The Treasury has allocated R1-trillion to infrastructure spend over the medium term as part of the government-wide strategy to attract more private sector participation in infrastructure build.
Infrastructure development is the linchpin of the government of national unity (GNU) as it plans to enhance investment into the economy, which has dragged on for more than a decade.
Fixed investment — an important factor in boosting job creation — has been hit hard in recent times as business confidence has deteriorated and firms have had to shore up finances amid plummeting economic activity and declining demand.
The Treasury’s push for more capital spending from the private sector underscores its fiscal constraints. The revised budget, tabled by finance minister Enoch Godongwana on Wednesday, sees a slight increase in gross government debt to GDP to 76.1% for 2025/26. Debt service costs increase by R30.5bn relative to the draft February budget.
The spending will focus on three sectors including: R402bn for transport and logistics; R219.2bn for energy infrastructure; and R156.3bn for water and sanitation.
In February the Treasury gazetted new regulations to simplify private-public partnerships (PPPs), making the procurement process less complex to draw in more private capital to state projects.
“The new regulations for public-private partnerships (PPPs) have been finalised and will take effect on June 1 2025. The regulations reduce the procedural complexity of undertaking PPPs, create capacity to support and manage PPPs, create clear rules for managing unsolicited bids, and strengthen fiscal risk governance.
“The regulations also make provision for national departments to establish sector-specific PPP units. These units will drive private sector participation (PSP), creating opportunities to optimise the balance sheets of financially distressed state-owned companies,” Godongwana said on Wednesday.
The government will not make an equity injection into state-owned freight, ports and logistics company Transnet but was funding strategic infrastructure projects, the head of Treasury’s budget office, Edgar Sishi, said in a question-and-answer session with Business Day reporters.
No financial support has been included in the Budget Review tabled in parliament on Wednesday.
The need for funding by Transnet, whose logistical challenges have been a constraint on economic growth, could add to the spending pressure on government in the years ahead. The Treasury says Transnet is hampered by high debt levels and needs to make faster progress on its recovery plan to improve operations and finances.
“What amazes me about the ‘Transnet bailout’ discussion is that it has been going on for three years. And every year we get told that it is inevitable,” Sishi said.
“As it relates to strategic infrastructure projects, Transnet will receive support. What we are not doing are equity injections into Transnet,” he said.
Treasury director-general Duncan Pieterse said that a balance sheet bailout for Transnet would be very difficult to consider, given current fiscal constraints. He noted that Transnet had already received a government guarantee of R47bn, granted in December 2023, to continue accessing the markets.
“The work that [Transnet] is currently engaged in in bringing the private sector into certain parts of their business, we believe will solve a significant part of the entity’s balance sheet challenges,” Pieterse said.
Godongwana said “should Transnet require gap funding for its PSP projects, the Budget Facility for Infrastructure (BFI) will consider these after proper packaging and financial structuring. Additional guarantees may also be considered to refinance the entity’s maturing debt as well as its capital investment programme.”
Prasa has been provisionally allocated an additional R19.2bn over the medium term for critical signalling upgrades.
“The allocation will also allow Prasa to maximise the potential of the 241 new trains delivered through the rolling stock renewal programme. Despite the progress made, Prasa’s procurement system needs strengthening. The management of the entity has already instituted measures to strengthen its procurement weaknesses. This includes getting support from the National Treasury to build capacity and mitigate risks and undertaking live audits for large procurement projects,” Godongwana said.
“A credit guarantee vehicle to mobilise private sector capital by de-risking projects will be launched in 2026. Its initial focus will be on independent transmission aimed at bridging the energy transmission deficit. Once the vehicle has demonstrated its efficacy, it will be broadened to include other sectors. Government will issue its first infrastructure bond in 2025/26.
“We will also introduce other innovative financing instruments to diversify the infrastructure funding sources. Financial institutions including pension funds, banks, development banks and international financial institutions have already expressed interest in participating.”
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