South Africa’s PPP reforms provide an investor-friendly platform for global infrastructure capital

The funding capacity of local investors is, however, not sufficient to meet the country’s infrastructure funding needs. The total value of the country’s Strategic Integrated Projects project pipeline has grown from R340 billion in July 2020 to R540 billion today, and the South African Government estimates that it will require R3.2 trillion (US$168 billion)  from the private sector in order to meet its infrastructure needs by 2030.   

South Africa’s ambitious infrastructure objectives cover four mission-critical infrastructure areas : energy, transport, water and digital communications. These areas, were they to receive sufficient investment, would support economic growth and job creation, and act as an enabler of future development.  President Ramaphosa said in March this year: “Infrastructure is an enormous economic multiplier, providing dividends for an economy long after the infrastructure has been delivered.”

To unlock this potential, and to meet South Africa’s crucially important developmental needs, the country’s state-owned companies (SOCs) are increasingly looking at International Investors for PPP opportunities aligned with their interests and capacity.  Over the past decade, the GCC has emerged as a major investor with interest across Africa, with a growing number of trade deals that significantly benefit both regions. Foreign Direct Investments from the GCC into Africa from 2012-2022 saw $101.9 billion invested in 628 projects.

South Africa’s infrastructural investment opportunities span various economic sectors, offering portfolio diversification potential for investors seeking global opportunities. The opportunities include social and utility infrastructure projects to improve access to much-needed water and power resources, and vital transport networks, including roads, rail, and ports. There are also ample investment opportunities in digital infrastructure and developing agriculture and agro-processing infrastructure.  

The South African government is highly incentivised to create conditions conducive to attracting international investments, and that includes establishing a predictable and sustainable regulatory environment. Faced with a notable decline in PPP activity in recent years, the National Treasury has instituted reforms that simplify and speed up the regulatory process of establishing PPPs.  

It has created two pathways for PPPs: one for high-value projects and a simplified version for low-value projects (less than R2 billion). The reforms mean that low-value projects no longer have to go through the lengthy process of obtaining Treasury approvals. Thus, investors who want to partner with the government on a smaller project won’t need to go through the time-consuming processes previously required. 

As a bank committed to fostering cross-border relationships and collaboration between all the local and international stakeholders that will make these partnerships a success, Standard Bank fully supports the amended PPP regulatory framework. We believe this will make it easier for South Africa to benefit from the more than $50 trillion international investment pool held by the world’s top 300 investors.

It is important that international investors work with institutions that can capably navigate the country’s broader regulatory framework. For instance, international investors entering into PPPs must prioritise community building, job creation, localisation, and skills transfer. They would also be expected to source local suppliers from the surrounding communities instead of importing necessary supplies. Unless given a special dispensation as a priority project, international investors must meet the local requirements. 

For investors looking to explore South African PPP infrastructure investment opportunities, Standard Bank is ideally positioned to help. We have the local know-how, experience, and expertise and have been a committed role player in the government’s private sector capital-raising initiatives. In terms of assets, we are the largest of the big four commercial and investment banks in sub-Saharan Africa and are equipped to put together large, impactful, and high-profile PPPs. 

Already a meaningful partner to many international investors, Standard Bank has a global presence in 20 countries on the African continent, as well as in the UAE, Dubai, Beijing, London, New York, New Jersey, and the Isle of Man. We are a preferred partner for many global multinationals coming to the continent and South Africa. We operate across multiple sectors and have been involved in many large infrastructure projects in the renewable energy sector in particular, including a sizeable hydro-electric project in the Northern Cape. 

Standard Bank has long nurtured its relationships with investors in the GCC and the surrounding region, where investors have access to substantial capital and the appetite to invest in the opportunities South Africa has to offer. These opportunities offer investors sustainable, long-term returns and exposure to a fast-growing population with tremendous economic potential.

Standard Bank’s State-Owned Company Investment Summit, held recently in Dubai, provided a platform for investors in the Gulf region to connect with representatives of South Africa’s state-owned companies to explore infrastructure opportunities and possible collaborations. We expect the summit to lead to a round of significant infrastructural investment agreements, as has occurred at each previous iteration of this annual event.

PPPs in South Africa have played a crucial role in attracting much-needed private investment. But more is needed. By sharing risks and rewards with the private sector, and international investors in particular, the government can unlock additional funding sources and accelerate the development of critical infrastructure projects.

The overhaul of the PPP regulatory framework has been instrumental in sending the right message to international investors about South Africa’s infrastructure opportunities. The country cannot meet its massive infrastructure development goals – and reach its full economic potential – without international investors and successful PPPs. The latest regulatory changes shift the dial in the right direction for all stakeholders.  

Prepared by:
Zen Dlamini - Executive Head: Infrastructure and Sovereign & Public Sector, at Standard Bank CIB