The African Development Bank (AfDB) approved a $400-million loan for South Africa and the facility will be guaranteed by the UK as part of its contribution to a climate finance pact between the continent’s largest economy and some of the world’s richest nations.

The AfDB said the loan will be used to fund municipal water and electricity projects in municipalities in South Africa’s eastern province of Mpumalanga, where the bulk of South Africa’s coal mines and its largest power plants are located. Money will be disbursed when municipalities meet service delivery and utility performance targets.

“It will focus on reducing water and electricity losses, improving revenue collection, rehabilitating critical infrastructure, strengthening municipal utility management, and creating opportunities for private-sector participation through performance-based contracts,” the Abidjan-based bank said in a statement late Thursday.

The loan forms part of a push by South Africa to improve the performance of its ailing municipalities, many of which are plagued by corruption and lose much of their water and electricity to leaks and theft. The World Bank is backing a $3-billion plan by South Africa’s National Treasury to improve municipal services in South Africa’s eight biggest metropolitan centers.

The UK said the guarantee forms part of the $10-billion Just Energy Transition Partnership between South Africa and the UK, Germany, France, the European Union, the Netherlands and Denmark.

Implementation of the project will be led by the Development Bank of Southern Africa, a South African state-owned development finance institution. It will benefit the eMalahleni, Lekwa, Govan Mbeki and Mbombela municipalities in which about 1.2-million people live.

It will finance rehabilitation of water and power networks, customer audits, the installation of green energy systems in public buildings and the retro-fitting of street lights with LED globes.