Punki Modise, Absa’s strategist and head of sustainable finance, has added her clout to Standard Bank boss Sim Tshabalala’s, urging global regulators to dial down tough international capital rules that starve investments in roads, grids and classrooms.
“If we can unlock that capital, it could be redirected towards financial inclusion and other development priorities,” Modise told Business Day.
“The truth is, many African governments have limited fiscal space, and finance is now better understood across the continent. Our risk models need to evolve with that understanding.”
Modise added her voice to the chorus led by Tshabalala. In his role as chair of a specialised finance and infrastructure task force in the SA Business 20 engagement strategy for the G20, Tshabalala has pressed Basel’s guardians to reclassify infrastructure as its own asset class.
Last week’s summit focused on Africa’s cost of capital, which drew serious institutional firepower, including former boss of the Central Bank of Kenya Patrick Njoroge; and Ndidi Okonkwo Nwuneli, president of One Campaign. This drew Tshabalala’s calls into a full-spectrum strategy for SA’s G20 presidency.
Basel III emerged in the aftermath of the 2008 global financial crisis as a regulatory antidote to the excesses of casino finance, where banks leveraged thin capital buffers to chase high-risk, high-return bets.
But the pendulum has swung too far, backers for reforms argue. When Basel III slaps a 150% risk weight on, for instance, a R2bn rail project, it forces banks to stump up more than R250m to sit on a balance sheet as a safeguard to absorb potential losses if the borrower fails to keep up with repayments.
But at a 50% risk weight, the capital charge shrinks to R85m, immediately freeing up three times more lending headroom.
“If you try to create a funding scheme outside of a bank today, you’re holding 100% risk-weighted assets.
“Investors want returns and you can’t afford to trap capital in suboptimal returns. We need creative ways to work around risk-weighting constraints — they’re a major barrier to economic development,” Modise said.
That urgency echoed in last week’s summit on Africa’s cost of capital, where policymakers and financiers warned that the continent is losing an estimated $74bn (R1.3-trillion) a year due to excessive interest payments and lost investments. Njoroge said that 2024 was the costliest year yet for Sub-Saharan Africa’s external debt — and 2025 is projected to be worse, at $89bn.
Research by the nonprofit One Campaign found that Africa’s debt was overpriced rather than excessive, citing the relatively lower debt-to-GDP ratios compared to high-income countries.
The growing calls for Basel III tweaks come as Africa is facing a huge shortfall — up $170bn annually — in infrastructure, such as roads, railways, power grids and water networks, needed to transform the Africa Continental Free Trade Area (AfCFTA) from a paper tiger to a functional engine of regional integration and industrialisation.
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