Deputy Minister of Finance David Masondo has called on the private sector to play a far greater role in financing South Africa’s next phase of infrastructure development, warning that public resources alone will not be enough to meet the country’s massive infrastructure needs.
His remarks follow a joint study by the Development Bank of Southern Africa and the World Bank, titled Beyond the Gap, which estimates South Africa’s infrastructure financing shortfall at approximately R13 trillion.
Speaking at the Infrastructure Investment Summit hosted by BlackRock in Cape Town on Wednesday, Masondo said government plans to spend around R1.07 trillion on infrastructure over the next three years, with much of the investment to be implemented through state-owned companies and public entities.
“This means public resources alone will not be sufficient. Private capital must play a far larger role in financing South Africa’s next phase of infrastructure development,” Masondo said.
He highlighted energy infrastructure as one of the country’s biggest investment opportunities, noting that South Africa plans to build about 14 000 kilometres of transmission lines at an estimated cost of R450 billion.
“This is one of the largest infrastructure opportunities currently available in emerging markets,” the Deputy Minister said.
To attract private investment, government has developed a Credit Guarantee Vehicle aimed at reducing investor risk in transmission infrastructure projects.
The initial goal is to mobilise R10 billion from development finance partners, with National Treasury providing first-loss capital support of 20%, starting with an initial US$100 million commitment.
“The National Treasury will provide first-loss capital support of 20 per cent, beginning with an initial US$100 million commitment.
“The Credit Guarantee Vehicle is expected to become operational by July 2026, aligned with the first phase of transmission expansion projects. Over time, this vehicle may be expanded beyond transmission infrastructure into logistics and water infrastructure,” Masondo said.
The Deputy Minister stressed that infrastructure development should support industrialisation and economic production rather than exist as an end in itself.
“Too often across the developing world, we have seen roads built without industrial corridors, ports expanded without manufacturing zones, and energy infrastructure developed without alignment to industrial demand.
“The result is infrastructure that is underutilised, economically inefficient, and unable to generate the growth required to sustain long-term returns,” Masondo said.
Masondo said infrastructure delivers the greatest economic impact when it supports production, trade, manufacturing, mining, agriculture, and exports.
“If we begin there, infrastructure becomes more targeted, more bankable, more growth-enhancing, and ultimately more investable,” the Deputy Minister said.
He added that South Africa has recently strengthened its macroeconomic position, helping government raise capital at increasingly favourable rates.
The country has achieved a primary budget surplus for three consecutive years and exited the Financial Action Task Force grey list.
During the 2026/27 budget, government also revised Gross Domestic Product (GDP) growth projections upward for the first time in many years.
“These developments matter to investors because capital prices are risky. Banks, pension funds, insurers, and asset managers allocate capital based on their assessment of stability, liability profiles, predictability, and returns.
“When risk declines, the cost of capital falls. Lower inflation, stronger public finances, and improved growth prospects reduce financing costs not only for government, but across the entire economy,” the Deputy Minister said.
He further noted that South Africa faces an estimated R36 billion annual municipal infrastructure maintenance gap.
To help address this, government has introduced the Metro Trading Services Reform, which aims to ring-fence revenue generated from water, electricity, and waste services and ensure it is reinvested directly into infrastructure and operations.
“The reforms are designed to improve financial transparency, strengthen operational accountability, and create clearer revenue visibility for investors and lenders.
“Government has already mobilised R54 billion in performance-linked incentives to support these reforms. Importantly, this programme is expected to unlock more than R100 billion in infrastructure investment opportunities across metropolitan municipalities,” the Deputy Minister said. -SAnews.gov.za
