- It has been a busy week for South Africa’s power transmission future.
- South Africa’s IPP Office has published a request for pre-qualification for new electricity transmission infrastructure capacity under the Independent Transmission Projects Procurement Programme (ITP).
- The government wants to build 14,000 km of new transmission lines by 2032 which is expected to cost around R440 billion. Read more
- German Cooperation via KFW Development Bank has concluded a €500 million loan to support structural reforms to enhance the efficiency, resilience, and sustainability of the country’s infrastructure services, with a specific focus on the energy sector and climate mitigation. Read more
- The National Treasury has designed a Credit Guarantee Vehicle of US 500 million to unlock private capital and complement public financing for infrastructure while minimizing contingent liabilities.
- The Credit Guarantee Vehicle will be operationalised by July 2026 to align with the first phase of ITP projects.
South Africa is faced with a significant infrastructure financing need. It is estimated that South Africa’s infrastructure gap is around R3.5 to R4 trillion by 2025, or around R400 billion per annum. This substantial need calls for scaling up of public financing for infrastructure as well as crowding in private capital through public-private partnerships (PPP).
Related news: IPP Office to manage Independent Transmission Projects Procurement Programme
Deputy Finance Minister, Dr David Masondo, explains that the objective of the Credit Guarantee Vehicle is to mobilize and leverage private capital to address South Africa’s infrastructure financing gap by mitigating offtake risk for private investors. “This vehicle will also support the efficient deployment of development partner funding under the Just Energy Transition Partnership (JETP) and the achievement of the country’s decarbonisation commitments,” said Masondo.
While the Credit Guarantee Vehicle will focus on the initial phase on enabling investments in transmission infrastructure, it will be expanded into other areas such as logistics and water over time. The vehicle will be incorporated as a private company in South Africa, regulated by the Prudential Authority. It will operate as a standalone entity with an independent balance sheet and will target a minimum credit rating of AAA.
A professional executive management team and board of directors with relevant experience and expertise will be appointed to operate and manage the fund.
The Credit Guarantee Vehicle will issue a combination of payment and termination guarantees to a Special Purpose Vehicle established for the project. This will substantially derisk early investments in ITPs until the model has been proven and established.
“We are targeting an initial capital raise of US$500 million for the vehicle, spread across a range of development partners. National Treasury has committed to providing first loss capital of 20%, which will be an initial US$100 million increasing to US$500 million (R9 billion) if needed,” said Masondo.
In February 2025, the Minister of Finance wrote to a range of development partners asking them to submit an expression of interest to invest in the vehicle. The responses received have been overwhelmingly positive, with 32 development partners engaged thus far.
Formal engagements with participating partners are continuing and will lead to the delivery of conditional equity participation commitment letters in the third quarter of 2025.
“This will enable the Credit Guarantee Vehicle to be operationalized by July 2026 to align with the first phase of ITP projects. South Africa’s ITP programme, backed by credit guarantees, represents a globally innovative model which has been designed with our own context and needs in mind. It will not only result in massive new investment in infrastructure but will enable thousands of megawatts of new renewable energy capacity to be connected in areas where grid capacity is limited,” concluded Masondo.
Author: Bryan Groenendaal
