Deputy Finance Minister, David Masondo, has gone on a charm offensive in an attempt to win over captains of industry to support the government’s call for the private sector to plug the huge gap in financing infrastructure development, in partnership with the Public Investment Corporation (PIC).
Speaking at the Sunday Times top 100 Companies Award Ceremony last night, Masondo said the government needed to accelerate the investment in infrastructure, which is critical for economic growth.
Masondo said the private sector will need to play a significant role to fill this gap given the fiscal constraints the government was facing.
“The key question is: how do we enable private capital to flow into the infrastructure space within South Africa? As the government, we will continue to respect the role played by fund managers as they seek to generate returns for asset owners,” Masondo said.
“We will continue to respect their discretionary mandate in selecting asset classes that deliver the best returns for asset owners. We need more incentives and financial structures that will make private sector investment in infrastructure more attractive.”
In the 2024 Medium Term Budget Policy Statement, finance minister Enoch Godongwana announced several initiatives to crowd-in private sector infrastructure investment.
These include the introduction of revised Private Public Partnerships (PPPs) regulations aimed at simplifying the rules governing PPPs.
Treasury is also working with the World Bank to create a Credit Guarantee Vehicle (CGV), which will have credit guarantees insurance instruments to systematically derisk large government infrastructure programs without the need for sovereign guarantees.
The initial pilot of this CGV will be on transmission infrastructure to derisk the off-taker risks that will be faced by the private sector when making investments linked to the National Transmission Company South Africa (NTCSA).
Once established and fully understood by the market, the plan is to extend the CGV to other infrastructure programs, such as water or electricity distribution in municipalities.
“As the government, we intend to issue infrastructure instruments such as bonds, bilateral transactions, project finance to crowd-in private capital. These instruments will be in the listed and unlisted space,” Masondo said.
As the manager of public sector retirement funds, Masondo said the PIC played a central role in funding South Africa's infrastructure roll-out and its involvement was critical in ensuring the long-term sustainability and success of these infrastructure projects.
The PIC operates with a triple bottom line approach of balancing social, environmental, and financial returns.
Masondo said rather than being viewed as a “bailout” institution, the PIC was positioned as an anchor investor in South Africa’s infrastructure landscape, acting as a catalyst to attract other local and foreign investors institutional investors.
He said the PIC has been instrumental in supporting South Africa's infrastructure development through substantial investments in the bond market, particularly in State-Owned Enterprises (SOEs).
“These investments have been pivotal in enabling these entities to finance critical infrastructure projects, thereby contributing to the nation’s economic growth and development,” Masondo said.
“Additionally, the PIC has made significant investments in renewable energy projects under South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
“By funding solar, wind, and other renewable energy initiatives, the PIC contributes to diversifying South Africa's energy mix, enhancing energy security, and reducing carbon emissions.”
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