Standard Bank expects R700bn in public-private investment over the next three years in SA, with rail and water infrastructure set for a huge windfall, in what could be a rare win for President Cyril Ramaphosa’s grand plan to revive the economy via private-sector-led recovery.
This was disclosed by Standard Bank corporate and investment banking (CIB) CEO Luvuyo Masinda at the UBS Conference at the end of last year, with investment in rail and infrastructure estimated at R150bn.
Standard Bank’s CIB business in SA serves large companies including multinational, regional and domestic players, governments, state-owned companies and institutional clients.
SA’s rail industry is undergoing the most fundamental change in a generation, after a government decision to move forward in granting the private sector access to sprawling rail infrastructure of more than 21,000km.
If it materialises, the influx of cash, coupled with the cheerful mood in corporate boardrooms, would advance one of the pillars of Ramaphosa’s plan to lift the economy through private-sector-led recovery.
Business Day reported last week that Transnet Freight Rail’s six rail corridors need about R14bn a year in refurbishment, having been hit by theft and vandalism, and in some cases outdated systems.
Transnet and the New Development Bank agreed in August to “enhance the efficiency and capacity of SA’s freight rail systems. The improvement and modernisation of the freight rail sector programme includes rail network infrastructure renewal, locomotive overhauls and wagon fleet renewal.”
Transport minister Barbara Creecy approved the publishing of the Transnet Network Statement in December. This is a major step in facilitating open access to the country’s rail network by third-party operators, a move welcomed by the business community and industry players.
Third-party access will see private sector freight and passenger transport entities procure, deploy and operate their own rolling stock on state-owned railways while paying access fees to the infrastructure owner, Transnet.
The network statement is a crucial step forward for the rail industry (and commodity providers reliant on rail services), which has been monopolised by Transnet, now opening the door to private investment.
The move will also give Transnet the means to reduce its vast debt now at a debilitating R136bn, with the entity recently put on a credit downgrade watch by S&P Global Ratings.
The move is also expected to alleviate pressure on the road network.
Bank of America Securities said it expected corporate borrowing activity and “positive externalities from infrastructure spending” to support a 14% CIB lending growth in SA in the first half of 2025, “on the back of a strong deal pipeline noted by the banks, SA infrastructure investments, lower interest rates, elevated business confidence currently and improved economic growth”.
Jason Swartz, portfolio manager at Old Mutual Investment Group, said improving logistics, particularly through Transnet, is critical for growth, and the next phase of reform must emphasise private sector investment, particularly in infrastructure.
“Now that the first phase of Operation Vulindlela — with the focus largely on regulatory interventions — is complete, the next phase needs to embrace private participation and investment as a priority. SA’s gross fixed-capital formation has been structurally trending lower for decades, while private investment spending is significantly lower than its peak in 2008-09, and current private-sector capital expenditure intentions are also at low levels,” he said.
“Some policy work has begun though, for example, the private sector partnership framework, which was approved by cabinet in 2023, provides a model to enable effective private sector investment and participation in the SA rail sector. However, the government needs to do more to incentivise and enable corporates to confidently increase private investment, specifically in infrastructure.”
The second phase of Operation Vulindlela, a joint initiative of the presidency and the National Treasury to speed up structural reforms, is poised to zoom in on reforming the local government system and improving delivery of basic services, Ramaphosa has said.
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