Sonia Phalatse

THE ROLE OF PRIVATE FINANCE IN INFRASTRUCTURE DEVELOPMENT IN SOUTH AFRICA – A CRITICAL ASSESSMENT

The South African government is undertaking a massive infrastructure drive in an effort to revive growth and increase employment. This comes at a time when the country is facing a deep economic crisis that has progressively worsened over the past few years.

This paper assesses South Africa’s massive infrastructure drive to revive growth and increase employment. This comes after years of stagnant growth, and now facing a deep economic crisis, exacerbated by the COVID-19 pandemic. This drive also comes after years of weak infrastructure investment, widening the infrastructure deficit. in the inequalities in infrastructure provisioning are particularly stark in communities where socio-economic conditions are characterised by over-crowding, deep levels of poverty and inadequate access to basic public services such as water and sanitation.

The Economic Response and Recovery Plan (ERRP), the economic response plan to COVID-19, outlines a R1 trillion investment drive, primarily from the private sector through an Infrastructure Fund over the next 10 years.1 It is envisaged that this Fund will finance large infrastructure projects that will incentivise private finance by de-risking infrastructure investments.

Infrastructure projects involve a number of risks, particularly for underdeveloped areas that require substantial resources. Because of this, the private sector is reluctant to invest in infrastructure projects that have higher risks than expected returns. The government has therefore undertaken measures to de-risk infrastructure investments using various financing instruments that are most commercially attractive to private investors.

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Friedrich-Ebert-Stiftung 
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