21 April 2025
Strategic role of Development Financing institutions as pockets of excellence within the state
Addressing the spatial inequality and the infrastructure gap in South Africa requires the government to mobilise resources through various financing mechanisms. The South African government has a successful track record of implementing major social and economic infrastructure projects. Funds raised from tax collection cannot be sufficient to fund the infrastructure gap. Through development financing institutions such as the Development Bank of South Africa, our government has expanded access to water and sanitation, human settlement, food infrastructure, school and health infrastructure, and the Energy sector. The Development Bank of South Africa is one of the pockets of excellence representing our aspirations of a developmental state. The DBSA not only supports the infrastructure needs of the country but also supports the developmental objectives of African states.
The DBSA realised a net profit of R5.3 billion and sustainable earnings of R5.1 billion in 2024/25, both up 14 per cent on the prior year. This reflects excellence within the state and the potential of the State in participating in the financial sector as a reliable financier of state interventions.
The Special Appropriation reflects this critical role, led by the work done by Infrastructure South Africa, leading the establishment of the Infrastructure Fund. Since its inception, the Infrastructure Fund has packaged a total of 26 approved blended finance infrastructure projects/programmes, with a capital value of R102 billion across several sectors, including water and sanitation, human settlements, transport, health and energy. Further, the Budget Facility for Infrastructure (BFI) has to date approved R37.5 billion of aggregated capital costs of these projects/programmes, out of the R100 billion provisionally allocated to the Infrastructure Fund over 10 years.
The allocation to support our rail networks is a major support to the implementation of Operation Vulindlela to increase the productivity of our rail routes and increase the productivity of our ports to increase exports and the efficiency of trade.
The DBSA and reports of various organs of state have reported on the backlog of infrastructure, whether economic or social. This reality requires the government to continue to crowd in private capital, including through investments by the Public Investment Cooperation. Our financial sector has adequate resources. The gap is in asset allocation and inadequate capabilities and the capacity to invest funds in a timely manner. The increase in the balance sheet of the DBSA should be prioritised in line with its strategy. The ANC calls for an increase in asset allocation by institutional financiers to increase infrastructure investment, contributing to economic growth.
The leveraging of Private Capital should not erode the capability of the state, but rather build the capability of the state. The state should continue to protect and advance its participation in key industries such as the energy sector and the transport sector.
A key aspect that ought to be considered in the formation of the Credit Guarantee Vehicle that is allocated R1.8 billion, backed by $350 million in World Bank funding, aiming to leverage R10 billion in capital and create nearly 1 million jobs. This vehicle will support Transmission infrastructure and planned reforms. We must be cautious in our approach to the Credit Guarantee Vehicle to ensure that blended finance is prioritised to ensure the State participates in the majority of the projects and strategic ownership of assets is retained in the long term.
This is critical as ceding the market share of the state to private sector players using the State capacity will have severe long-term implications for the Country. Many countries that have enabled the participation of private sector players in key network industries have reversed their decisions, as private provision of bulk public services can be impacted by high market prices and inefficiencies due to private players prioritising profit margins.
Support for the transmission line should be backed by a clear strategy to ensure domestic manufacturing of critical inputs for rail infrastructure. The scale of public investment in the transmission line should grow domestic industries and produce black industrialists.
The implementation of the Public Procurement Bill is also a key instrument to support localisation and domestic beneficiation of minerals and other primary goods. Our increased infrastructure should support businesses owned by the youth, women and persons with disabilities. Infrastructure should have a developmental, lasting legacy impact for domestic producers and local producers of infrastructure inputs. The alignment of funding by the Industrial Development Cooperation and other DFI’s should support industrial players.
The Credit Guarantee Vehicle should also prioritise social infrastructure to improve access to education and enhance our health system for the implementation of the National Health Insurance. Achieving universal access to healthcare is an important priority. Ensuring our schools have adequate infrastructure that meets the minimum norms and standards is a fundamental enabler of an education system that responds to the needs of our children. Overcrowding and multiple temporary classrooms are not sustainable, and the understanding of labour migration patterns should shape areas of investment.
The ANC welcomes the increased contribution of the GTAC, DBSA and MISA in supporting local municipalities. Fixing local government requires a whole-of-government approach through the DDM. Our government has the capabilities and governance systems to harness the pockets of excellence and specialities within state entities to produce positive social and economic outcomes. This will enable the creation of much-needed jobs and the tackling of high levels of poverty. The special appropriation bill optimises available resources, and the ANC supports the bill as part of optimising state resources.