Tackling South Africa's Infrastructure Deficit: The Role of Development Finance Institutions

Infrastructure development is widely considered to be pivotal to South Africa’s economic recovery plan and growth prospects. Yet infrastructure spending at all levels of government has been declining in recent years in the face of a steady rise in public debt. There is, however, an opportunity for the government to meet its infrastructure development requirements by accessing more funding from international development finance institutions and multinational development banks, as well as private sector investors. This policy insight outlines the importance of infrastructure development for South Africa, the role of development finance institutions in providing financial and technical assistance for infrastructure development, the infrastructure initiatives that have been launched in South Africa, the nature of the engagement between international development finance institutions and the South African government, and evident gaps in the assistance offered to date. South Africa has a huge pipeline of infrastructure projects that could unlock considerable potential across numerous sectors – from energy and transport to housing – with the help of foreign and local finance and investment partners. However, the government needs to take urgent steps to resolve current uncertainties surrounding the types of infrastructure that are needed in different sectors and how much financial assistance is required from local and international sources respectively. Critically, too, skills are needed to ensure that projects are properly conceptualised, prepared and executed. Capacity-building (including at the highest levels) is therefore a priority. It is also important that different role players’ contributions to infrastructure development projects are well-coordinated.