Johannesburg’s financial crisis has intensified after Agence Française de Développement (AFD) refused a request for additional financing, citing compliance and governance concerns. The decision adds fresh strain to South Africa’s largest city, which is already grappling with budget instability and declining service delivery.

Loan compliance issues trigger funding refusal

According to sources familiar with the matter, AFD declined the request because the City of Johannesburg allegedly failed to meet the terms of a R2.5 billion ($152 million) infrastructure loan issued in 2024. Key concerns include missed reporting requirements and broader governance issues tied to how the funds were managed.

City officials, however, dispute these claims, maintaining that all contractual obligations and reporting commitments have been fulfilled.

Mounting pressure on Johannesburg’s finances

The funding setback comes at a critical time for Johannesburg, a metro serving approximately 4.8 million residents. The city is facing:

  • Ongoing corruption allegations

  • Failing water and electricity infrastructure

  • Budget approval challenges

In March, the city council—led by the African National Congress—failed to pass its budget on the first attempt due to concerns over rising salary expenses, highlighting deepening fiscal strain.

Future funding remains uncertain

While AFD has left the door open to future financing if compliance issues are resolved, it confirmed that no additional funding is planned within its current cycle. Johannesburg, meanwhile, is seeking approximately R2.5 billion in long-term debt refinancing this financial year.

The municipality insists that AFD’s decision is not unusual, noting that development finance institutions are not obligated to provide annual funding. It also emphasized its long-standing relationship with AFD as a repeat investor.

Exploring alternative financing options

To bridge its funding gap, Johannesburg is engaging with multiple lenders, including:

  • Asian Infrastructure Investment Bank

  • International Finance Corporation

  • New Development Bank

  • European and South African financial institutions

Additionally, Germany’s development bank KfW has already committed €200 million toward electricity infrastructure projects.

Political and financial scrutiny intensifies

In August, Finance Minister Enoch Godongwana called on Johannesburg Mayor Dada Morero to explain how the city plans to recover R24.4 billion in irregular or wasted expenditure.

With municipal elections approaching, political pressure is mounting. The Democratic Alliance, led in Johannesburg’s mayoral race by Helen Zille, is campaigning aggressively to unseat the ANC.

Broader implications for South Africa

AFD has invested heavily in South Africa, providing €4.2 billion in funding since 1994 and supporting major climate finance initiatives. Its reluctance to extend further credit to Johannesburg raises concerns about investor confidence in the city’s governance and financial management.