South Africa is establishing a new infrastructure support agency as the nation seeks to address its crumbling infrastructure with assistance from the private sector.
Infrastructure investment is seen as one of the best ways to increase GDP growth, but South Africa’s investment has been limited.
President Cyril Ramaphosa previously said that he wanted the nation to become a construction zone to help with growth.
In line with growth-enhancing infrastructure, Finance Minister Enoch Godongwaan said that the government is shifting its spending from consumption to investment.
Speaking at the Medium-Term Budget Policy Statement, Godongwana said that capital payments are the fastest-growing expenditure item at 7.5% over the medium term.
“We are leveraging public resources to mobilise private finance and expertise at scale to strengthen service delivery, improve spending effectiveness and drive higher economic growth”
One way of achieving this is the new Infrastructure Finance and Implementation Support Agency, which will be operational by March 2026.
The agency will provide project preparation support to supply the Budget Facility for the Infrastructure (BFI) pipeline.
The BFI is a budget reform initiative established to support priority infrastructure projects via a more rigorous project planning, appraisal, and selection process.
The aim is to support enhanced project outcomes and improve value for money for the government. Projects require sustainable financial arrangements and sufficient operational capacity.
Godongwana said the new agency will centralise finance functions to systematically crowd-in private capital and promote the use of alternative delivery mechanisms.
The BFI is also no longer running just one bid window per year, with four bid windows taking place each year.
“Since the reconfiguration, the BFI has received 28 submissions, of which 9 projects were accepted for detailed analysis.
Funding worth R4.1 billion has been allocated for disaster relief to fix schools, pipelines, clinics and substations damaged by flooding in KZN, Mpumalanga, and the Eastern Cape.
“To raise the funding for these BFI projects, a new infrastructure bond will be launched soon to raise a minimum of R15 billion,” said Godongwana.
“The bond forms part of our efforts to introduce dedicated financing instruments that can mobilise cheaper financing to support our infrastructure agenda.”
The government will also contribute R2 billion to capitalise the Credit Guarantee Vehicle. The vehicle will support electricity transmission expansion/
“This heralds a new era in PPPs, where private investment in high-voltage transmission lines is enabled.”
“This is real progress in our move away from merely fixing the power utility to securing power to the grid from a range of sources.”
