SA Accelerates R1 Trillion Infrastructure Drive to Boost Growth, Services

Despite large allocations to infrastructure in recent years, persistent underspending, inefficient procurement, and governance weaknesses have undermined value-for-money and delayed service delivery.

South Africa is ramping up its infrastructure development efforts as a central pillar for reviving economic growth and improving service delivery across the country. This commitment is at the heart of the recently tabled 2025 Medium Term Budget Policy Statement (MTBPS) by National Treasury, which outlines strategic reforms and funding plans aimed at unlocking large-scale investment in critical infrastructure sectors.

The MTBPS reaffirms the R1 trillion infrastructure investment commitment over the medium term, announced earlier this year by Finance Minister Enoch Godongwana in the maiden budget of the Government of National Unity (GNU). This expansive allocation is seen as essential to addressing the country’s infrastructure backlog, crowding in private-sector participation, and creating long-term economic resilience.

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Infrastructure Investment: A Catalyst for Short- and Long-Term Growth

National Treasury emphasized that infrastructure investment plays a dual role in the economy:

• In the short term, it stimulates aggregate demand through employment creation, material procurement, and construction activity.

• In the long term, it enhances productivity and competitiveness by expanding the country’s production capacity and improving logistics, energy, and social infrastructure.

“Infrastructure investment has strong direct and indirect effects on growth… boosting demand for inputs and workers in the short term and expanding the economy’s capacity to produce over the longer term,” Treasury noted.

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Tackling Underspending and Enhancing Delivery Capacity

Despite large allocations to infrastructure in recent years, persistent underspending, inefficient procurement, and governance weaknesses have undermined value-for-money and delayed service delivery.

To address these concerns, government is undertaking systemic reforms aimed at:

• Mobilising private-sector finance and technical expertise

• Strengthening institutional capacity within the state

• Improving procurement processes and monitoring systems

• Enhancing reporting and transparency in infrastructure projects

These measures are designed to ensure that infrastructure budgets are not only spent, but spent effectively—achieving developmental outcomes on time and within cost.

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Overhauling the Public-Private Partnership (PPP) Framework

A key pillar of the infrastructure strategy is the revitalisation of public-private partnerships (PPPs). Government has taken several steps in this regard:

1. Amended PPP Regulations

• Amendments to Treasury Regulation 16, which governs PPPs, came into effect in June 2025.

• New guidelines, published in October 2025, now provide a clear framework for:

  • Unsolicited bids from private investors, including cost recovery mechanisms

  • Managing fiscal commitments and contingent liabilities, improving the accountability and bankability of PPP projects

2. Sector-Specific Toolkits & Manuals

• Updated PPP manuals and sector-specific implementation toolkits are being developed for completion in 2026.

• These tools will aid government departments and municipalities in preparing, evaluating, and managing PPP projects efficiently.

3. Municipal PPP Reforms

• Amendments to municipal PPP regulations are underway and expected to be finalised by February 2026, pending concurrence from the Department of Cooperative Governance and Traditional Affairs (COGTA).

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Expanded Infrastructure Budget Facility and Disaster Recovery

In a major development, the Budget Facility for Infrastructure (BFI)—which previously held a single bid window annually—has been restructured to now run four bid windows per year, improving access and responsiveness.

Since the reconfiguration, the BFI has:

• Received 28 project submissions,

• Accepted nine projects for detailed analysis

• Allocated R4.1 billion for disaster recovery projects, including:

  • Repairs to schools, water pipelines, clinics, and substations damaged by floods in KwaZulu-Natal, Mpumalanga, and the Eastern Cape

To complement this effort, a new infrastructure bond is being launched, with the goal of raising R15 billion to fund priority BFI projects.

“This forms part of our broader strategy to create dedicated financing instruments that mobilise cheaper capital for infrastructure,” said Minister Godongwana.

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Infrastructure Financing Innovation: Credit Guarantee Vehicle and Energy Focus

In a further move to catalyse private investment, government will inject R2 billion to capitalise a Credit Guarantee Vehicle, initially focused on the electricity transmission network.

This facility aims to:

• De-risk investments in high-voltage transmission infrastructure

• Attract private capital to support energy security and grid expansion

• Promote decarbonisation by enabling clean energy projects to connect to the national grid

“This marks real progress in our shift from just fixing the power utility to securing energy from a range of sources,” said the Minister, highlighting the transition towards a more open and flexible energy market.

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Infrastructure Agency to Drive Coordination and Investment

To institutionalise financing and coordination functions, the Infrastructure Finance and Implementation Support Agency is expected to be operational by March 2026. Its mandate includes:

• Crowding in private capital for infrastructure

• Coordinating across departments and spheres of government

• Promoting alternative delivery mechanisms such as design-build-operate (DBO) and joint ventures

• Ensuring project bankability and lifecycle cost management

This agency is part of broader efforts to build a professionalised, project-ready infrastructure ecosystem, aligned with fiscal sustainability and long-term development goals.

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Towards a New Era in Infrastructure Delivery

The initiatives outlined in the 2025 MTBPS reflect a decisive policy shift—from fragmented and reactive spending to strategic, reform-driven infrastructure development. With new financing tools, improved PPP governance, and renewed institutional focus, government is seeking to transform infrastructure delivery into a reliable engine of growth, investment, and inclusive service provision.

“These reforms are not just about spending more, but about spending smarter—with improved outcomes, accountability, and innovation,” Treasury concluded.

If successfully implemented, these reforms could serve as a blueprint for sustainable infrastructure development—not only in South Africa but across the region.