The World Bank Group has approved $350-million, or about R5.6-billion, to capitalise South Africa’s new credit guarantee vehicle (CGV), which is being established to mobilise private finance for public infrastructure without requiring additional government guarantees.

The World Bank board of executive directors’ approval of the ‘South Africa Blended Finance Platform for Resilient Infrastructure Program’ opens the way for establishing the CGV, which the International Bank for Reconstruction and Development will help capitalise through the $350-million in approved funding.

The CGV will be a private non-life insurance company, regulated by the Prudential Authority, and the National Treasury has already announced that it will inject seed equity of R2-billion into the vehicle, giving it a minority shareholding.

“Investment in infrastructure is central to South Africa’s efforts to restore growth and create jobs,” World Bank division director for South Africa Satu Kahkonen said in a statement confirming the approval.

“This operation supports the government’s agenda by helping mobilise private investment for infrastructure that improves services, strengthens competitiveness, and expands economic opportunity,” she added.

The CGV will issue market-based credit guarantees that will help derisk investment in infrastructure, crowd in private capital, and reduce reliance on sovereign guarantees, the bank explains.

It adds that, over a ten-year period, the programme could mobilise about $10-billion of capital (about R160-billion), including capital from private investors, commercial lenders and institutional investors, generate about 997 000 direct and indirect jobs, and support a lowering of carbon emissions.

The CGV’s initial focus will be projects aimed at expanding the country’s electricity grid infrastructure, but its scope will be broadened in future to include water, freight logistics, education and health infrastructure.

South Africa has initiated an independent transmission project procurement programme, but has delayed the release of a request for proposals to seven pre-selected consortiums so that the bid window can coincide with the launch of the CGV later this year.

The pre-qualified bidders will compete to build 1 164 km of powerlines and associated substation infrastructure across seven preselected corridors; projects that are expected to have a combined investment value of about $1-billion.

In his February Budget speech, Finance Minister Enoch Godongwana said the CGV would be incorporated as a company in the coming months, once development partners had confirmed their capital participation.

“Thereafter, the CGV will apply for a licence from the Prudential Authority. We are targeting the CGV to be operational later this year,” the Minister added, a timeframe he reiterated when the World Bank approval was confirmed.