South Africa wins R5.8 billion from the World Bank

South Africa has won $350 million (R5.8 billion) in World Bank funding for a credit-guarantee vehicle designed to boost private investment in infrastructure and accelerate the rollout of its transmission grid expansion. 

The vehicle, which will be hosted by the state-owned Development Bank of Southern Africa, will target an initial capitalization of $500 million and is expected to mobilize $10 billion (R165.4 billion) in investment over the next decade. 

The facility “will support massive investments in transmission infrastructure,” Enoch Godongwana, South Africa’s finance minister, said in a joint statement with the World Bank on Friday.

“We expect development partners to confirm their capital participation. We are targeting the CGV to be operational this year.”

Growth in Africa’s largest economy has been handicapped by its inadequate infrastructure, including a limited grid that’s hindered the country from taking advantage of some of the world’s best renewable energy potential. 

The fund’s creation marks a step forward in the drive to lift investment, most notably in transmission lines. These are needed to increase energy security and boost the construction of green energy plants in sunny and windy parts of the country.

President Cyril Ramaphosa said last month that a transmission company independent of state power utility Eskom Holdings will be created.

Global energy companies, including Engie, Adani Power and China’s State Grid International Development, have expressed interest in investing. 

The plan is to roll out 14,000 kilometers of new power lines at a cost of about R440 billion.

The existing grid is strongest in the east where coal-fired power plants produce about three quarters of the country’s electricity.

The vehicle will use “market-based credit guarantees” to lessen the risk of investments and cut reliance on sovereign guarantees, the World Bank and South Africa’s National Treasury said in the statement.

The fund will also foster investment in transport and water, the DBSA said in a separate statement.

“The mechanism is designed to be sustainable and scalable, starting with transmission