mortality
rate has been declining, from 53.2 infant deaths per 1,000 live births in 2002 to 36.4 infant deaths per
1,000 live births in 2018. The advent of COVID-19 had a negative impact on general health care,
including access to medicines and treatment, TB and HIV/AIDS care, services for people with
disabilities and mental health services, as well as immunisations and sexual and reproductive health
services.

In addition to the health impacts associated with COVID-19 containment, there is emerging evidence of
increased food insecurity and malnutrition. The education and skills development sub-sector strategies
are implemented by the Education and Training Sector Authorities (SETAs)24. The SETAs are expected
to facilitate the implementation of sectoral skills interventions that contribute to achieving the objectives
of the third National Skills Development Strategy (NSDS III25), namely to meet employer demands and
achieve results. SETAs develop sectoral skills plans (SSPs) and are the authority on labour market
information, ensuring that skills needs and strategies to meet them are clearly defined in sectoral skills
plans. In the education sector, TVET is supposed to play an important role in preparing young people
for the world of work, but these structures at the systemic level have been subject to extensive changes
and are not yet firmly established. SASSA receives and processes applications for social assistance from
individuals. The National Development Plan (NDP) was put in place to increase the number of students
enrolled in higher education institutions (HEIs) to 1.62 million by 2030 in order to effectively address
skills shortages in South Africa.

In the transition to democracy, South Africa is witnessing a reform of the social protection system (SP)
that entitles all people to access to health, food, water and social security. On the legislative front,
reforms have been adopted to restore social justice in the SP system, notably: the gradual extension of
the age of eligibility (18 years) for the child support allowance; the equalisation of the age to 60 years
for the eligibility of men and women for the old age pension; and the adoption in August 1997 of the
White Paper for Social Protection

2. Challenges / Opportunities / gaps

Jobs: COVID-19 has undoubtedly worsened the circumstances of youth in the labour market in South
Africa. The high unemployment (56%) and inactivity amongst the youth (32 %) is indeed a worrisome
issue for the country. The high-level unemployment is driven mostly by insufficient job opportunities
and relevant technical skills for self-employment and employability.

The government envisages that small businesses (SMEs) will create up to 90% of jobs by 2030. The
challenge though is that these SMEs generally have a low survival rate (with 63% failing within the first
18 months of operation), mainly due to lack of access to finance; inadequate technical and business
development skills and lack of experienced mentorship and coaching services for young entrepreneurs
which leaves them at a competitive disadvantage in the marketplace.

Education and Skills Development: South Africa continues to make efforts to improve educational
attainment, which is still comparatively low with over half (59%) of 25-64-year-olds having upper
secondary education as the highest qualification; 26% not having attained upper secondary education
and only 7% of adults having tertiary education. South Africa also has a high percentage of youth that
are neither employed nor in education or training (NEET), with about 48.6 % of 20-24-year-olds being

24
The Sector Education and Training Authority (SETA) is a vocational training organisation in South Africa.
As of March 2011, there were 21 SETAs. Each SETA is responsible for the management and development of
apprenticeship programmes, internships, unit skills programmes and apprenticeships within its jurisdiction.
25
In NSDS 3, the focus is on institutional learning linked to professionally oriented programmes.
XLVI
NEET in 201826. The country also has a low Human Capital Index of only 0.4327 in 2018 with skills
shortage challenges and a limited ability to nurture talent through educating, training and employing its
youth.
Nevertheless, South Africa faces high qualification and field-of-study mismatch (skills mismatch) as
well as skills shortages in some critical sectors of the economy. There is about 52% of qualification
mismatch in South Africa and more than 30%28 of South African workers are employed in an occupation
unrelated to the field of study of the qualification that they hold. As regards skills shortages, it is
noteworthy that technology and engineering firms are struggling the most with the shortage of
adequately skilled employees. Also, the gap between the skills of the current workforce and the skills
businesses need to achieve their growth plans is growing and in 2016, 31% of employers reported
difficulties in filling positions. In order to meet South Africa’s skills shortages, the National
Development Plan (NDP) targets to increase student enrolment in Higher Education Institutions (HEIs)
to 1.62 million by 2030. Enrolment in HEIs (both public and private) stood at 1 070 00029 in 2019,
indicating that an increased enrolment of 35% is needed between 2019 and 2030 to achieve the NDP
target. Should the current growth trend in enrolment continue, it is quite likely that the government
would meet its target by 2030. However, these targets have major implications for the infrastructure of
HEIs, the availability of high-quality lecturing staff and other financial and human resources needed to
ensure the continued provision of high-quality higher education in South Africa. The NDP also targets
to increase graduation rates to more than 25% by 2030. The average graduation rate at public HEIs was
about 22% in 2016, indicating a high dropout rate and the need for a concerted and comprehensive set
of interventions to achieve the set target by 2030. Part of the solution to improve the quality of education
provided by HEIs is to increase the number of lecturing staff who have doctorate degrees, expand HEI
enrolment capacities and improve efficiencies by reducing dropout rates.
In the age of the 4th Industrial Revolution (4IR), the education and skills development system in South
Africa needs to be adapted and investments carried out to ensure youths are imparted with the right skills
mix that enhance productivity, competitiveness and resilience to shocks. It is estimated that technology
could displace about 3.3 million30 existing jobs in South Africa by 2030 and could compound the severe
youth unemployment challenge the country is facing if measures are not taken in a timely manner to
ensure youth are imparted skills for the jobs of the future. The COVID-19 pandemic has disrupted
education and training and brought about the need for changes to respond to future pandemics. Digital
transformation has been accelerated with some schools going digital in a matter of weeks despite having
plans to go digital over 10 years. The pandemic has also laid bare the shortage of digital skills and the
urgency of upskilling the workforce with some companies carrying out online apprenticeships. Almost
all trainees in the country (98%)31 have been affected by the pandemic and about a third of them might
not able to return to their training, even with online courses being adopted. Closing the education and
skills digital divide in South Africa will ensure that rural students and those from disadvantaged
backgrounds will continue learning in the current and future pandemics.
In order to respond more effectively to the skills development requirements of the 4IR and pandemics,
the National Skills Development Plan (NSDP) needs to be revised to make it more adaptable and address
the emerging challenges. Interventions should also take into account regional dynamics in terms of skills
needs, aligning with provincial growth and development strategies, and allowing for analysis of trends.
Efforts will need to be directed to ensuring that programmes offered by HEIs especially Technical and
Vocational Education and Trainings (TVETs) are responsive to those identified needs. While the TVET
sector is expected to perform an important role in preparing young people for the workplace, the TVET
structures at systemic level have been subject to wide ranging change, and are not yet firmly established.

26
https://www.oecd.org/education/education-at-a-glance/EAG2019_CN_ZAF.pdf
27
https://databank.worldbank.org/source/human-capital-index
28
https://oecdskillsandwork.wordpress.com/2017/11/14/getting-skills-right-in-south-africa
29
http://www.statssa.gov.za/publications/Report-92-01-05/Report-92-01-052017.pdf
30
https://businesstech.co.za/news/business/338977
31
https://mg.co.za/special-reports/2020-06-29-covid-19-impact-on-education-skills-development-and-training/
XLVII
At the institutional delivery level, the sector is large, and the institutions are complex, offering a range
of different curricula and being funded from a number of different sources.

Health: In South Africa, the high prevalence of co-morbidities, especially diabetes, hypertension and
obesity have been associated with the relatively high proportion of severe illness leading to
hospitalisation. While this put a strain on critical care resources and facilities at the peak of second and
third waves, the low diagnostic capacity at primary care level has resulted in large numbers of people
with undiagnosed non-communicable diseases. This has also exposed the pervasive poor access to health
care for those in historically underserved areas which continue to bear the largest burden of ill health.
This is compounded by the disproportionate health expenditure in large metropolitan areas and tertiary
hospitals and under-investment in primary care services which are accessed by 80% of the population.

Opportunities for Bank Support in Human Capital Sector:

Jobs: Opportunities for the Bank to support the Government to create jobs for youth along some of the
identified pathways include:
1. Transformational private sector development including industry value chain development to create
more decent jobs. This can focus on South Africa’s key growth sectors such as agriculture and agro-
processing value chain, tourism, blue economy, high value services and trade (See AEO 2019
recommendations). The structure of the South African Economy, which was built on the extraction
of minerals, where ownership and control are highly concentrated, remains largely untransformed.
Significant levels of public investment in infrastructure, which kept the economy afloat following
the 2008 global financial crisis, has been tapering off as consumption spending and debt servicing
is consuming a greater portion of the budget.

2. Formalizing the informal economy with incentives and growth pathways for micro, small and
medium enterprises. This includes the fact that for the South African economy to grow and for jobs
to be created, it is essential that there is a substantial increase in domestic demand. This means that
South African companies, government and consumers must buy local in partnership with Proudly
SA as well as commitments to local procurement initiatives like ‘Buy SA Circle’, as part of the
operational strategies of many of the existing large and industrial companies domiciled in SA such
as Nestle and Coca Cola. Initiatives such as the Makhoba Youth Empowerment Program supported
by Nestlé and Inyosi focusing on Skills and Enterprise and Supplier Development have the potential
to create new jobs and entrepreneurship opportunities in a rural area marked by high levels of
poverty and unemployment, particularly when they leverage the mainstream value chains of such
global agribusiness companies as Nestlé. This could also create opportunities for commercialization
of rural enterprises in along the value chain. The South African government spends billions of Rands
and can also reprioritize public spending to support job creation.

3. Reinvigorating the spirit and practice of entrepreneurship at an early age and developing a robust
entrepreneurship ecosystem including access to finance, access to markets and technology. South
Africa has the logistics to seize the opportunities presented by regional integration and the
establishment of an African Continental Free Trade Area (AfCFTA) to produce more goods for
other African markets. This is already happening with fast moving consumer goods chains like
SPAR, Checkers and other Fast Food Chains, but still has enormous potential to further take
advantage of regional integration.
The Presidential Jobs Summit held in 2018 is also an important initiative to coordinate job creation
commitments from both the Government and Private Sector. The Presidential Youth Empowerment
Intervention, focusing on youth-led SMMEs and entrepreneurship development, policy and promotion
of private sector networks and linkages, is among the programs arising from the outcomes of the
Presidential Jobs Summit.

XLVIII
Education and Skills: The Bank support is important to ensuring that the education and skills
development system in South Africa needs to be adapted and investments made to ensure that young
people receive the right mix of skills that improve productivity, competitiveness and resilience to shocks.

In order to respond more effectively to the skills development requirements of the 4IR and pandemics,
the National Skills Development Plan (NSDP)32 needs to be revised to make it more adaptable and
address the emerging challenges. Interventions should also take into account regional dynamics in terms
of skills needs, aligning with provincial growth and development strategies, and allowing for analysis
of trends. Efforts will need to be directed to ensuring that programmes offered by HEIs especially
Technical and Vocational Education and Trainings (TVETs) are responsive to those identified needs33.
While the TVET sector is expected to perform an important role in preparing young people for the
workplace, the TVET structures at systemic level have been subject to wide ranging change and are not
yet firmly established. At the institutional delivery level, the sector is large, and the institutions are
complex, offering a range of different curricula and being funded from a number of different sources.
Health: Opportunities to build back better through, Industrialization and Regional Integration
As South Africa transitions into the COVID-19 recovery phase, greater investment in some of the areas
of innovation in health care are worth revisiting. These include building and expanding the
pharmaceutical and medical commodities/equipment manufacturing opportunities initiated by the
pandemic such as the production of ventilators, personal protective equipment and drugs such a
dexamethasone which has been found to reduce mortality in hospitalized patients with covid-19 who
required respiratory support.
In addition, the hosting of three covid-19 vaccine trials by the country’s leading universities and research
institutions offers an opportunity for investment in the fledgling vaccine manufacturing industry.
Expanding the manufacturing of vaccines, medicines and medical equipment and commodities in South
Africa will benefit regional supplies and reduce dependency on imports which are extremely vulnerable
to supply chain disruptions such as obtained during the covid-19 pandemic. The planned establishment
of a technology transfer hub for mRNA vaccines in South Africa in partnership with the WHO and
partners from COVAX marks a major advance in efforts to build vaccine development and
manufacturing capacity in South Africa and the continent at large.
Routine data on selected primary care indicators in the public health system in SA over the period from
the first COVID-19 case in March 2020 through to December 2020 give a clear picture of the negative
indirect consequences in terms of use and quality of care. Almost across the board there was a decrease
in use, with far fewer people visiting health facilities, using head counts (number of patient visits)
as a proxy.

3. Donor Mapping
Development partners in the sector
1 World Bank (WB)
2 UNICEF
3 Development Bank of South Africa (DBSA)
4 WHO
5 EU
6 ILO

32
The NSDP seeks to ensure that South Africa has adequate, appropriate and high quality skills that contribute
towards economic growth, employment creation and social development and created in March, 2019.
33
TVET Sub Sector Report for 2020-2021Sector Skills Plan from Department of Higher Education and Training,
XLIX
 34
ANNEX 18. CAPITAL MARKETS NOTE

1. Context

a. As one of the world's 20 largest stock exchanges by market capitalisation, the Johannesburg Stock
Exchange (JSE) offers issuers access to deep and liquid capital markets in a regulated and secure
market, according to the World Federation of Stock Exchanges. The JSE's capital markets promote
innovation, capital raising and shared prosperity. As a leading global exchange, the JSE co-creates
and unlocks value through innovative products and services that meet the needs of local businesses.
The JSE had approximately 472 listed companies. As of Q3 2020, the JSE had approximately 500
listed companies and a market capitalisation of over ZAR 11 trillion, as well as an average monthly
trading value of ~ZAR 97 billion.

The JSE has proved remarkably resilient during the global COVID-19 crisis. The JSE All Share
Index is performing reasonably well compared to the same period last year, although it has gone
through some of the most volatile periods in recent history. South Africa's local capital markets have
protected and cushioned investors through rand hedging and dual listings, which were a special
feature of South Africa compared to other emerging markets.

b. On the policy and regulatory front, the South African regulator is considering potential proposals to
relax exchange controls. For example, securities with a foreign underlying that are traded, cleared,
and settled in Rand are currently classified as a foreign holding, which places a burden on fund
managers' foreign allocations. A study is underway to classify these securities as local.

1) Challenges / opportunities / gaps

International investors face some obstacles to trading on the JSE as their guarantees and settlements
must be made in local currency. The advantage of removing exchange controls would be that South
Africa would improve its chances of becoming an OECD country, which would open up inward
investment considerably. Therefore, one of the real possibilities is for the JSE to come up with a policy
proposal to allow dollar-denominated margins and settlements.

The stimulus measures implemented by South Africa and other countries to manage the economic fallout
from the Covid-19 crisis have had the unfortunate consequence of pumping cheap money into the global
economy, widening the gap between the economies of emerging and developed countries. This debt
overhang will limit potential investment and therefore growth. To overcome this challenge, the JSE is
responding to this trend by exploring the possibility of introducing private market investments. In
other words, an infrastructure to facilitate private market capital formation for SMEs and potentially
for infrastructure - both for South Africa and in Africa.

In the post COVID-19 era, the SME sector is a growth node that needs as much support as possible.
Asset managers are largely investing in the highly liquid Top 40 stocks, leaving the other 300 or so
stocks and the dedicated SME exchange in a relatively illiquid and therefore more speculative space. It
is important for the South African economy to see more investment in the SME sector, as this will
increase liquidity and establish capital formation for this vital growth node of the economy.

2) Recommendations and the Bank's response

The Bank currently supports the JSE, directly and indirectly, to ensure more liquid, integrated, and
regulated capital markets. For example, the Bank is supporting the interconnection between the JSE and
the Stock Exchange of Mauritius through a MICTAF grant. Once implemented, the Bank's support will
result in more flexible dual listing and trading between the two exchanges. In addition, the Bank is

34
It is the main exchange of the Johannesburg Stock Exchange, as well as the alternative exchange (AltX)
dedicated to SMEs.
L
leading a continental initiative to support the Africa Exchange Linkage Project (AELP). Once fully
deployed, the AELP will enable the JSE to be connected to other African exchanges in Abuja, Cairo,
Casablanca and Nairobi. This is an important step that, once implemented, will create more liquid
exchanges, attract long-term funding from institutional investors and establish well-regulated and
integrated African financial markets.

3) Donor Mapping

Development partners in the sector

1 Development Bank of South Africa (DBSA)
2 Johannesburg Stock Exchange (JSE)
3 Mauritius Stock Exchange
4 The Middle Income Country Technical Assistance Fund (MICTAF)
5 Africa Exchange Linkage Project (AELP)

LI
ANNEX 19. TRANSPORT NOTE

1. Context

The development of the transport sector in South Africa is under the aegis of the Department of
Transport (DoT), which has a general mandate to ensure the provision of safe, efficient, reliable,
environmentally friendly and affordable transport services.

The transport sector in South Africa comprises five sub-sectors:

(i) Road transport: South Africa's road network of about 750 000 km is the 11th largest in the world
and the largest on the continent. Its replacement cost is estimated at around ZAR 2 trillion (~ USD 135
billion) and it is essential to connect the country to its neighbours. The highest functional class consists
of completely paved national roads (~22,200 km), provincial roads (~272,800 km) and municipal roads
(~323,000 km).

 The large maintenance backlog of about ZAR 200 million is a major challenge for the sub-
sector, as well as sustainability needs. The maintenance backlog mainly concerns provincial
roads.

(ii) Rail transport: South Africa's rail network is approximately 20,000 km long and is predominantly
of the Cape gauge (1067 mm) , popular in the Southern Africa region. Its operation and maintenance are
distinguished in terms of freight and passenger transport. Two agencies operate the rail network: (i)
TRANSNET which is responsible for non-passenger operations and, (ii) PRASA which is responsible
for passenger operations.

 The lack of investment in the rail network, particularly in passenger rail assets, poses significant
problems for the provision of reliable passenger services, which is one of the main challenges
of the sub-sector.

(iii) Air transport (aviation): The aviation sub-sector is overseen by the Airports Company of South
Africa (ACSA) which owns and operates nine national airports. OR Tambo International Airport
(Johannesburg) and Cape Town International Airport are the busiest airports in sub-Saharan Africa.
Adding King Shaka (Durban), they account for almost 90% of ACSA's 39 million annual passenger
movements.

 The main problems in the sub-sector result from the perspective of the national company SAA,
which has had a poor performance in recent years and has required numerous government
bailouts. This situation has been exacerbated by the COVID-19 pandemic.

(iv) Maritime and Ports: The Transnet National Ports Authority, a division of Transnet Limited, is
responsible for the control and management of the eight commercial ports on the South African
coastline. These include the main seaport of Durban on the eastern Indian Ocean coast, a key terminal
point on the North-South corridor. The national Department of Transport, through the Ports Regulator,
regulates the sub-sector and is responsible for the safety of maritime services.

 One of Transnet's main concerns is the development of Durban's Dig-out port to expand the
container handling facilities at the port.

(v) Pipelines: Transnet Pipelines, a division of Transnet SOC Limited, is mandated to manage pipelines
in South Africa. It owns, operates, manages and maintains a network of 3 800 km of pipelines. The
network, which crosses five of the country's nine provinces, consists of high-pressure oil and gas
pipelines.

LII
Transport provision in the country is a function that is legislated and executed at all levels of government
in South Africa: national, provincial and municipal. At the national level, the DoT is responsible for the
development of the transport sector in South Africa.

The main function of the department is to promote transport as a catalyst for social and economic
development by ensuring: an efficient and integrated transport network; addressing any imbalances in
the network; improved rural mobility for basic services; improved public transport systems; job creation
opportunities; environmental/climate change integration.

South Africa has developed various strategies and policies to address specific elements of the sector
that are geared and intended to respond to the National Development Plan (NDP), the New Growth Path
(NGP) and the National Infrastructure Plan (NIP). The DoT's interventions are part of the Department
of Transport's Strategic Plan 2015/16 - 2019/20, which sets out the sector's approach to improving
service delivery and to address the country's three key challenges of poverty, inequality and
unemployment.

The service delivery targets for the transport sector are aligned with the government's priority outcomes
and should specifically address four outcomes: Outcome 4 - Decent jobs through inclusive growth,
Outcome 6 - An efficient, competitive and responsive economic infrastructure network, Outcome 7 -
Vibrant, equitable and sustainable rural communities contributing to food security for all and Outcome
10 - Protecting and enhancing our environmental assets and natural resources

The Transport White Paper (1996) sets out the configuration of the transport sector in South Africa.
NATMAP 50 now outlines the way forward for the development of the sector. The government is aware
that the realisation of the NDP 2030 vision is subject to various medium-term constraints, including
regulatory uncertainty. Reforms identified that would have an impact on the sector include: (i)
construction of essential infrastructure and increase in the number of jobs; (ii) job creation and skills
development; (iii) regulatory and business environment; and (iv) incentives, new sectors and new
activities.

2. Challenges / opportunities / gaps

The transport sector in the country faces certain challenges, the main ones being addressing the spatial
distribution of the country and providing efficient transport services to the population. While South
Africa can be described as having a generally well-developed transport system, there are clear gaps in
the penetration, distribution, diffusion, and reliability of affordable public transport. An integrated
modal approach taking into account road and rail is essential.

The aim of transport system development is to promote integration between land use and transport
planning, as well as a better maintained infrastructure.

There are many opportunities for the development of the transport system: The Bank participated in
the preparation and conduct of the Symposium on Sustainable Infrastructure Development (SIDS) held
in June 2020. The Bank's participation in the Transport Sector Technical Working Group provided an
overview of proposed interventions in the sector. The SIDS process aimed to generate a pipeline of
projects to contribute to the regeneration of the economy and to provide visibility of the pipeline to
potential financiers.

3. Recommendations and the Bank's response

The Bank has the opportunity to partner with government to further develop the transport sector,
although this is more likely to be at sub-national level, given the National Treasury approach.

Based on the country sector reviews and country guidance, it is recommended that the Bank's work in
the sector be aligned with Outcome 6 - Efficient, competitive and responsive economic infrastructure

LIII
and Outcome 7 - Vibrant, equitable and sustainable rural communities contributing to food security for
all.

The specific areas where the Bank should continue its partnership with the Government are proposed as
follows:

• Improved national transport planning to develop long-term transport plans that synchronise with
land-use planning and align with the infrastructure investment activities of provincial and local
governments.
• Development of the integrated transport plan.
• Development and implementation of the approved modal split plan between road and rail for
containerised goods; transport more containerised goods by rail.
• Improvement and preservation of national, provincial and local road infrastructure.
• Strengthening road traffic management.
• Improvement of public transport.
• Strengthening institutional arrangements for public transport
• Improving transport infrastructure and public transport in rural areas.
• Implementation of the access road development plan to improve rural road infrastructure.

4. Donor Mapping

Development partners in the transport sector in South Africa

1 Development Bank of South Africa (DBSA)
2 European Investment Bank (EIB)
3 Kreditanstalt fur Wiederafbau (KfW)
4 World Bank (WB)
5 Japan International Cooperation Agency (JICA)
6 French Development Agency (AFD)

LIV
ANNEX 20. NATURAL RESOURCES NOTE

1. Introduction

The analytical note on Natural Resources has been constrained to two specific thematic areas (Mining
and Marine Resources & Blue Economy) where South Africa has competitive advantage to harness the
natural capital to support socio-economic development.

2.0 The Mining Sector

2.1 Context

Mining has been the main stay of South Africa’s economy. Although gold, diamonds, Platinum Group
Metals (PGMs) and coal are the most well-known among the minerals mined, South Africa also hosts
chrome, rare earth elements, vanadium, titanium among others. South Africa possesses ore reserves
amounting to more than US$2.5 trillion, with 16 commodities ranked in the top 10 internationally. In
2019, the mining sector contributed 8.1% to GDP, R94.7 billion direct investment; and R348.2 billion
of merchandise exports (a third of total export earnings). For every direct mining job, there are at least
two other jobs created in the allied industries. The sector is therefore a significant source of primary
income for the economy (Statistics South Africa, 2019). However, there is a challenge of declining
employment in this sector. Given the size of the sector and the large range of minerals, it is surprising
that mining continues to lose jobs in South Africa (figure 1: see annex). Since 2012, employment in the
mining sector has consistently been declining. Figure 1 shows about 13% decline.

Despite its immense contribution to the economy, the mining sector has been on a decline particularly
with respect to gold production. The 2019 average mining production declined by 2.8%, similar to the
rate of decline recorded in 2018. Analysis of the continued declining trend shows that since 2009,
mineral production has not risen above levels achieved in the year 2000. This challenge has been
attributed to various factors which include logistical constraints (such as competition for rail capacity
with other sectors); utility disruptions, particularly in 2019 due to electricity shortages and load-
shedding; industrial actions and community unrests in some mining areas. A notable feature of 2019
was the loss of approximately 26 metric tonnes of gold valued at approximately R1.6 billion as a direct
result of the Association of Mineworkers and Construction Union (AMCU) four-month strike in the
gold industry.(Mineral Council South Africa, 2019).

Impact of covid-19 on the mining sector: South Africa projected an end of year reduction in production
of between 8 to 10% (Minerals Council, 2020). Mining production decreased by 47.3% year-on-year in
April 2020 (Statistics South Africa). Overall, total mining production in the country in the first four
months of 2020 fell by 14% relative to the same period in 2019. This level of production decline is
unprecedented in recent times as Figure 2 (see annex) makes clear. The mining GDP of the country fell
by 6% in the first quarter of 2020. This was the highest fall in sector GDP within the country. Given this
drastic fall in sector output, there should be a corresponding decline in government revenues.

Policy, regulatory and institutional framework

The mining sector is principally regulated by the Ministry of Mineral Resources and the Department of
Mineral Resources and Energy. Other collaborating ministries include those responsible for industry,
trade, finance and labour. Additionally, institutions such as the Council for Geoscience also play
significant roles in ensuring effective governance of the sector.

2.2 Challenges and Opportunities

Challenges

LV
Cost of power and other inputs: South Africa’s mining sector has been plagued with unreliable power
supply coupled with a steep and unpredictable increase in electricity prices. In 2019, the energy regulator
granted Eskom tariff increases which effectively amounts to a 9.8% increase per year over a 3-year
period. Despite plans for mining companies to build their own generation plants, this is yet to
materialise.

Falling Productivity: Most of the underground mines are facing challenges of falling productivity due
to increasing depth, resulting in higher energy cost and sometimes lower mining grades.

Inadequate Mineral Exploration: Known reserves of iron ore are depleting at a faster rate than the
discovery of new ones due to limited mineral exploration. Thus, there is the need to promote greenfield
exploration through incentives.

Illegal Mining: Illegal mining is a significant challenge to socio-economic development. In addition, it

increases the risk of establishment of alternative and illicit economies as all illicitly produced gold is
fed into the illegal market where the government loses expected revenues - royalties, income tax and
Value Added Tax. However, this sub sector, when well organised could provide legal employment
avenues as well as unlock revenues to Government.

Opportunities

Key opportunities include significant mineral resources to serve as feedstock for industrial development.
South Africa is well endowed with natural resources and relatively high infrastructure quality compared
to other countries in Africa. South Africa is the leading producer of Manganese globally. It also produces
gold, coal, cobalt and nickel. For the Low carbon future, manganese, cobalt and nickel will be needed
for manufacturing battery for energy storage. This is a huge opportunity for South Africa as it prepares
to add more renewable energy sources to its energy needs. This will also address the high carbon
intensity energy generation using coal. The mineral endowments and infrastructure present South Africa
with a unique opportunity to become a regional centre for battery manufacturing for Electric Vehicles
(EVs) among others.

2.3 Recommendations

Improve Investment Environment to Encourage Mineral Exploration

Current mining rate exceeds discovery of new deposits. It is therefore important for the Government to
improve the investment environment to bring policy certainty.

Provide Support to the Artisanal and Small-Scale Mining (ASM) Sector

ASM is a sector that holds potential for addressing Africa’s unemployment challenge when properly
managed. Government should therefore strengthen formalisation efforts by identifying the critical
bottlenecks and provide solutions to address them.

3.0 Marine Resources and the Blue Economy

3.1 Context

With 3,600 km of coastline, South Africa is the only country to have a maritime space on both the Indian
and Atlantic Oceans. The Exclusive Economic Zone (EEZ) is 1.07 million km², plus the 180,000 km²
marine biodiversity sanctuary surrounding the sub-Antarctic islands of Prince Edward.

The fisheries of South African waters vary enormously from region to region, the most productive area
being the northwest coast, which is part of the Benguela Current system, the site of intense upwelling
that directly influences planktonic production. This area is less rich in terms of biological diversity, with
about 800 species, compared to 1340 species present in the eastern waters.

LVI
In 2018, capture fisheries produced 619,300 tonnes, of which 7% were caught in inland waters. More
than 50% are small pelagic (anchovies, pilchard) caught on the west coast, followed by hake (20%).
These figures have been relatively stable over the last 5 years, as shown in Fig.3 (FAO, 2018). In total,
the fishing industry employs an estimated 28,000 people in the capture sector, while more than 80,000
people are employed along the fishery value chain. Recreational fishing is very popular in South Africa,
with more than 500,000 sports fishers and non-consumptive uses of living marine resources such as
whale and shark viewing, are of great economic importance. Currently, South Africa has 42 Marine
Protected Areas (MPAs), almost half of which are offshore35. The development of MPAs aims to cover
10% of the waters under jurisdiction as provided for in Aichi Target 11, and will allow South Africa to
diversify its tourism economy, which is a major job creator.

Although aquaculture is fast developing, its contribution to the economy is still minor. In 2018,
aquaculture production reached 7,870 tonnes, of which 75% in marine waters. South Africa has a
relatively low per capita consumption of fish (6.1 kg in 2016) but is traditionally a net exporter. In 2017,
the value of exports was USD 598 million compared to USD 424 million for imports (FAO, 2019). The
contribution of the capture fisheries sector is estimated at only 0.3% of GDP, but taken as a whole, the
marine economy would contribute over USD 3.3 billion in 2019, or 1% of GDP (RSA, 2019).

The national fisheries sector strategy is enshrined in the Marine Living Resources Act of 1998 (MLRA)
Fisheries policy is founded on two principles of inclusiveness and sustainability. The 2014-2019
strategic action plan establishes 3 strategic objectives: i) Ensure increased production and productivity
as well as value chains; ii) lead and coordinate government food security initiatives and iii) Ensure the
conservation, protection, rehabilitation and recovery of degraded natural resources.

Fisheries regulations are very elaborate and support the various fisheries management plans which are
based on high quality scientific research. South Africa also implements important means to combat IUU
fishing. The fisheries sector is managed by the Department of Environment, Forestry and Fisheries
(DEFF). However, fishing is increasingly managed within the framework of Marine Spatial Planning as
defined by the Act No. 641 of 2018 (MSPA). This Law establishes a broader governance framework,
which brings together all the Ministries concerned36 within a Ministerial Committee.

South Africa has also adopted since 2015 an ocean economy strategy, Operation Phakisa, which is
expected to bring a USD 10 billion increase in GDP and the creation of one million jobs by 2030 through
investment in four key growth areas: maritime transport and manufacturing, aquaculture, offshore oil
and gas, and protection of the marine environment (Spamer, 2015). Finally, South Africa is a member
of all regional fisheries management and marine conservation organizations37.

3.2 Challenges and Opportunities

Challenges

The blue growth sectors have been severely affected by the Covid-19 pandemic in South Africa, in
particular maritime transport and tourism, but also populations dependent on fishing.

Marginalization of small-scale fishing: Small Scale fishing is not sufficiently considered, despite its
essential contribution to food security and the livelihoods of many poor communities. On June 1, 2020,
the DEFF designated the fishing sector as a priority sector that could benefit from a relaxation of sanitary
measures in the face of the Covid-19 pandemic. At the same time, a study conducted by Nelson Mandela

35
https://www.marineprotectedareas.org.za/
36(defense, energy, environmental affairs, fisheries, mineral resources, planning monitoring and evaluation, public
enterprises, science and technology, telecommunications, tourism, transport, rural development and land affairs)
37
International Commission for the Conservation of Atlantic Tunas (ICCAT), South East Atlantic Fisheries Organization (SEAFO),
Benguela Current Commission (BCC), Southwest Indian Ocean Fisheries Commission (SWIOFC), Commission for the Conservation of
Antarctic Marine Living Resources (CCAMLR) and Southern African Development Community (SADC) protocol on Fisheries, etc.
LVII
University showed that small-scale fishing remained marginalized and vulnerable, and that its informal
nature did not allow it to benefit from public aid.

Weak Governance: Governance of the fishing sector is not inclusive enough. The fisheries management
plans do not involve professional organizations of small-scale fishing and more generally, the
governance remains weak in the maritime economy sector.

Opportunities

More inclusive governance would be consistent with the objective of developing a South African ocean
economy, based on the implementation of maritime safety and development objectives (Walker, 2018).
Great opportunities exist in the aquaculture and marine biotechnology sectors, as well as in marine-
based energies (swells and tides), which are not really considered in the current Blue Economy strategy.

4.0 Proposed Bank Interventions

4.1 Mining

• Policy and investment support on mineral value chain development especially South Africa’s
quest to add more renewable energy sources to its energy needs. The Bank can facilitate the
conduct of Pre-Feasibility Studies of Establishing Africa’s Battery Manufacturing Value
Chain. A recent study by the African Natural Resources Centre (ECNR) on battery minerals
revealed that Africa has all the ingredients for various chemistries for the Lithium ion battery
manufacturing. However, in order to attract the needed funding for the projects, a pre-feasibility
study needs to be conducted based on country readiness and how it can benefit from the various
segments of the value chain: raw materials; refineries; precursors and battery assembling.

4.2 Marine Resources and Blue Economy

• The Bank can provide i) technical assistance to support the strengthening of governance in the
management of marine resources, ii) financial support to the private sector for the development
of aquaculture and marine biotechnology, as well as iii) guarantees for the large-scale
development of clean marine-based energy.

Donor mapping

• According to the OECD report on ODA in the maritime economy sectors (OECD, 2020), South
Africa received an average of USD 3.65 million per year between 2013 and 2018 (Fig. 4 -
Annex). This ODA comes essentially from bilateral donors. The sectors concerned are mainly
related to the sustainable maritime economy: scientific research and high-level education,
sustainable fisheries management, protection of the marine environment.

References
Baust, S.; L. The; S. Harper and D. Zeller. 2015. South Africa’s Marine Fisheries Catches (1950–2010). Sea
Around Us, Fisheries Centre, University of British Columbia, 2202 Main Mall, Vancouver V6T 1Z4, Canada
FAO. 2018. Fishery and Aquaculture Country Profiles: The Republic of South Africa. Rome, Dec. 2018.
FAO. 2019. Fisheries and Aquaculture yearbook 2017: Commodities. FAO, Rome. 268 pp
Gilau, A.M. and P. Failler. 2020. Economic assessment of sustainable blue energy and marine mining resources
linked to Large Marine Ecosystems. Env. Dev. (2020).
Government Gazette. 2019. Act No. 16 of 2018: Marine Spatial Planning Act, 2018. Vol. 647, 06 May 2019, No.
42444. Cape Town
Government Gazette. 2014. Act No. 5 of 2014: Marine Living Resources Amendment Act, 2014. Vol. 587. 19
May 2014 No. 37659. Cape Town
Kainge, P. et al. 2020. Fisheries yields, climate change, and ecosystem-based management of the Benguela
Current Large Marine Ecosystem. Environmental Development, https://doi.org/10.1016/j.envdev.2020.100567
Minerals Council, 2020. Minerals Council. [Online] [Accessed September 2020].
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OCDE. 2020. Sustainable Ocean for All: Harnessing the Benefits of Sustainable Ocean Economies for Developing
Countries, The Development Dimension, Éditions OCDE, Paris, https://doi.org/10.1787/bede6513-en.
Paterson, A.R. 2009. Legal Framework for Protected Areas: South Africa. IUCN- Environmental Policy and Law
Papers. No. 81. 47pp
Republic of South Africa. 2019. Oceans Economy: Operation Phakisa. Summary Progress Report, 12 Feb. 2019.
Spamer, J. 2015. Riding the African Blue Economy Wave: A South African Perspective. 4th IEEE International
Conference on Advanced Logistics and Transport (ICALT). 2015.
Statistics South Africa, 2019. Annual Statistics, Johannesburg: Statistics South Africa.
Statistics South Africa, 2020. Statistics South Africa. 2020. “Quarterly GDP”, Pretoria.
Walker, T. 2018. Securing a sustainable oceans economy: South Africa’s approach. The Institute for Security
Studies (ISS). 24pp.
World Bank, 2019. World Bank. “Digging Beneath the Surface: An Exploration of the Net Benefits of Mining in
Southern Africa”, Washington, DC.

LIX
ANNEX 21. REGIONAL INTEGRATION NOTE

Sector Context

The 2019 Africa Regional Integration Index ranked South Africa as the most integrated country
in Africa, with a score of 0.625/1. Insofar as economic integration is concerned, South Africa’s well-
developed agriculture, industry, and service sectors are the principal drivers of its success. The country
is a member of three major regional economic blocks: The Southern Africa Development Community
(SADC), the Southern African Customs Union (SACU), and the Common Monetary Area (CMA) with
Eswatini, Lesotho and Namibia. As a Member of SADC, South Africa is also a Member of the Tripartite
Free Trade Area (TFTA) between SADC, the Common Market for Eastern and Southern Africa
(COMESA) and the East Africa Community (EAC). The TFTA comprises 28 countries with a combined
population of nearly 600 million people and GDP approximately USD 1.0 trillion and close to 50% of
the Africa Continental Free Trade Area (AfCFTA). At continental level and in addition to being
Member of the African Union (AU) and the AfCFTA, South Africa is actively promoting and providing
leadership in key continental flagships such as implementation of the Programme for Infrastructure
Development in Africa (PIDA) and championing the development to the North-South Corridor as part
of the AU’s Presidential Infrastructure Championship Initiative (PICI). The NSC is a multimodal trans-
boundary and continental interconnector aimed to realise the Cape to Cairo connectivity envisioned by
the AU. The flagship projects under this initiative include; i) South Africa becoming a manufacturing
hub for rail stock for Africa as agreed at the AU; ii) Beitbridge Border post project, a major gateway for
South Africa’s exports to the continent; iii) Inga III Hydropower Project that includes five SADC
Countries (Angola, Botswana, DRC, Namibia and South Africa.

The SADC has set a Microeconomic Convergence Criteria using four primary targets: inflation
between 3% and 7% per year, a fiscal deficit of no more than 3% of GDP, public debt that does not
exceed 60% of GDP, and GDP growth of at least 7% annually. The pandemic caused South Africa to
miss three of those targets in 2020, when the country’s GDP contracted by 8%, its budget deficit hit
14%, and public debt rose to equal 80% of GDP. With regards to monetary policy, however, South
Africa fared better, with an inflation rate of 3.3%.

In 2019, the African Union launched the operational phase of the African Continental Free Trade
Area (AfCFTA), establishing a single market for goods and services in 54 countries. AfCFTA’s
terms, combined with South Africa’s strong connections across the continent and the country’s well-
established manufacturing base, promise growth and more trade for South Africa. Trading under the
AfCFTA began on 1 January 2021. Along with the other members of the Southern African Customs
Union, South Africa has ratified the AfCFTA agreement with the exception of Botswana.

In pursuit of deeper regional integration within the African Continent, South Africa has made
commendable progress and continues to adopt reforms to position the country as the continent’s gateway
to global markets and in linking Africa to the rest of the world. Albeit deteriorating infrastructure, South
Africa remains relatively ahead of many countries especially in the Southern Africa region with the
Durban Port being Africa’s biggest and busiest port both in terms of freight volumes and size making it
the region’s most important port for both imports and exports including intra-regional trade as most
countries in southern Africa largely import intermediary goods from Asia, Europe and North America.
This complemented by a fairly developed infrastructure northwards along some of major corridors in
the Southern Africa region and specifically SADC recognised transport corridors such as the North-
South Corridor makes South Africa an important player in the region and in economies that rely on
South Africa Ports and transport infrastructure for accessing international markets.

The above notwithstanding, South Africa’s ranking on global competitiveness rankings since 2007 and
slipping a further three places to 59 out of 63 economies in 2020 from 56 in 2019, while there have been
significant improvements in similar economies over the same period. Many factors have contributed to
this decline including the introduction of some control measures that result in non-tariff barriers to trade,
increasing concerns for safety and security for truck drivers and freight transport on the major highways
in some instances targeting foreign drivers. developments in other countries such as the expansion of

LX
the port of Walvis Bay in Namibia completed in 2020; the port of Dar Es Salaam, in Tanzania are
becoming increasingly viable options for countries such as Zambia, Botswana, Malawi and DRC known
to have traditionally relied heavily on South African Ports. These do not only affect imports and exports
of other African countries but also South African industries exporting to the region as SADC accounts
for the lion’s share of South Africa’s manufactured exports at over60% in 2020. However, high
transportation costs from South Africa’s manufacturing hubs to the rest of Africa hinders the
competitiveness of South Africa Products with stiff competition from manufactured goods from China
and other regions.

Regional Energy Trade

South Africa is the most industrialised country on the African Continent, thus reliable supply of energy
is key to maintaining the competitive urge and to meet the needs for its large manufacturing sector.
Thus, a well capacitated Southern Africa Power Pool (SAPP) is critical for creation of enabling
environment to facilitate regional power trade. Currently, the South Africa electricity company ESKOM
supplies power to several other countries in the region including Lesotho, Zimbabwe, Mozambique etc.
this indicates the importance of reliable power supply not only for the benefit of South Africa’s economy
but to those of South Africa’s neighbouring countries. Despite the government of South Africa having
over the years shown interest in supporting and leading the development of the Grand Inga III
hydropower Project with the Democratic Republic of Congo this is yet to yield concrete results in terms
of developing this project beyond concept. If implemented, this project could enable South Africa and
other countries in the region to leverage the immense energy generation capacity of the project,
increasing the capacity of the SAPP and enhancing regional energy trade. Given the importance of this
project and impending energy requirements for South Africa and industrial agenda, there is need for a
coordinated regional effort to galvanise political support for making this project a reality. Additionally,
this is one the project being championed by the President of the Republic of South Africa under the NSC
project of the PICI.

Trade and Transport Facilitation

Beitbridge border post between South Africa and Zimbabwe is South Africa’s the busiest land border
on the North-South Corridor and provides critical connectivity between the port of Durban and
landlocked countries in SADC as well as being an important route for transporting South Africa Exports
to other SADC Countries and in intra-Africa trade. Numerous reports have pointed to significant
delays at Beitbridge with truck drivers spending days at the border post with long queues to obtain the
necessary clearance of cargo. This does not only affect the cost of trading across borders but also poses
significant health and safety risk for the users of this port of entry and the staff on either side of the
border. To improve the conditions at this border, the Government of the Republic of South Africa has
adopted several reforms that once completed are expected to contribute to enhanced competitiveness
and facilitating increased intra-Africa trade. These include the development of National OSBP policy
with support from the Bank in 2015; establishment of the Border Management Authority which is
currently being operationalised; and, in close collaboration with the Government of Zimbabwe is
developing Beitbridge whereby a joint working group has been established. The South African Revenue
Services (SARS) on the other hand has been implementing a comprehensive Customs Modernisation
Programme since 2010 to which one of the key results is the enhanced ICT capabilities, further
streamlining of border processes among other trade facilitation measures.

Despite these efforts more needs to be done to ensure adequate infrastructure and the enabling regulatory
environment including strengthened cooperation and collaboration at regional level. For example,
although NSC is identified as a priority initiative for South Africa and is led from the Office of the
President, the institutional framework for the NSC remains weak as there is no clarity on responsibility
and mandate regarding coordination with other countries on the NSC like it is the case with other similar
initiatives on the continent. The Abidjan-Lagos Corridor and the Northern Corridor in West Africa and
East Africa respectively provides some good lessons for the development of the North-South Corridor.

LXI
As part of the Presidential Championship of the NSC, South Africa should mobilise NSC countries and
lead in the establishment of firm institutional framework for the NSC.

Opportunities and Challenges

Despite accounting for over 60% of intra-SADC trade, South Africa’s exports remain less competitive
as they are continuously faced with high transportation costs and huge delays at border posts. This
diminishes significant potential for South Africa’s exporters to penetrate markets in many countries.
While South Africa continues to attract significant investment from Multinational Corporations, these
are mainly market seeking investors especially access to the bigger regional markets such as the SADC
and now the AfCFTA. Equally, South Africa’s Trade and Invest Africa Strategy, an investment led
integration strategy aimed at facilitating and stimulating intra-Africa trade is likely to position the
country as one of major players in the intra-regional investment market. Therefore, improving trade
facilitation within the SADC region and along major trade and transport corridors is critical for
enhancing South Africa’s regional integration and in efforts to curb the deindustrialisation that the
country has been experiencing. The share of Manufacturing in GDP declined from 22% in 1990 to a
meagre 11.5% in 2020. The share of manufacturing employment in total formal employment also
declined, also declined significantly over the same period. The main reasons for this continuous process
of deindustrialization are increasing import competition from Southeast Asia, skills shortages on
domestic labour markets, raising labour costs, increasing electricity prices and the withdrawal of
subsidies and tariff protections. Southern Africa as a region is endowed with vast sources of renewable
energy that South Africa could leverage through the existing and new agreements such as SAPP and
closer cooperation with neighbouring countries for mutual benefit.

Deeper regional economic integration should therefore be pursued through:

• Addressing blockages at the country’s major border posts in particular Beitbridge as it is a
gateway to wider regional and continental markets
• Strengthen coordination of the North-South Corridor with countries along the corridor including
establishment of relevant institutional framework.
• Improve efficiency of cross-border infrastructure networks and services through closer
cooperation with SADC countries.
• The SADC Regional Development Fund being operationalised by SADC with support of the
Bank could benefit from a more strategic participation by South Africa as this is an instrument
aimed at mobilising resources for implementation of regional infrastructure projects.
• Strengthen the backward-forward linkages for developing regional value chains

Recommendations for the Bank’s response

In addition to the work that the Bank is already doing in other sectors in particular the energy sector and
the financial sector the Bank could complement this with:
• Trade facilitation as it is more aligned to the bank’s comparative advantage in the area of trade
and transport facilitation and corridor development.
• Facilitate dialogue to fast track the development of Beitbridge and establishment of the North-
South Corridor institutional framework.

LXII
ANNEX 22. SOUTH AFRICA - SELECTED MACROECONOMIC INDICATORS

South Africa
Selected Macroeconomic Indicators

Indicators Unit 2010 2016 2017 2018 2019 2020 (e) 2021 (p)

National Accounts
GNI at Current Prices Million US $ 317,033 307,456 308,423 332,307 353,692 ... ...
GNI per Capita US$ 6,190 5,470 5,410 5,750 6,040 ... ...
GDP at Current Prices Million US $ 375,348 323,826 381,931 402,372 384,030 330,210 360,175
GDP at 2010 Constant prices Million US $ 375,348 418,923 423,951 430,310 430,740 403,173 415,348
Real GDP Growth Rate % 3.0 0.7 1.2 1.5 0.1 -6.4 3.0
Real per Capita GDP Growth Rate % 1.6 -0.8 -0.2 0.1 -1.2 -7.6 1.8
Gross Domestic Investment % GDP 19.5 19.2 18.8 17.9 17.6 16.7 16.3
Public Investment % GDP 12.6 6.9 6.3 5.7 5.4 5.5 5.5
Private Investment % GDP 6.9 12.3 12.5 12.2 12.2 11.2 10.8
Gross National Savings % GDP 18.0 16.1 16.3 15.9 17.4 22.4 ...

Prices and Money

Inflation (CPI) % 4.1 6.6 5.3 4.6 4.1 3.2 4.0
Exchange Rate (Annual Average) local currency/US$ 7.3 14.7 13.3 13.2 14.5 17.1 16.3
Monetary Growth (M2) % 6.4 4.6 6.4 5.8 5.9 4.9 ...
Money and Quasi Money as % of GDP % 120.1 115.9 115.5 116.6 118.6 127.9 ...

Government Finance
Total Revenue and Grants % GDP 27.7 28.7 28.4 29.6 30.6 25.7 29.2
Total Expenditure and Net Lending % GDP 32.0 32.7 32.8 33.8 37.5 40.0 40.2
Overall Deficit (-) / Surplus (+) % GDP -4.3 -4.0 -4.5 -4.3 -6.9 -14.3 -11.0

External Sector
Exports Volume Growth (Goods) % 8.7 -0.2 0.1 3.8 -2.4 -10.3 4.8
Imports Volume Growth (Goods) % 9.7 -4.1 1.5 4.5 -0.1 -16.6 11.8
Terms of Trade Growth % 5.6 3.3 4.4 -3.1 3.4 13.3 -2.9
Current Account Balance Million US $ -5,634 -9,294 -9,704 -14,279 -11,585 7,265 -6,324
Current Account Balance % GDP -1.5 -2.9 -2.5 -3.5 -3.0 2.2 -1.8
External Reserves months of imports 5.1 6.4 6.1 5.7 6.4 9.0 ...

Debt and Financial Flows

Debt Service % exports 33.1 51.9 42.5 54.2 59.8 66.3 80.5
External Debt % GDP 29.6 48.2 49.6 46.9 50.5 63.5 52.5
Net Total Financial Flows Million US $ 4,885 4,703 4,599 4,121 4,760 ... ...
Net Official Development Assistance Million US $ 1,036 1,180 1,015 921 971 ... ...
Net Foreign Direct Investment Million US $ 3,636 2,235 2,008 5,450 4,624 ... ...

Real GDP Growth Rate, 2009-2021 Inflation (CPI), Current Account Balance as % of GDP,
2009-2021 2009-2021
%

4.0 8
3.0
2.0 7 2.0
6 1.0
0.0 0.0
5
-1.0
-2.0 4 -2.0
3 -3.0
-4.0
2 -4.0
-5.0
-6.0 1 -6.0
-8.0 0 -7.0
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Source : AfDB Statistics Department: African; IMF: World Economic Outlook,October 2020 and International Financial Statistics, December 2020;
AfDB Statistics Department: Development Data Portal Database, December 2020. United Nations: OECD, Reporting System Division.
Notes: … Data Not Available ( e ) Estimations ( p ) Projections Last Update: September 2021

LXIII
ANNEX 23. SOUTH AFRICA - COMPARATIVE SOCIO-ECONOMIC
INDICATORS

South Africa
COMPARATIVE SOCIO-ECONOMIC INDICATORS

Develo-
South Southern
Year Africa ping
Africa Africa
Countries
Basic Indicators
GNI Per Capita US $
Area ( '000 Km²) 2020 1,213 6,571 30,067 94,557
Total Population (millions) 2020 59.3 213.2 1,338.8 6,437.7 8000
7000
Urban Population (% of Total) 2020 66.7 50.0 43.8 50.8 6000
Population Density (per Km²) 2020 48.9 32.8 45.6 67.2 5000
GNI per Capita (US $) 2019 6 040 2 814 1 843 5 093 4000
3000
Labor Force Participation *- Total (%) 2020 51.5 68.5 61.3 58.3 2000
Labor Force Participation **- Female (%) 2019 49.6 62.7 55.8 45.9 1000
Sex Ratio (per 100 female) 2020 97.1 96.8 99.9 106.9 0

2000
2009
2013
2014
2015
2016
2017
2018
2019
Human Dev elop. Index (Rank among 189 countries) 2019 114 ... ... …
Popul. Liv ing Below $ 1.90 a Day (% of Population) 2007-18 18.7 45.5 34.4 …
SouthAf rica Afr ica

Demographic Indicators
Population Grow th Rate - Total (%) 2020 1.3 2.3 2.5 1.2
Population Grow th Rate - Urban (%) 2020 1.9 3.2 3.6 2.3
Population Growth Rate (%)
Population < 15 y ears (%) 2020 28.8 38.9 40.4 27.4
Population 15-24 y ears (%) 2020 16.6 19.3 19.3 16.3 3.0
Population >= 65 y ears (%) 2020 5.5 3.6 3.5 7.3 2.5
Dependency Ratio (%) 2020 52.2 73.8 78.1 54.6
Female Population 15-49 y ears (% of total population) 2020 27.1 25.2 24.2 25.1 2.0

Life Ex pectancy at Birth - Total (y ears) 2020 64.4 63.7 63.8 71.0 1.5

Life Ex pectancy at Birth - Female (y ears) 2020 67.9 66.6 65.6 73.2 1.0
Crude Birth Rate (per 1,000) 2020 19.8 30.4 32.6 19.7 0.5
Crude Death Rate (per 1,000) 2020 9.4 7.8 7.8 7.3 0.0
Infant Mortality Rate (per 1,000) 2019 27.5 41.0 47.9 30.6

2000
2010
2014
2015
2016
2017
2018
2019
2020
Child Mortality Rate (per 1,000) 2019 34.5 57.0 69.5 41.0
Total Fertility Rate (per w oman) 2020 2.4 3.8 4.3 2.6 Sou
t hAfr ica Afr ica

Maternal Mortality Rate (per 100,000) 2017 119.0 245.8 432.3 231.0
Women Using Contraception (%) 2020 57.5 54.6 39.1 59.1

Health & Nutrition Indicators

Phy sicians (per 100,000 people) 2010-18 90.5 48.0 33.4 127.9 Life Expectancy at Birth
Nurses and midw iv es (per 100,000 people) 2010-18 130.8 102.1 107.8 247.6 (years)
Births attended by Trained Health Personnel (%) 2010-18 96.7 73.5 64.7 79.4 80
Peop. Using at least basic drinking w ater serv ices (% of Pop.) 2017 92.7 69.5 66.3 87.7 70
60
Peop. Using at least basic sanitation serv ices (% of Population) 2017 75.7 44.6 40.3 68.4 50
Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2019 19.0 11.3 3.1 ... 40
30
Incidence of Tuberculosis (per 100,000) 2019 615.0 382.2 198.2 152.0 20
Child Immunization Against Tuberculosis (%) 2019 84.0 83.8 81.0 88.0 10
0
Child Immunization Against Measles (%) 2019 72.0 75.6 71.9 84.9
2000
2010
2014
2015
2016
2017
2018
2019
2020

Underw eight Children (% of children under 5 y ears) 2010-19 ... 13.4 18.1 14.5
Prev alence of stunding 2010-19 ... 31.6 32.4 23.6 SouthAf rica Afr ica

Prev alence of undernourishment (% of pop.) 2018 5.7 20.3 15.1 9.7

Current health ex penditure (% of GDP) 2018 8.3 6.8 5.2 5.4

Education Indicators
Gross Enrolment Ratio (%)
Primary School - Total 2010-20 98.5 114.9 101.0 101.6
Primary School - Female 2010-20 96.6 112.9 98.8 100.5 Infant Mortality Rate
( Per 1000 )
Secondary School - Total 2010-20 100.5 63.0 53.5 72.4
Secondary School - Female 2010-20 104.0 58.8 50.5 72.1 90
Primary School Female Teaching Staff (% of Total) 2010-20 78.8 59.3 49.2 63.7 80
70
Adult literacy Rate - Total (%) 2010-18 87.0 81.7 67.9 84.3 60
Adult literacy Rate - Male (%) 2010-18 ... 78.7 73.5 88.4 50
Adult literacy Rate - Female (%) 2010-18 86.5 79.4 61.7 80.2 40
30
Gouv ernment ex penditure on Education (% of GDP) 2010-19 6.5 5.7 4.8 4.1 20
10
Environmental Indicators 0
2000
2009
2013
2014
2015
2016
2017
2018
2019

Land Use (Arable Land as % of Total Land Area) 2016 10.3 6.1 8.0 11.3
Agricultural Land (as % of land area) 2016 79.8 55.7 38.2 38.3
Forest (As % of Land Area) 2016 7.6 30.9 22.0 31.9 SouthAf rica Afr ica

Per Capita CO2 Emissions (metric tons) 2016 8.5 2.9 1.1 3.4

Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update : March 2021
UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports.
Note : n.a. : Not Applicable ; … : Data Not Available. * Labor force participation rate, total (% of total population ages 15+)
** Labor force participation rate, female (% of female population ages 15+)

LXIV
ANNEX 24. SOUTH AFRICA - PROGRESS TOWARDS ACHIEVING THE SDGS
(2021)
PROGRESS TOWARD ACHIEVING THE SUSTAINABLE DEVELOPMENT GOALS

Goal 1: End poverty in all its forms everywhere 1 2 3

2000 2010 2020 Prevalence of undernourishment
(%)
Proportion of population living below the international poverty line of US$ 1.90 (PPP) per day 25.7 16.2 18.7 7

6
Proportion of population living below the national poverty line (%) 66.6 53.2 55.5 5

Employed population below the international poverty line of US$1.90 per day, aged 15-24 4
16.1 5.4 7.2
(%) 3
Employed population below the international poverty line of US$1.90 per day, aged 25 and 2
11.3 4.4 6.2
over (%) 1
Goal 2: End hunger, achieve food security and improved 0
nutrition and promote sustainable agriculture 2005 2010 2019

Prevalence of undernourishment (%) 3.4 3.6 6.5

Proportion of children moderately or severely stunted (%) ... 24.9 21.4

Under-five mortality rate,
Agriculture orientation index for government expenditures 0.7 0.7 0.9 (per 1000 live births)

T otal official flows for agriculture (Millions of Constant 2018 US$) 21 31 18 90

80
70
Goal 3: Ensure healthy lives and promote well-being for all at all ages 60
50
40
Maternal mortality ratio 201 171 119 30
20
10
Proportion of births attended by skilled health personnel (%) 91.2 94.3 96.7 0
2005 2010 2019

Under-five mortality rate (deaths per 1,000 live births) 79.1 51.2 34.5

Malaria incidence (per 1,000 population) 1.6 1.6 0.5

Goal 4: Ensure inclusive and equitable quality education and promote lifelong
Proportion of seats held by women in
learning opportunities for all national parliaments (% of total
Proportion of children and young people at the end of primary achieving a minimum number of seats)
... 37.0 36.1
proficiency level in: Reading (%)
Proportion of children and young people at the end of primary achieving a minimum 50
... ... 14.9 45
proficiency level in: Maths (%) 40
35
Gender parity index of trained teachers, primary (ratio) 0.9 ... ... 30
25
20
15
T otal official flows for scholarships (Millions of Constant 2018 US$) ... 6 9 10
5
0
Goal 5: Achieve gender equality and empower all women and girls 2005 2010 2020

Proportion of seats held by women in national parliaments (% of total number of seats) 32.8 44.5 46.4
Proportion of women who make their own informed decisions regarding contraceptive use
... ... 88.6
(% of women aged 15-49 years)
Proportion of women who make their own informed decisions regarding reproductive health Proportion of population with access
... ... 94.8 to electricity (%)
care (% of women aged 15-49 years)
Goal 6. Ensure availability and sustainable management of water and sanitation for 86

all 85

84
Proportion of population using safely managed drinking water services, (%) ... ... ...
83
Level of water stress: freshwater withdrawal as a proportion of available freshwater resources 82
47.1 53.4 63.6
(%) 81
T otal official development assistance for water supply and sanitation (Millions of Constant
36.7 46.0 93.8 80
2018 US$) 79
2005 2010 2019
Goal 7: Ensure access to affordable, reliable, sustainable and modern energy for all

Proportion of population with access to electricity (%) 81.0 83.0 85.0

Proportion of population with primary reliance on clean fuels and technology (%) 67.0 77.0 86.0
Annual growth rate of real GDP per
capita (%)
Renewable energy share in the total final energy consumption (%) 11.0 11.8 10.3
5
Goal 8: Promote sustained, inclusive and sustainable economic growth, full and 4
productive employment and decent work for all 3

Annual growth rate of real GDP per capita (%) 4.0 1.6 -1.2 2

1
Unemployment rate, (aged 15-24) (%) 56.3 51.2 57.1
0
2005 2010 2019
Unemployment rate, (aged 25 & over) (%) 23.5 20.4 24.8 -1

-2
Proportion of youth not in education, employment or training (%) 34 33 33
Sources : ADB Statistics Department Database; last update : October 2021
United Nations Statistical Division, Online Database on Sustainable Development Goals (https://unstats.un.org/sdgs/).
Note : n,a, : Not Applicable ; … : Data Not Available,
1 2 3
Latest year available in the period 2000-2005; Latest year available in the period 2006-2010; Latest year available in the period 2011-2020

LXV
 PROGRESS TOWARD ACHIEVING THE SUSTAINABLE DEVELOPMENT GOALS (Contn'd)

Manufacturing value added per

Goal 9: Build resilient infrastructure, promote inclusive and sustainable 1 2 3 capita (constant 2015 US$)
2000 2010 2020
industrialization and foster innovation
250
Manufacturing value added per capita (constant 2015 US$) 691 702 580
200

Manufacturing employment as a proportion of total employment (%) 15.6 13.3 10.8 150

100
Carbon dioxide emissions from fuel combustion (millions of tonnes) 372.3 420.3 428.0
50

Total official flows for infrastructure (Millions of Constant 2018 US$) 473 1,033 417 0
2005 2010 2020

Goal 10: Reduce inequality within and among countries

Labour share of GDP (%) 51.1 51.1 54.1

Total assistance for development (Millions of current US$) 14,784 4,885 5,239 Proportion of urban population living
in slums (%)
Remittance costs as a proportion of the amount remitted (%) ... ... 7.5 35

Goal 11: Make cities and human settlements inclusive, safe, resilient and 30

sustainable 25
20
Proportion of urban population living in slums (%) 28.7 23.0 25.6 15
10
Number of deaths due to disaster (number) ... ... 300.0 5
0
Direct economic loss attributed to disasters relative to GDP (%) ... ... 0.0001 2005 2010 2018

Goal 12: Ensure sustainable consumption and production patterns

Domestic material consumption per capita, coal (tonnes) 3.593 3.672 3.173
Forest area as a proportion of total
Domestic material consumption per capita, natural gas (tonnes) 0.0 0.1 0.1 land area (%)

18
Electronic waste generated, per capita (Kg) ... ... 6.3 16
14
Goal 13: Take urgent action to combat climate change and its impacts 12
10
8
Number of deaths and missing persons attributed to disasters per 100,000 population ... ... 0.54 6
4
Proportion of local governments that adopt and implement local disaster risk reduction 2
... ... 98.1
strategies in line with national disaster risk reduction strategies (%) 0
2000 2010 2020
Goal 14: Conserve and sustainably use the oceans, seas and marine resources for
sustainable development
Coverage of protected areas in relation to marine areas (Exclusive Economic Zones) (%) ... ... 14.6

Average proportion of Marine Key Biodiversity Areas (KBAs) covered by protected areas (%) 39.7 39.7 46.6
Debt service as a proportion of
Goal 15. Protect, restore and promote sustainable use of terrestrial ecosystems, exports of goods and services (%)

sustainably manage forests, combat desertification, and halt and reverse land 6
degradation and halt biodiversity loss 5

4
Forest area as a proportion of total land area (%) 14.7 14.4 14.1 3

2
Forest area annual net change rate (%) ... -0.2 -0.2
1

Red List Index 0.81 0.80 0.77 0

2005 2010 2019
Goal 16: Promote peaceful and inclusive societies for sustainable development,
provide access to justice for all and build effective, accountable and inclusive
institutions at all levels
Unsentenced detainees as a proportion of overall prison population (%) 26.5 ... 27.0
Proportion of children under 5 years of age whose births have been registered with a civil
... ... 88.6 Internet users per 100 inhabitants
authority (% of children under 5 years of age)
Goal 17: Strengthen the means of implementation and revitalize the Global 60
Partnership for Sustainable Development 50

Proportion of domestic budget funded by domestic taxes (% of GDP) 78.5 69.7 64.0 40

30
Volume of remittances (in United States dollars) as a proportion of total GDP (%) 0.2 0.3 0.3 20

10
Debt service as a proportion of exports of goods and services (%) 6 2.9 4.5 0
2005 2010 2017
Internet users per 100 inhabitants 7.5 24.0 56.2

Sources : ADB Statistics Department Database; last update : October 2021

United Nations Statistical Division, Online Database on Sustainable Development Goals (https://unstats.un.org/sdgs/).
Note : n,a, : Not Applicable ; … : Data Not Available,
1 2 3
Latest year available in the period 2000-2005; Latest year available in the period 2006-2010; Latest year available in the period 2011-2020

LXVI
ANNEX 25: KEY FINDINGS OF THE STUDY ON SOUTH AFRICA STATE OWNED
ENTERPRISES (SOES) CONTRIBUTION TO ECONOMIC TRANSFORMATION
AND INCLUSIVE GROWTH

I. Background

The National Development Plan is South Africa’s primary developmental blueprint. The goal of the
NDP is to realize a greatly improved quality of life for all South Africans by 2030. In the spirit of the
Constitution, the NDP envisages an equal and just society in which poverty has been eliminated and
inequality has been reduced. This will be achieved through enhancing the capabilities of citizens,
building an effective developmental state, and fostering inclusive growth. According to the NDP SOEs
are the primary tools for implementing the developmental aspirations of the State with key roles spelt
out in terms of e.g. providing cost-effective energy, driving down the cost of doing business, leading on
spatial and industrial transformation and facilitating trade. SOEs are key to ensuring the provision of
minimum basic goods and services (e.g. water and sanitation, education, healthcare, electricity and
transport) and are also expected to contribute to jobs creation and skills development. Therefore, to
achieve national development goals it is imperative that SOEs operate effectively, efficiently and
sustainably.
The recent South African experience has however revealed a number of key SOEs to be costly,
inefficient and poorly managed. For example, the government has provided significant bail outs and
substantial debt guarantees to Eskom, Denel, South African National Roads Agency, South African
Airways, South African Broadcasting Corporation which on all the evidence nevertheless continue to
underperform or meet financial obligations. This not only puts additional pressure on financing and
service delivery but the collective implication of government bailouts, rising debt, and credit rating
downgrades is stunting economic growth and development. Most troubling is the adverse impact non-
performing SOEs have on the lives of the poorest members of society. As the first five-year NDP
planning cycle (2014-2019) draws to a close, it is a good time to take stock of the performance and
purpose of SOEs in achieving the NDP’s long-term goals.
II. Scope of the Study
Against this background the Government requested the Bank to support the National Planning
Commission to undertake a study to assess the alignment of SOE performance, structure and governance
in delivering to relevant NDP objectives. This is in line with the NPC mandate to advise on the long
term development trajectory of the country and make recommendations for course correction as
necessary. The study was undertaken by Genesis Analytics, a South African Economics research
firm. The assignment has called for the firm to analyze the specific performance of selected
infrastructure SOEs (Eskom, Transnet and the Passenger Rail Agency of South Africa (PRASA) against
the NDP, market structure, and governance and policy considerations - and then to synthesize more
general lessons for application to other SOEs.
The comprehensive four-part study provides government with a factual evidence base of performance
of SOEs against the NDP, and the policy reform options that Government can take, based on
international best practice to better position the SOEs to deliver on development.
• Paper 1: Review of performance against NDP: The purpose of the first paper is to provide an
independent and evidence-based assessment of the performance of SOEs against the outcomes
sought in the NDP in three areas: electricity (ESKOM); rail logistics (Transnet) and commuter rail
(PRASA);

• Paper 2: Market suitability analysis: This paper explores the market structure and socioeconomic
conditions and builds an analytical framework on the types of economic reforms that may address
some of the suitability concerns that are identified for these three SOEs.

• Paper 3: Institutional governance review: Looks at the how the institutional /governance/policy
cascade between the organs of the State as Shareholder and State-Owned Enterprises (SOEs) in

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 electricity, freight rail and commuter can be clarified with a view to improving SOE performance
and contribution to the NDP? What general structural lessons can be learned for SOEs?

• Paper 4: Synthesis paper: The final paper presents learnings from the first three papers and
synthesized principles and policy recommendations for SOEs.

III. Key Findings

The main finding is that the three critical infrastructure SOE’s covered by the Study namely Eskom,
Transnet and PRASA, are not performing well in delivering to the aspirations of the NDP. This is due
to amongst others; years of uncertain policy expectations; unsustainable financing, poor institutional
accountability, governance shortfalls and political interference. Significant shortfalls in delivery have
had an impact on economic growth and have led to worrying increases in government debt and have
since spilled over into increased national credit risk. Most problematic is the adverse impact non-
performing SOEs have on the lives of the poorest and vulnerable members of society and in constraining
economic development.
Without reform, the report finds that it is unimaginable that the prosperous and cohesive society envisioned
by the NDP will be achieved. The study therefore offers a number of policy reforms including governance
and organizational reforms to improve performance; financial reforms to provide SOEs with clear instruction
on the balance between commercial and developmental mandate; and clarifying the over-arching policy on
SOEs by formalizing the role of State as a shareholder. The study also recommends the consideration of
structural reforms which may include providing more avenues for private sector participation and closing
parts of the SOE if poor performance persists. In as far as possible, specific recommendations are also made
for the case study SOEs, regard being had to ongoing national efforts and pronouncements in this regard.

IV: Current Status/Follow Up on the Study

Following the Study, the National Planning Commission issued a Position Paper 38 for Public Comment.
Following public consultations, the report would be presented by the NPC to Parliament and other
stakeholders with a view to contributing to the national dialogue on the reform options for SOEs.

The key highlights of the recommendations are as follows:

Governance Reforms
The institutional governance of SOEs must be strengthened by inter-alia:
• Appointment of management and boards must be done in line with acceptable corporate governance
norms.
• Improved Internal accountability. This can be achieved by narrowing performance management
indicators, stronger linking of executive remuneration to outcomes achieved rather than measurement
of activities, inputs or outputs, and finally by requiring more systematic public disclosure of the main
objectives from SOE Shareholder Compacts, as well as of an assessment of the achievement of these
annual objectives in public reporting and to Parliament, to facilitate public scrutiny.
• Consideration in the approach to state ownership and oversight. The NPC proposes that most of the
effort should be focused on improvements in accountability, governance, financial and operational
performance.

Financial Reforms

• Provide the SOEs with clear instruction on the balance between commercial and developmental
objectives and clarify the process on the costing and funding of each.
• Separate the accounts and reporting of commercial and sub-commercial activities to improve
transparency of cost allocation1.

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%20Contribution%20of%20SOEs%20to%20Vision%202030.pdf
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 • Approve additional budget support with improved strict, ex-ante conditionality. This has also been
widely adopted to date but with limited success. The funding is often needed at a crisis point when
National Treasury is faced with financial crisis of an SOE that is “too big to fail”; and conditionality
appears rarely applied or adhered to.

Structural Reforms
• Where there are repeated failures in operational performance, or where fiscal and credit risk starts to
outweigh benefits, government has a duty to implement organisational reforms. These include
corporate governance, funding, and policy and process reforms.
• Where chronic operational, governance and financial underperformance continues, and
organisational reforms are inadequate, structural reforms should be introduced. This means opening
the provision of the service or infrastructure to other economic actors besides the state and/or
changing the structure of state ownership. The debate about structural reforms must move away from
the unhelpful binary and ideological privatise/nationalise discourse.
• It is the underlying nature of the market conditions that must guide the decision to create or retain an
SOE or components thereof. It is hard to see on either constitutional or efficiency grounds why the
state should use public resources to intervene with an SOE in private commercial activities where the
market is competitive and produces outcomes that are acceptable to both sellers and buyers, or where
light failings can be regulated. Scarce resources would be better directed to where markets do not
operate efficiently.

Policy and Process Reforms

• Introduce a single state ownership policy.
• Introduce mechanisms of compulsory consultation on mega-transactions.
• Improve transparency and provide greater powers of oversight to stakeholder forums.
• Strengthen or introduce new sectoral regulation, and improve regulatory capacity.

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