What is the need?
The National Development Plan (NDP) set a target for South African Gross Fixed Capital Formation (GFCF) to reach 30% of GDP by 2030, with public sector investment contributing about 10%. In 2024, however, total fixed investment was approximately 14.1% of GDP. Private sector investment accounted for 10.1% and public sector investment for the balance. Kevin Lings, economist at Stanlib noted in a presentation given during August 2026 that with total fixed investment at 13,2% of GDP, South Africa could be a failed state. “Even if we get to 20%, we will grow at 4%”, he observed.
Global context
A global infrastructure fund will typically own shares in companies operating electricity transmission networks, utilities, airports, ports, railways, toll roads, pipelines, communications towers and data centres. The investor is buying exposure to a diversified collection of long-life assets, revenue streams, jurisdictions, counterparties and
infrastructure subsectors. The diversification is one of the reasons why the asset class has historically attracted institutional investors – it is not simply a collection of project-finance transactions.
Retirement funds
Pension assets globally exceed USD 56 trillion, making pension funds among the largest pools of capital in international markets. Yet infrastructure allocations remain modest. OECD analysis of approximately USD 10.6 trillion held by large public and private pension funds found that infrastructure investments represented about 2% of assets under management. Even in developed markets, this is a relatively small portfolio allocation.
The Boston Consulting Group published “Infrastructure strategy 2026: A year of increasing scale and diversification” earlier this year. The survey notes that private infrastructure Assets Under Management (AUM) reached $1.6 trillion in 2025.
Other observations include: Infrastructure now represents 10% of private market assets. And the largest 50 infrastructure funds dominate, attracting nearly three-quarters of capital raised. Public pension fund infrastructure allocations have risen from approximately 3% to 6% over the past decade.
McKinsey’s Global Private Markets Report 2026 adds to the analysis that 51% of surveyed Limited Partners expect to increase infrastructure allocations over the next three years.
Both reports noted a significant increase in allocations to the asset class, following two challenging years.
The reform is also intended to make municipal water and sanitation projects more bankable. Institutional investors, including asset managers and pension funds, have an appetite for infrastructure investment, but water projects need credible governance, identifiable and sustainable revenue streams, clear risk allocation, measurable performance outcomes and properly structured contracts. The MTSR can help to create these conditions.
This aligns with the role of the Water Partnerships Office, established by the Department of Water and Sanitation, the South African Local Government Association and the Development Bank of SA. The office supports municipalities in preparing bankable water and sanitation projects and developing standardised partnership models, including performance based contracts for reducing non-revenue water.
A natural fit?
South Africa’s retirement fund industry holds close to R5.8 trillion in assets plus a further R2.7 trillion in the Government Employees Pension Fund managed through the Public Investment Corporation. These are patient pools of capital, contractually committed over decades, matched to liabilities that are themselves long dated.
The characteristics of infrastructure assets match well with the typical investment objectives of a retirement fund. Cash flows are typically long-dated, often contractually or regulatorily linked to inflation, and relatively uncorrelated with listed equity and bond markets. Infrastructure assets have demonstrated these stable, low volatility returns.
The World Bank estimates that South African institutional investors, including retirement funds, currently allocate only about 5–7% of total assets to domestic infrastructure, despite holding assets equivalent to roughly 160% of GDP.
Recent policy changes encouraging investment in infrastructure within the private sector include:
- In 2021, when the cap for private power generation without a licence was lifted, it provoked the private sector to produce 18 000 megawatts within 18 months, which eased the pressure on the national grid, and assisted South Africa’s emergence from rolling blackouts.
- The Minister of Transport has been actively involved in initiatives collaborating with the private sector to enhance the rail and port infrastructure, with 11 private train operating companies approved in the national freight rail network.
- The PRASA exploration of satellite-based signalling as an alternative to physical infrastructure could reduce dependence on physical infrastructure, ensuring uninterrupted operations, enhancing safety, and improving overall efficiency.
- The Transnet National Ports Authority has awarded and continues to invite tenders for significant development at Durban port, increasing private sector involvement, and modernisation of facilities.
Financial initiatives
The World Bank’s Credit Guarantee Vehicle (issued in March 2026) is intended to use capital guarantees to de-risk infrastructure investment and crowd in institutional capital with an eventual programme target of R160bn over ten years.
The Infrastructure Fund, initially established in 2020 through cooperation between National Treasury, Infrastructure South Africa and the DBSA, is intended to blend public and private resources and crowd private capital into infrastructure projects. By 2025, it had helped package and finance 26 blended finance projects and programmes with a capital value of R101.6 billion.
In December 2025 National Treasury launched an Infrastructure and Development Finance Bond which successfully raised R11.8 billion and was over two times subscribed.
In 2025 the Public Investment Corporation hosted PIC Perspectives: G20 Dialogues. Research papers covering topics like Using Listed and Unlisted Financial Instruments to Fund Infrastructure on the Continent and Accelerating Infrastructure Development in Africa initiated debates and discussions with the asset management industry and culminated in the “Melrose Agreement”, a signed declaration that commits institutional investors to unlock capital for accelerated investments in infrastructure, industrialisation, the green economy, and new and emerging industries on the African continent.
The future – wary confidence?
The gap between South Africa’s 30% GFCF ambition and its current reality is a big ask from both the public and the private sector. How capital finds its way into the roads, power stations, and transmission lines the country needs depend critically on whether government can consistently deliver policy that is sustainable and projects worth investing in.
Infrastructure is a sector that over the last few decades has been slow to deliver on outcomes, that are vitally important to a sustainable future for South Africa. Recent developments and the potential patient capital may be cause for a healthy dose of disciplined optimism.