Exploring Pooled Finance for South Africa

The document examines sub-national pooled financing mechanisms (SPFMs) as a tool for South African municipalities to access cost-effective private capital for infrastructure. While SPFMs have successfully mobilized billions in developed and emerging economies, they have not yet been implemented in Africa. In South Africa, the author identifies a mature bond market and appetite for municipal finance, but notes significant barriers including deteriorating municipal financial health, a lack of technical capacity, and limiting regulations from the National Treasury. The brief argues that the Development Bank of Southern Africa (DBSA) holds a near-monopoly on municipal lending and should lead de-risking efforts to catalyze a vibrant local government debt market.

• Sub-national pooled financing mechanisms (SPFMs) allow local governments with similar credit characteristics to pool infrastructure projects, increasing transaction size to attract capital market investors and substituting individual credit ratings with those of the pooling entity.
• SPFMs have been used globally to fund 40,000 local projects, mobilizing $1 trillion in developed countries and $3 billion in developing countries over the last 15 years, specifically in sectors such as energy, transport, water, sanitation, telecom, and education.
• South African municipalities face severe financial distress, with 34% in deficit totaling ZAR 5.8 billion as of the 2017/2018 fiscal year, and widespread inability to collect fees and taxes.
• Despite the lack of SPFMs, South Africa has a mature bond market; four metropolitan municipalities (Johannesburg, Cape Town, Tshwane, and Ekurhuleni) have issued bonds, including a ZAR 1.46 billion green bond by the City of Joburg in 2014.
• The adoption of pooled finance in South Africa is hindered by the National Treasury's limiting conditions, specifically the requirement for zero risk transfer between entities and the mandate that municipalities only borrow when they are creditworthy.
• The Development Bank of Southern Africa (DBSA) is described as having a 'near monopoly' on municipal finance and is criticized for a reluctance to facilitate pooled finance or provide the necessary de-risking mechanisms for infrastructure projects.

APA

Shipalana, P. (2020). Exploring Pooled Finance for South Africa. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2020/04/Policy-Insight-82-Shipalana.pdf

Chicago

Shipalana, Palesa. Exploring Pooled Finance for South Africa. South African Institute of International Affairs, 2020. https://saiia.org.za/wp-content/uploads/2020/04/Policy-Insight-82-Shipalana.pdf.

Wikipedia

{{cite report |last1=Shipalana |first1=Palesa |title=Exploring Pooled Finance for South Africa |publisher=South African Institute of International Affairs |date=March 2020 |url=https://saiia.org.za/wp-content/uploads/2020/04/Policy-Insight-82-Shipalana.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{shipalana2020exploring, author = {Shipalana, Palesa}, title = {{Exploring Pooled Finance for South Africa}}, institution = {South African Institute of International Affairs}, year = {2020}, month = mar, url = {https://saiia.org.za/wp-content/uploads/2020/04/Policy-Insight-82-Shipalana.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }