Infrastructure credit guarantee scheme to unlock billions

South Africa is turning to a new financing mechanism to unlock private investment into infrastructure as the government seeks ways to rebuild failing public systems while managing severe fiscal constraints. Thecredit guarantee vehicle(CGV), developed through a partnership between the Development Bank of Southern Africa (DBSA), national treasury and theWorld Bank, is intended to reduce investment risk in large infrastructure projects and draw private capital into sectors such as electricity transmission, water systems and transport infrastructure. The initiative will begin with an initial capitalisation of about $500million (R8 billion), including $350 million (R5.6 billion) from the World Bank.

Over time, the programme is expected to mobilise as much as $10billion (R160 billion) in infrastructure investment. The government hopes the structure will help address one of the most persistent constraints on economic growth: the country’s widening infrastructure backlog. Energy shortages,failing municipal water systemsand congestion across thefreight rail and port network, have steadily eroded productivity and investor confidence.Infrastructure investment has also declinedover the past decade, limiting the state’s ability to expand and maintain critical public systems.

The new guarantee vehicle is designed to make infrastructure projects more attractive to lenders by reducing specific risks associated with project financing. Mpho Mokwele, the group executive for coverage and origination at the DBSA, said the mechanism will offer guarantee instruments aimed at improving the bankability of projects. “The credit guarantee vehicle will improve bankability by providing various guarantee instruments including partial risk guarantees that cover specific risks such as payment default, political risk or early stage project uncertainties,” said Mokwele.

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“This credit enhancement allows lenders to extend financing on better terms, lower interest rates, longer tenures and reduced security requirements,” he said. “By de-risking projects and standardising risk allocation, the CGV will accelerate financial close of projects.” The programme is expected to be fully established in the fourth quarter of 2026 in time to support the first projects under the independent transmission procurement programme. It will “expand to other sectors as the model proves successful,” Mokwele said. “The credit guarantee vehicle will benefit projects in transmission, transport, water and social infrastructure.”

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