Deputy Minister of Finance, David Masondo, called for innovative financing solutions like blended finance to address a global infrastructure funding shortfall, estimated at $1 trillion to $1.5trl (R27trl) annually, during opening remarks at the G20 Infrastructure Investors’ Dialogue held last Thursday.
Held at the Freedom Park Museum in Pretoria, the event focused on scaling up sustainable infrastructure investment through public-private collaboration.
The event drew representatives from local and international financial institutions, G20 members, and long-term investors, reflecting South Africa’s commitment to its 2025 G20 presidency theme of “Solidarity, Equality, and Sustainability.”
"This event comes at a critical period where, the world faces several crises including climate change, poverty, inequality and geopolitical tensions, amongst other challenges. Moreover, it comes at a time where, more than ever before, the significance of private capital as a positive force for social and environmental change is increasingly being appreciated," he said.
“This Dialogue is borne out of the realisation of the extent of infrastructure funding requirements and the concomitant shortfall in the amount available,” Masondo, noting that the world currently allocates around $2.5trl annually to infrastructure, far below what is needed.
The session, co-hosted with the OECD, builds on discussions from a prior meeting in Cape Town and aims to deepen insights from emerging markets.
In South Africa, the National Development Plan has set a target of 30% investment-to-GDP ratio, with one-third expected to come from the public sector. However, Masondo said current infrastructure spending remains well below this target, highlighting the need for increased private sector participation and innovative financing mechanisms.
“Blended Finance can be a useful tool for crowding in Additional Commercial Finance and making otherwise non-viable projects viable,” Masondo said.
He warned, “Blended Finance alone cannot be expected to carry the burden of financing public infrastructure, let alone achieving the SDGs. It must be viewed as part of a broader solution.”
Blended finance is still underused, with a major hurdle being the diverse stakeholders involved - private sector companies, commercial investors, philanthropic groups, governments, multilateral development banks, national development banks, and development finance institutions - each bringing different, sometimes conflicting, motivations and expectations. for instance, private firms often aim to boost profits or shareholder value, while governments focus on providing services at the lowest cost to citizens, Masondo said.
Alessandro Scalco, the Blended Finance Lead at RMB, explains that the movement towards blended finance in South Africa reflects a broader global trend where financial mechanisms are not just about profit but about creating a sustainable future. As these strategies gain momentum, they challenge traditional investment paradigms, inviting all stakeholders to reconsider what it means to invest responsibly.
"The potential for South Africa to lead in this arena is immense, given its rich biodiversity and developmental needs, making it a fertile ground for pioneering financial innovations that could set precedents for the continent and beyond," he said.
To mitigate risks for private investors, Masondo pointed to initiatives like South Africa’s pilot Credit Guarantee Vehicle and facilities from the World Bank’s Multilateral Investment Guarantee Agency. “There is a need to systematically derisk large infrastructure government programs,” he said.
The Dialogue’s outcomes will feed into a G20 Infrastructure Working Group report on de-risking measures for sustainable infrastructure in developing economies.
Masondo urged participants to be comprehensive, stating, “Let us produce a more fundamental Report.”
No matter how innovative the funding instruments could be, without an appropriate regulatory environment, without the right capacity, without good governance, without political will, to mention but a few, these instruments are unlikely to succeed, Masondo further said.
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