South Africa Says Lenders Commit $21 Billion to Building Projects

Banks, development finance institutions and multilateral organizations have committed 340 billion rand ($21 billion) to infrastructure projects in South Africa that could create 290,000 jobs, the government said.

The projects range from water supply to housing, energy, agriculture and roads. They were named in a July 24 government gazette, paving the way for the beginning of private investment in a 2.3 trillion rand program over the next decade.

Infrastructure investment has been identified by South Africa‘s President Cyril Ramaphosa as a key plank in his bid to revive a stagnant economy that’s been further damaged by the coronavirus pandemic. While the state has traditionally funded most infrastructure in South Africa, surging debt has seen the government turn to private capital.

The projects need sovereign guarantees and an increase in debt limits, Kgosientsho Ramokgopa, the head of infrastructure investment in the presidency, said at a press conference today.

For more on the initial announcement, click here

“The details are still scant so it is difficult to determine how viable the financing plans really are,” said Stuart Theobald, chairman of Intellidex, a South African capital markets and financial services consultancy. “There seems to be a view that funding can be raised simply by extending Treasury guarantees or increasing debt ceilings that apply to state-owned enterprises. However, these do have implications for the government balance sheet.”

Still, the commitments are a step forward in attracting investment into the country, which faces infrastructure deficits ranging from piped water to housing and power plants.

Of the 276 projects being considered by Ramokgopas department, the initial list totaled 50 with an additional 12 “special projects.” The projects are “shovel ready,” he said, with work likely to begin within three months.

“We will come with the next wave of projects,” he said. “The state needs to reciprocate by providing those guarantees.”

Private funding

Some of the projects, such as the next stage of the Lesotho Highlands Water Project, are already in process. Ramokgopa was not clear on whether the total investment amount included previously announced expenditure.

“What we need are projects that are financed independently by private investors who then earn a return through operating the projects,” said Theobald. “Those are genuinely fiscal neutral and growth positive.”

Ramokgopa did say one project to build 45,000 housing units was completely privately funded.

The commitments are as follows:

• Transport: 47 billion rand, creating 50,000 jobs

• Water and sanitation: 106 billion rand, creating 25,000 jobs

• Housing: 138 billion rand, creating 190,000 jobs

• Agriculture: 7 billion rand and 4,000 jobs

• Digital: 4 billion rand and 700 jobs

• Energy: 58 billion rand, creating 6,000 jobs

(Updates with breakdown of commitments at end of story)