South Africa’s private sector holds the key

Africa’s largest money manager sees private capital as key to narrowing the continent’s $100 billion (R1.7 trillion) annual infrastructure-financing gap, critical to boosting economic growth and lifting millions out of poverty.  

A new report by the Public Investment Corp. (PIC), which oversees about R3 trillion in South African state-worker pension funds, shows the continent needs as much as $170 billion (R3 trillion) every year to build power, water, transport and digital networks, with a persistent $100 billion (R1.7 trillion) financing gap, leaving swaths of the continent underserved. 

Private capital made up only $1.3 billion in infrastructure funding in 2024, with national governments among the “most reliable” sources of financing.

The money manager wants to work alongside policymakers, multilateral institutions and commercial banks to create innovative financial instruments to drive private investments, Patrick Dlamini, the PIC’s new chief executive officer, said at a conference in Pretoria on Thursday. 

The PIC also sees scope for asset managers to work with policymakers to promote regulations that align with the continent’s developmental goals and support clear, consistent policies that will help to build an investment-ready pipeline and improve governance.  

Risk perceptions

While investments on the continent are perceived as risky because of regulatory uncertainties and political instability, the default rate on infrastructure projects in Africa is 3% – one of the lowest in the world, according to Lungile Mashele, a sector specialist for energy and infrastructure at the PIC. 

Infrastructure funding shortfalls throttle economic growth potential about 2%, constrain productivity and increase trade costs as much as 40%, according to the report.

It’s also a significant barrier to regional integration and the rollout of reliable services to some of the continent’s most vulnerable people, especially in rural and low-income areas.  

“We all know how important and how critical infrastructure is to economic growth anywhere in the world,” Dlamini said.

“We have seen so many other nations coming out of poverty because there was a meaningful drive for infrastructure development, and they were able to create economies that were inclusive and created sustainable jobs.”