South African Fund Targets $7 Billion for Infrastructure by 2022
A South African fund that was established to promote investment in water provision, low-cost housing and other infrastructure expects to galvanize funding for projects worth more than 100 billion rand ($7 billion) by next year.
Established in August 2020, the Infrastructure Fund aims to catalyze 1.1 trillion rand in investment over the next decade, with pension funds, banks and other private institutions providing 10 rand for every rand the government spends. The fund, so far, has eight sets of projects in the pipeline that require 105 billion rand to implement, it said in a presentation.
We are bringing “in new ideas around the financing of infrastructure projects,” Misaveni Ngobeni, the fund’s public finance management specialist, said in an interview. “Most of the instruments that we’re starting to introduce have never been used in the public sector before to be able to assist in leveraging private financing.”
Increased infrastructure investment underpins plans unveiled by President Cyril Ramaphosa last October to reignite an economy that contracted the most in at least 27 years in 2020 because of the coronavirus pandemic. Investment as a percentage of South Africa’s gross domestic product plunged to a record low of 12% last year, World Bank data show.
The National Treasury allocated the fund 18 billion over the next three fiscal years and it has applied to draw down 5.2 billion rand to fund four sets of projects, ranging from building student housing to improving water supplies.
All projects have been vetted by the government, business groups, the Banking Association South Africa and the Association for Savings and Investment South Africa, according to Mohale Rakgate, the fund’s chief investment officer. A second phase of the Mokolo Crocodile Water Augmentation Project, which is being built by the Trans-Caledon Tunnel Authority in the northeastern Limpopo province, is among the most advanced, with funding to be sought from private investors in October, he said.
Once complete, the project will be used to transfer water from the Crocodile River to the Lephalale area to support mining and energy generation, including state power utility Eskom Holding SOC Ltd.’s Matimba and Medupi coal-fired plants.
The fund, which falls under the state’s Development Bank of Southern Africa, will take equity stakes in some projects, and provide loans, debt guarantees or grants to others.
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