Infrastructure investing

Infrastructure investing in South Africa

South Africa has a deep savings pool which, if channelled effectively and conservatively into infrastructure, would not only be able to achieve commercial returns, but also curb unemployment and meaningfully address inequality and poverty.
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South Africa should be spending at least 30% of GDP by 2030 on infrastructure to promote inclusive economic growth.

Unfortunately, spend has tracked well below this target since the early 1980s, and South Africa significantly lags other, faster-growing economies in this key metric.

Now, however, the landscape is improving at a rapid pace and asset owners are waking up to the infrastructure opportunity. It is no longer the case that to contribute to development and invest sustainably, investors must accept lower returns.

  1. The pipeline
  2. The opportunity for institutional investors
  3. Why infrastructure debt?
  4. Meet the team
  5. Latest thinking
  6. Download brochure

The pipeline


South Africa has a clear and critical need to invest in infrastructure, both as a primary boost to activity and as a facilitator of growth for the wider economy. The government’s infrastructure investment plan represents an investment value of more than R2.3 trillion in more than 200 projects, spanning sectors from:

  • Transport
  • Water
  • Energy
  • Human settlements
  • and digital communications.

Allocations to alternative investment in South Africa, including infrastructure, are up 21% in 25 years, and asset owners are starting to recognise the benefits that investment in infrastructure offers, such as predictable steady cash flow with low volatility.

The opportunity for institutional investors

The amendments to Regulation 28, whereby up to 45% of domestic assets can now be invested in infrastructure, presents a significant opportunity for the SA institutional market to diversify exposure away from traditional listed markets.

The allocation to alternative investments, including infrastructure, has risen by 21% over the last 25 years. Global pension funds are increasingly investing in infrastructure, with infrastructure funds hitting an all-time high in 2021.*

* McKinsey Global Private Markets Review 2022, Preqin, Excludes secondaries, funds of funds, and co-investment vehicles to avoid double counting of capital fundraised.

Why infrastructure debt?

1
Debt provides a large and attractive investment opportunity, typically accounting for 70-90% of the funding required for projects.

2
The equity upside is forgone, but in its place the investment becomes more defensive and provides greater certainty thanks to preferred rights to the underlying assets and cash flows.

3
Debt providers are able to exploit their position in the funding structure to encourage, influence and incentivise borrowers to design and operate their projects in an impactful and sustainable way.

4
The speed at which investment can take place is also fast tracked given the protections afforded to debt holders, standardised terms and the growing opportunity set in both the private and public markets.

Meet the team

Our team manages numerous strategies across illiquid and liquid credit, including 17 vintages of the Credit Opportunities Fund, closed-ended funds that focus on private and illiquid credit in South Africa and the rest of Africa.

R58bn

Invested in infrastructure over 20 years

R7 billion

Rate of deployment per annum

130+

Projects and borrowers supported

R100bn +

Assets under management

50%

of illiquid debt strategies are in infrastructure

Bashier Omar
Alastair Herbertson
Thanzi Ramukosi
Puleng Pitso
Nathaniel Micklem
Martijn Proos

Our team manages numerous strategies across illiquid and liquid credit, including 17 vintages of the Credit Opportunities Fund, closed-ended funds that focus on private and illiquid credit in South Africa and the rest of Africa.

They are also responsible for the management of the Emerging Africa Infrastructure Fund (EAIF), a public-private partnership anchored by the governments of the United Kingdom, the Netherlands, Sweden and Switzerland. Established in 2002, the Fund is a market leader in infrastructure finance in Africa, and has over US$1 billion in drawn and committed exposure to numerous sectors including renewable energy, ports, water, manufacturing student housing and logistics.

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