South Africa's 2025 Medium Term Budget Policy Statement (MTBPS) positions infrastructure as a central pillar of economic recovery. For private sector investment vehicles such as our Prescient Infrastructure Debt Fund and the Prescient Clean Energy Debt Fund, the budget signals potential opportunities for private capital to contribute to national development while generating sustainable returns.
In his address, Finance Minister Enoch Godongwana echoed President Ramaphosa's sentiment, describing infrastructure as the "flywheel" of the economy.
The budget backs this vision with a strategic shift in public spending from consumption to investment, coupled with significant financial commitments and regulatory reforms to attract private-sector participation at scale.
Article by: Conway Williams - Head of Credit at Prescient Investment Management
A Budget built on infrastructure
The MTBPS outlines a multi-pronged approach to revitalising South Africa's infrastructure. Capital payments are set to be the fastest-growing expenditure item, increasing by 7.5% over the medium term. Key allocations include an R8.3 billion injection into Transnet for the rehabilitation of crucial rail corridors, a move expected to unlock a further R12.4 billion in private funding. Additionally, R4.1 billion is earmarked for disaster relief and rebuilding essential public infrastructure.
The most significant aspects for private investors lie in the budget's financing and regulatory innovations. The government is launching a new infrastructure bond to raise at least R15 billion, creating a dedicated instrument to mobilise financing. Furthermore, a R2 billion capitalisation of a Credit Guarantee Vehicle will help de-risk private investments, initially focusing on the critical electricity transmission sector.
A much-needed overhaul of the regulatory landscape strengthens these financial mechanisms. For example, amendments to the Public-Private Partnership (PPP) regulations, effective from June 2025, are designed to streamline approvals and unlock potential across all levels of government. Additionally, new guidelines for unsolicited bids, published in October 2025, provide a clear pathway for the private sector to introduce innovative project ideas, an important step toward accelerating development.
Key budget initiative details:
- Transnet Rail Rehabilitation: R8.3 billion public funds to unlock R12.4 billion private investment.
- New Infrastructure Bond: To raise a minimum of R15 billion for infrastructure projects.
- Credit Guarantee Vehicle: R2 billion government capitalisation to de-risk private investment.
- PPP Regulatory Reform: Streamlined approvals and new guidelines for unsolicited bids.
The economic imperative of Infrastructure
The budget's focus on infrastructure is a direct response to the challenging economic conditions South Africa faces. The economy grew modestly by around 0.8% in the second quarter of 2025, while unemployment remains persistently high at over 31%. Power supply stability has improved compared to previous years, with load shedding estimated to have reduced GDP growth by approximately 0.5 percentage points in 2024. Export performance has also been challenging, with values declining in 2024 due to lower volumes and prices. More recently, trade disruptions from tariffs have begun impacting key export sectors such as vehicles, chemicals, and agricultural products, particularly affecting exports to the US market in 2025. These ongoing challenges underscore the urgent need for infrastructure investment to support economic recovery and job creation.
These statistics underscore the critical importance of infrastructure not just for economic growth, but for the nation's functioning. Government has committed to stabilising the debt-to-GDP ratio at 77.9% in 2025/26, marking the first stabilisation since 2008, though at a significantly higher level than pre-crisis ratios. The achievement of a primary budget surplus (R68.5 billion or 0.9% of GDP in 2025/26) represents an important fiscal milestone, although the overall budget deficit remains around 4% of GDP due to debt-service costs consuming 21 cents of every revenue rand. This fiscal discipline, combined with the strategic pivot to infrastructure investment, provides a foundation for private sector involvement, though execution risks remain.
Opportunities for the private sector
The 2025 Medium Term Budget Policy Statement (MTBPS) highlights opportunities for the private sector to invest in South Africa's infrastructure development. The government has committed to leveraging public resources to mobilise private finance, supported by reforms in key sectors. The Department of Transport's private-sector participation unit is actively seeking proposals for rail corridor projects and passenger rail modernisation, presenting tangible investment avenues. Similarly, the Water Partnerships Office is developing a pipeline of bankable projects focused on reducing non-revenue water and promoting water reuse to address critical water challenges. Additional measures, such as the reconfiguration of the Budget Facility for Infrastructure to multiple bid windows annually and the upcoming infrastructure bond, further signal growing space for private sector participation in infrastructure investment.
It is our view that the private sector is well-positioned to participate in the ongoing energy transition. The budget's support for electricity transmission expansion directly complements the growth of renewable energy generation. South Africa has already attracted significant investment in its renewable energy sector, with the Renewable Energy Independent Power Producer Procurement (REIPPP) program demonstrating how aligned public policy and private capital can achieve results. The Just Energy Transition (JET) framework provides a roadmap for decarbonisation. The government's commitment to a new, lower inflation target of 3% may, over time and subject to successful implementation, contribute to a lower interest rate environment that could improve the viability of long-term capital projects.
The Path Forward: collaboration and implementation
The 2025 MTBPS provides specific details on infrastructure financing and regulatory reforms. It recognises the fiscal constraints facing the state and underscores the necessity of private sector participation as a critical partner in development.
It also details specific reforms, such as amendments to PPP regulations (effective June 2025), new guidelines for unsolicited bids (published October 2025), the reconfiguration of the Budget Facility for Infrastructure to run multiple bid windows annually, and the planned launch of an infrastructure bond. The success of programs like the Renewable Energy Independent Power Producer Procurement (REIPPP) provides a precedent for how aligned public policy and private capital can achieve results, though South Africa's broader infrastructure track record has been mixed, with some projects experiencing delays and cost overruns.
The pace and quality of implementation will determine the ultimate impact of these initiatives. Success depends on efficient and transparent execution of the newly streamlined regulatory processes, as well as proactive engagement from private investors who can bring both capital and expertise.
The challenge now lies in execution. The government must ensure that the newly streamlined regulatory processes are efficient and transparent. For their part, private investors, including specialised debt funds, must engage proactively, bringing not just capital but also expertise to the table.
The 2025 budget represents, in our view, a significant policy commitment to infrastructure-led growth. It offers investors the opportunity to finance essential infrastructure that could support the nation's economic development, create jobs, and deliver both social and financial returns.
Prescient Investment Management remains constructively engaged with South Africa's evolving infrastructure ecosystem and are positioned to participate in the opportunities that may emerge, while remaining mindful of the execution risks inherent in infrastructure development.
Disclaimer
Prescient Investment Management (Pty) Ltd, an authorised Financial Services Provider (FSP 612), is the appointed Trustee of the Prescient Infrastructure Debt Fund and the Prescient Clean Energy Infrastructure Debt Fund. These Trusts are private ventures and is not open to the members of the public as defined in the Collective Investment Schemes Control Act No 45 of 2002 (“CISCA”). Due to confidential nature of the associated Funds private placement documents, these documents are not publicly available.
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