The Bankability Gap, Not the Capital Gap: Why SA Infrastructure Finance Stalls

Every conference on South African infrastructure ends at the same place. The room agrees there is no shortage of capital - pension funds, development finance institutions, balance-sheet lenders all stand ready - and then concludes, with a shrug, that "projects aren't coming through." After two decades of structuring transactions, I have come to a sharper conclusion: South Africa does not have a capital gap. It has a bankability gap. And the gap is not a funding problem; it is a project-preparation, risk-allocation and structuring problem.

The distinction matters because it changes the answer. If the problem were capital, the solution would be to lower hurdles or print more liquidity. But capital, in my experience, is patient with risk it understands and ruthless with risk it does not. What stalls infrastructure finance in this country is that too few projects ever reach the threshold where a credit committee can price them. They die in preparation - in the space between a feasibility study and a financeable structure.

Where the gap actually lives: project preparation

Project preparation is the unglamorous, capital-intensive work of turning an idea into something a lender can underwrite: feasibility, environmental authorisation, land rights, offtake, technical specification, financial modelling, risk allocation. It is expensive, it is uncertain, and nobody wants to pay for it - least of all the public sector, which has been steadily hollowed out of the engineering and commercial capacity to do it.

So preparation gets underfunded, projects arrive at the financing gate half-formed, and lenders - quite rationally - walk away. The capital was never the constraint. The constraint is that there was no bankable thing for the capital to buy.

Capital is patient with risk it understands and ruthless with risk it does not. The bankability gap is the distance between a feasibility study and a financeable structure. - Richard Ngwenya

Transmission: the R440bn test case

Nowhere is this clearer than in electricity transmission. The Independent Power Producers (IPPs) have, against considerable odds, built a credible renewable generation pipeline. But the grid cannot absorb it. Eskom's transmission build programme sits at roughly R440 billion over the next decade, and the constraint is not the money - it is the structure. Who builds? Who owns? Who takes construction risk? Who guarantees the offtake? Under the legacy single-buyer model, these questions collapse into a single balance sheet that is already over-extended.

The structural fix is the Independent Transmission Provider (ITP) - a ring-fenced, separately financed entity that can raise capital against transmission assets on their own merits, with revenue underpinned by regulated wheeling charges rather than sovereign guarantee. An ITP converts a public-sector capacity problem into a bankable infrastructure asset class. Lenders understand regulated transmission revenue. They can price it, tenor it, and syndicate it. The moment you separate the asset from the sovereign, you turn an unfundable mandate into a financeable one.

The Credit Guarantee Vehicle: de-risking the preparation itself

But an ITP still needs projects in the ground. That is where a Credit Guarantee Vehicle (CGV) becomes the missing piece. A CGV - capitalised by DFIs and the public sector - provides partial credit and completion guarantees that absorb the early-stage risk no commercial lender will price. It does not replace private capital; it makes private capital willing to participate. We have seen this model work elsewhere on the continent: a thin layer of guarantee capital unlocks a multiple of commercial debt, because it converts unquantifiable preparation risk into a defined, capped exposure.

Reg 28: aligning domestic capital with domestic infrastructure

The final lever is regulatory. Regulation 28, which governs how pension funds allocate, has been incrementally reformed to permit greater infrastructure exposure - but the practical reality is that asset owners still face friction: concentrated exposure limits, the absence of investable instruments, and the credit-rating cliff that bankable infrastructure often sits just below. Reform that lowers the cost of structuring infrastructure exposure for domestic pension capital - not just raising nominal limits, but creating the instruments and rating pathways to use them - is what converts R440bn of need into R440bn of commitment.

The Public Investment Corporation and the Eskom Pension & Provident Fund manage capital that is, in principle, perfectly matched to long-duration infrastructure cash flows. The reason that match is not realised in practice is structural: there is no pipeline of bankable, ring-fenced, properly-risk-allocated assets for them to buy. Fix the structuring and the capital follows.

The structuring is the value

This is the lesson I keep returning to in my own work: in emerging markets, the structuring is the value. The deal-maker who can take a partially-prepared opportunity, separate its risks, allocate each to the party best able to bear it, and present a credit committee with something it can price - that is the person who closes the bankability gap. It is not glamorous work. It is the work that actually moves capital.

South Africa's infrastructure decade will not be unlocked by a single instrument or a single institution. It will be unlocked when we stop talking about a capital gap and start funding the project preparation, the ITPs, the credit guarantees and the regulatory pathways that turn need into bankable assets. The capital is waiting. It has been waiting. Our job is to build the thing it can buy.