THE ROLE OF PRIVATE FINANCE IN INFRASTRUCTURE DEVELOPMENT IN SOUTH AFRICA – A CRITICAL ASSESSMENT

The document examines South Africa's strategy to mobilize R1 trillion in private investment through an Infrastructure Fund to address a widening infrastructure deficit. It analyzes three primary de-risking instruments: blended finance, the conversion of infrastructure into tradeable asset classes, and public-private partnerships (PPPs). The author argues that these mechanisms often shift excessive risk to the state through contingent liabilities and high transaction costs, while prioritizing 'bankable' economic projects over essential social infrastructure in poor and rural areas. The paper concludes that the current focus on private capital overplays benefits and underplays the risks of public-private arrangements, recommending a governance framework that prioritizes human rights and sustainable development over profit maximization.

• The South African government aims to mobilize R1 trillion in private sector financing over 10 years through an Infrastructure Fund to revive growth and employment following the COVID-19 pandemic.
• De-risking infrastructure can be more costly to the fiscus than public provision because the government absorbs higher risks to attract private capital, often through increased contingent liabilities and high transaction costs.
• Blended finance often fails to scale at the anticipated rate and is disproportionately directed toward 'economic' infrastructure (such as energy) rather than 'social' infrastructure (such as health and education) due to private sector profit motives.
• Converting infrastructure into an asset class via Collateralised Debt Obligations (CDOs) and securitization can lead to financial instability and 'shadow banking', potentially exposing governments to predatory market transactions.
• Public-Private Partnerships (PPPs) in South Africa often involve complex, non-transparent contracts that can lock governments into long-term liabilities, as seen in the Gautrain rail-link system where the public sector covers upwards of R250 million per year in revenue shortfalls.
• The Ilembe water and sanitation PPP case study demonstrates that private participation can lead to uneven access, where targets in wealthy areas are met while poorer communities face service failures and tariff increases of up to 119%.
• South Africa's infrastructure landscape is marked by a decline in public investment since the 1980s and a failure of 'mega-projects' like the Kusile and Medupi coal power plants, which resulted in high debt burdens and a R128-billion government bailout for Eskom.
• The author recommends that the state should not transfer human rights and poverty reduction responsibilities to private corporations and should instead prioritize domestic resource mobilization and progressive taxation.

APA

Phalatse, S. (2021). THE ROLE OF PRIVATE FINANCE IN INFRASTRUCTURE DEVELOPMENT IN SOUTH AFRICA – A CRITICAL ASSESSMENT. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2021/01/F4D-Infrastructure-Working-Paper-29_01_2021.pdf

Chicago

Phalatse, Sonia. THE ROLE OF PRIVATE FINANCE IN INFRASTRUCTURE DEVELOPMENT IN SOUTH AFRICA – A CRITICAL ASSESSMENT. Institute for Economic Justice, 2021. https://iej.org.za/wp-content/uploads/2021/01/F4D-Infrastructure-Working-Paper-29_01_2021.pdf.

Wikipedia

{{cite report |last1=Phalatse |first1=Sonia |title=THE ROLE OF PRIVATE FINANCE IN INFRASTRUCTURE DEVELOPMENT IN SOUTH AFRICA – A CRITICAL ASSESSMENT |publisher=Institute for Economic Justice |date=January 2021 |url=https://iej.org.za/wp-content/uploads/2021/01/F4D-Infrastructure-Working-Paper-29_01_2021.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{phalatse2021role, author = {Phalatse, Sonia}, title = {{THE ROLE OF PRIVATE FINANCE IN INFRASTRUCTURE DEVELOPMENT IN SOUTH AFRICA – A CRITICAL ASSESSMENT}}, institution = {Institute for Economic Justice}, year = {2021}, month = jan, url = {https://iej.org.za/wp-content/uploads/2021/01/F4D-Infrastructure-Working-Paper-29_01_2021.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }