By S’thembile Cele, Bloomberg.
South Africa is launching a credit-guarantee facility to boost private sector involvement in the country’s ambitious infrastructure investment plans, reducing the need for public spending.
“We are looking to manage levels of risk associated with projects or project sponsors in attracting private sector financing” Deputy Finance Minister David Masondo said in an interview on Thursday in London. “The Credit Guarantee Vehicle looks to crowd in private sector capital for strategic infrastructure projects.”
Masondo is part of a delegation in the UK presenting South Africa to investors, who’ve sought assurances the country will stay on a path of fiscal consolidation to help preserve improvements in confidence that have underpinned a three-month rally in the rand.
South African President Cyril Ramaphosa said in March that as much as 1.6 trillion rand ($91 billion) in public-sector infrastructure investment and a further 3.2 trillion rand from the private sector will be needed for the country to achieve its infrastructure goals by 2030.
Finance Minister Enoch Godongwana will focus on the infrastructure strategy when he presents his medium-term budget statement on Oct. 30. The government plans to upgrade the nation’s ports, railways and roads to help revive economic activity — with a goal of 2% growth in 2025 and accelerating thereafter — after a decade of expanding at less than half that pace.
The CGV “will provide credit enhancement in the form of credit guarantees or insurance products to cover risks that the private sector is not prepared to take,” Masondo said, adding that it will cover projects, not entities, and won’t be a funding platform in itself.