South Africa’s infrastructure boom 

South Africa’s government is putting active recovery and investment plans in place to boost infrastructure projects in partnership with the private sector. 

This is according to Nedbank, which said that this is a welcome change after the 2024 National Budget limited additional spending on infrastructure to service the debt of state-owned enterprises (SOEs) – most notably Eskom and Transnet.

“The new emphasis on public-private infrastructure partnerships should create downstream business opportunities and boost economic activity,” the bank said. 

This year, several notable developments have taken place at Eskom – including largely saying goodbye to load-shedding and the utility’s monopoly over South Africa’s electricity market.

“Many municipalities, especially those in larger metros, are looking for ways to reduce their dependence on Eskom to supply electricity,” Nedbank said.

The two largest cities in South Africa, Johannesburg and Cape Town, are already taking steps to reduce their reliance on the national power provider.

In April 2024, Johannesburg’s City Power restarted the John Ware substation’s open gas turbine, adding 50 MW of power to the grid. This is part of a broader plan to add another 100 MW by the end of 2024.

Cape Town announced a R4 billion investment over three years to upgrade and maintain its electricity grid as part of its 2024/25 budget. 

“The city plans to move away from an Eskom monopoly and allow many different businesses of all sizes to sell electricity,” Nedbank explained.  

“These include individuals selling their excess solar power to the city, commercial entities selling electricity to each other, and large-scale independent power producers (IPPs) feeding electricity into the grid.”

“The city already provides load-shedding protection for up to 2 stages where possible and is working on plans to protect residents against the first 4 stages of load-shedding by 2026.”

Additionally, the suspension of national load-shedding since May has improved Eskom’s outlook. 

This is due to better performance at power plants and a reduction in demand, partly driven by increased use of rooftop solar and contributions from IPPs.

“According to market analysts, energy use data shows that the improvement is also due to a significant reduction in demand by almost 2,000 MW. Rooftop solar and IPPs are key to the reduction in demand on the national grid,” Nedbank said.

Transnet has also made strides in improving its service delivery, Nedbank explained. 

Over recent years, it has faced significant challenges with its rail and port infrastructure costing the country billions in lost revenue. 

To address these problems, the SOE has introduced a recovery plan as part of the National Rail Policy and Freight Logistics Roadmap. 

The goal is to improve rail transport by allowing private companies to access and operate parts of the rail network, increasing private sector involvement in Transnet’s operations. 

Public consultations are ongoing, and the final tariffs for private access will need approval from the Ministers of Transport and Public Enterprises before implementation.

Despite its struggles with debt and other issues, Nedbank said that Transnet’s new board reported some positive results for the 2023/24 fiscal year. 

“There has been an increase in revenue, a reduction in operating costs, and an improvement in operational volumes. The SOE handled about 152 million tonnes of cargo, which is close to its self-imposed target of 154 million tonnes,” Nedbank said. 

The container sector at ports also improved, nearly meeting the target of 4.2 million TEUs (twenty-foot equivalent units, a standard measure of cargo volume).

The government has also partnered with International Container Terminal Services Incorporated, based in the Philippines, to address infrastructure issues at the Durban Container Terminal (DCT2), South Africa’s busiest port. 

This partnership aims to enhance DCT2’s capacity as part of Transnet’s broader recovery efforts.

Nedbank explained that there are also several public works and infrastructure projects currently in the government pipeline. 

“They present genuine business and job creation opportunities, along with potential macroeconomic benefits.”

In January, the government awarded a long-term concession for the liquefied natural gas (LNG) project to a consortium led by Dutch terminal operator Vopak.

“This will be the first of its kind in South Africa. It will need a total investment of R2.1 billion, and it aims to import between 1 and 5 million tons of LNG a year.”

“The new terminal is expected to generate around 4,500 jobs and R914 million of additional income to local households.”

“The project represents a R2.2 billion investment and will serve as the main liquid fuels supply hub of the Nelson Mandela Bay Municipality and surrounding areas.”

Another major project comes from the Airports Company of SA (ACSA), which has allocated R21.7 billion to airport infrastructure developments and statutory compliance over the next 5 years.

Nedbank explained that the developments include a new hotel and capacity expansion projects at several airports across South Africa. 

Project Ukuvuselela, which involves upgrading the rail line from Gauteng to Eastern Cape, and multibillion-dollar special economic zones in Mpumalanga and the Northern Cape are also in the pipeline.