Deputy President Paul Mashatile: Standard Bank Infrastructure Focus Engagement

Remarks by Deputy President Shipokosa Paulus Mashatile at the Standard Bank Infrastructure Focus Engagement with British DFIS, London

Programme Director;
Ministers and Deputy Ministers;
CEO the Standard Bank of South Africa Limited, Lungisa Fuzile;
CEO Corporate & Investment Banking South Africa, Zaid Moola;
Head of Investment Banking Africa Regions and International, Yewande Sadiku;
Ladies and gentlemen.

Many of those that I have worked with will comprehend when I say it is an honour to stand before you today to discuss the crucial role of infrastructure investment in South Africa. This has become a subject that is particularly dear to me, as I am of the opinion that infrastructure is the foundation of sustainable economic growth.

Infrastructure that is well-designed is essential for the efficient production and utilisation of products and services, as it reduces trade costs and enables economies of scale. It is a critical component of economic growth and development, which is essential for the improvement of living standards.

South Africa stands at a crossroads where infrastructure development plays a pivotal role in driving economic growth, fostering innovation, and improving the quality of life for its citizens.

As we navigate through these challenging times, it becomes increasingly essential for the Standard Bank Group to harness opportunities in infrastructure investment and steer the country towards a sustainable future.

Infrastructure investment in South Africa presents a vast array of prospects across various sectors, including transportation, energy, water, and telecommunication. By leveraging our expertise and partnerships, the Standard Bank Group can actively contribute to these projects, creating jobs, promoting local business development, and enhancing overall connectivity within the region.

As Africa's largest bank by assets and the leading enabler of energy and infrastructure on the African continent. We urge the bank to remain committed to supporting the continent's energy transition.

South Africa has vast energy resources, including oil, gas, coal, and renewable energy sources, and with the right investment and expertise, the sector has the potential to unlock growth and improve the lives of millions of our people.

The Government plans to prioritise the investment in infrastructure through improvements in the infrastructure pipeline, the execution of that pipeline, and the financing thereof. Mobilising private sector resources to augment public sector capability and finances is necessary to fast-track the provision of infrastructure and improve effectiveness.

The Government has initiated various reforms to systematically crowd-in greater private sector participation to improve spending and delivery outcomes.

The South African Government has a huge financing gap for its infrastructure portfolio that could further require more funding. As reflected in the 2023/24 Budget Review, total infrastructure investment planned by the government over the next three years amounts to almost R943 billion.

The National Treasury is attempting to raise funding for the public sector infrastructure projects that are funded through the Budget Facility for Infrastructure (BFI) using blended finance instruments that include concessional financing from MDBs and development partner countries.

The MDBs and development partners have been invited to participate in the current BFI window and to also share their financing frameworks. The National Treasury is in the process of screening the projects that could potentially be funded. As the finance institution, we urge you to participate in funding some of the projects once the projects have been approved for BFI funding.

Ladies and gentlemen,

The transmission infrastructure is emerging as a significant bottleneck to the ability of the grid to incorporate additional renewable energy generation into the country’s energy supply. The investment community can play a crucial role in this space at the back of the reforms that the National Treasury is championing to crowd in the private sector in the funding framework for the grid.

The two prominent initiatives are the introduction of an Independent Power Transmission model and establishment of a Credit Guarantee Vehicle to derisk projects.

Moreover, the Cabinet in 2023 agreed for the private sector to compliment Eskom in speeding up investment in the transmission grid to meet the country's requirement of 14,000 kilometres of transmission lines in the next ten years.

The National Treasury, working with the Ministry of Energy and Electricity, Eskom, and other departments, are piloting an Independent Power Transmission (IPT) model to crowd in private sector investment in transmission infrastructure through a Build, Own, Operate, and Transfer (BOOT) model.

The Government, through the Independent Power Producer Office, is expected to go out to the market for tender at the end of this year.

The South African Renewable Energy (Just Energy Transition) Implementation Plan is a roadmap that aims to meet South Africa's decarbonisation commitments in a manner that delivers just outcomes for those affected by the energy transition and contributes to inclusive economic growth, energy security, and employment.

The Just Energy Transition (JET) Project Management Unit (PMU) in the Office of The Presidency has introduced a funding platform to facilitate funding from multiple sources and $11.596 billion (R221 bn) in international pledges into clean energy projects. It provides and supports the roadmap for Just Energy Transition Investment Plan (JET IP) implementation, convenes role-players and builds partnerships for JET IP delivery, guides sources of finance to address JET IP needs, and ensures transparent monitoring and evaluation of JET IP delivery and results.

The JET Funding Platform aims to accelerate grant deployment, but the implementation of the ACT has been delayed due to the Eskom debt moratorium and rescheduled decommissioning. The Government has deployed US$600 million in policy loans to support prior commitments in 2022.

The JET Funding Programme aims to stimulate private investment in renewable energy generation, skills development, and municipal capacity through a combination of international partnerships and targeted incentives from the public sector.

As South Africa navigates its energy transition, the role of State Owned Enterprise in the energy sector remains pivotal. The Government is committed to optimising the performance of these entities while ensuring alignment with national energy policies and sustainability goals.

Ladies and gentlemen,

It is crucial to acknowledge the challenges that come with infrastructure investment in South Africa. Issues such as regulatory hurdles, funding constraints, and skills shortages require innovative solutions and collaborative efforts to overcome.

As a leading financial institution, the Standard Bank Group is well-positioned to drive change and facilitate sustainable infrastructure development in the country. Through strategic investments, responsible financing, and a commitment to long-term growth, the Standard Bank Group can be a catalyst for positive change in South Africa's infrastructure landscape.

While important steps have been taken recently to make it easier to speed up private investment in energy generation, more needs to be done to fix the transmission grid's problems. This is especially important for South Africa's long-term energy security and energy sovereignty, as well as for meeting global decarbonisation goals and boosting the economy.

Transmission infrastructure is important for South Africa's green economy potential, job creation, and growth that is focused on industry. The Ministry of Energy and Electricity is in charge of making new Transmission Regulations so that the private sector can invest in the grid. Also, work is being done with the help of the National Treasury to set up an ITP pilot that will focus on connecting renewable energy in the Cape corridors.

The Government is also working with the World Bank, MIGA, and the IFC to make a blended finance Credit Guarantee Vehicle (CGV). This will help private investors who can't get sovereign guarantees for transmission projects. It is planned that the CGV will start running in the middle of 2026.

Ladies and gentlemen,

We have identified a gap in project readiness and preparedness for the market. Infrastructure South Africa received its first batch of money for project preparation in 2023. This has proven to be a game changer, as some projects have enormous potential but do not always have the necessary financial resources for technical help, legal support, or capacity building.

Infrastructure South Africa uses project preparation financing to support initiatives that would otherwise go inactive for many years. It is worth noting that 37 projects are already receive project preparation assistance as part of the first R200 million tranche.

As the Government of the National Unity, we are paying special attention to unlocking regulatory barriers that prevent projects from moving.

Infrastructure South Africa has played a role in infrastructure development and has contributed to some of the key achievements in the sector, and it is indeed one of the best accomplishments of this Government.

Ladies and gentlemen, we encourage you to obtain the South African Construction Book, which was formally released this year and provides a complete review of investment opportunities in the country's infrastructure industry. The book tells the tale of where we are going as a country, with the primary goal of providing stakeholders and investors with information about infrastructure projects projected in the market during the fiscal year 2024/25. It is available at www.sidssa.org.za and www.infrastructuresa.org.za

Lastly, I would like to express my confidence in you as investors and funders to form more strategic partnerships with our continental brothers and sisters through us as gateway to Africa's market. The African Continental Free Trade Area agreement continues to serve as a vital platform for our continent's economic and cultural integration.

Transport infrastructure, in particular, is the cornerstone of regional economic progress, and South Africa aims to offer practical collaboration on bi-national projects that would boost the continent and its economy. By collaborating closely we can create a more resilient and inclusive infrastructure ecosystem that benefits everyone.

Finally, I urge the Standard Bank Group to exploit the opportunity afforded by infrastructure investment in South Africa. Let us embark on this road with a common goal of prosperity, sustainability, and advancement for our country. Our motto in the Presidency is the speed of execution, the cornerstone of getting things done.

Thank you.