Infrastructure opportunity

Infrastructure investment is fast becoming one of the country’s most important economic levers because it literally builds economies. According to the 2026/2027 National Budget, SA’s public sector will spend R1.07 trillion on infrastructure. This will be spread across the three spheres of government, public entities and state-owned entities.

The need is urgent. SA has experienced consistent under investment in infrastructure for three decades, with only a brief spike around the 2010 World Cup. The result is an estimated R4 trillion funding gap, a figure so large it is almost impossible to conceptualise, and certainly impossible to close without drawing in every available source of capital, from private markets to retirement funds and offshore investors.

A structural constraint in the domestic financial system is that local capital markets are relatively shallow and concentrated compared to developed economies. Deepening capital markets is not merely a financial ambition but a developmental imperative.‍

Infrastructure is becoming increasingly investable

There is a false, lingering perception that infrastructure is primarily a public-sector responsibility and some how not commercially investable. In fact, investments into infrastructure equity and debt provide an alternative asset class that generates stable, long-term returns and suit patient investors.

Revised Regulation 28 limits and blended finance models make it possible for retirement funds to participate meaningfully in infrastructure projects without sacrificing returns or governance standards. The myth that infrastructure is 'too risky and illiquid’ ignores the fact that structured solutions and private credit strategies are already mitigating these concerns.

By their nature, infrastructure investments are intended to provide long term value enhancement that is most often unlocked at the expense of easy liquidity. However, illiquidity is partly mitigated by investing in structured funds with sufficient scale and a mix of assets whichare in different life stages. The more mature assets in the fund will already be generating a steady dividend flow, while new projects in the pipeline orunder construction will take a few years to achieve those same outcomes.

A key theme is how private equity and private credit work together in funding large projects. Meaningful infrastructure development requires both. Private equity drives long-term transformation: the just energy transition, inclusive growth, and governance upgrades. It aligns with Regulation 28 incentives for infrastructure allocations. Similarly, private credit benefits from the Regulation 28 incentives and is increasingly filling the funding gap for projects, where banking regulations are making these projects less appealing to banks. It supports mezzanine structures that blend debt and equity for flexibility. Private credits attractive for retirement funds seeking yield and diversification.

Equity investors typically take an active, long-term governance role, while credit provides the scale of funding required to make projects viable. In many renewable energy projects, equity may account for only 10% to 20% of the capital stack. Debt provides by far the larger portion. The partnership between equity and credit forms a powerful engine for capital deployment.‍

Beyond financial returns to measurable impact

A typical project financed through private equity and debt infrastructure funds in South Africa would be a solar plant of about 100 MW in a remote location. Its benefits extend far beyond megawatts generated or emissions avoided. They include improved access to electricity, community development programmes, early childhood play groups, meals, bursary schemes, and skills training. Infrastructure canalter life trajectories in ways that are not always captured in spreadsheets.

The alignment is natural. For the country, the need is to plug a multi-trillion rand shortfall in infrastructure spending. Government initiatives (Infrastructure SA) aim to crowd in private capital. Retirement funds, which control about R4.6 trillion in assets, can unlock significant funding to achieve these national goals by making even modest allocations from this pool of savings. For pension funds, the need is to match long-dated liabilities and create predictable cash flows spread over extended periods. Infrastructure assets offer precisely that profile.

There are other advantages in infrastructure assets for pension funds. Infrastructure offers low correlation with listed equities and bonds, reducing portfolio volatility and improving resilience during market shocks. Infrastructure revenues often escalate with inflation, protecting real returns in high CPI environments, because core infrastructure assets like toll roadsand utilities are often underpinned by long-term contracts or regulated tariffs. Essential services (energy, transport, water) remain in demand regardless of economic cycles, making infrastructure resilient during downturns.

But there is also a second-order benefit: retirees depend on the health of the economy in which they live. Investing in infrastructure strengthens that foundation.

With meaningful reform and essential, clear frameworks for private participation, water infrastructure may be the next viable investment opportunity. By directing capital into real assets that provide essential services to the economy, infrastructure investment becomes far more significant than a financial exercise – it becomes tangible nation-building.