South Africa has sufficient domestic capital to support large-scale renewable and energy infrastructure development but structural barriers within the financial system are preventing this funding from supporting the country’s Just Energy Transition (JET).
This was the central message at the launch of the National Planning Commission (NPC) report, Transformation of South Africa’s Monetary Architecture: 1983-2024, on December 2. Speakers at the launch warned that persistently low investment levels are undermining national development objectives and constraining the delivery of infrastructure required for the energy transition.
Presenting the report, Department of Water and Sanitation Director-General Sean Phillips said total investment in South Africa has fallen to below 15% of GDP – well short of the National Development Plan target of 30%.
Phillips said South Africa’s financial system holds significant assets but these are not being channelled into infrastructure or productive activity at the scale required. “Institutional investors, including pension funds, have accumulated large pools of capital partly because the 45% offshore investment cap has been reached.” This has resulted in excess domestic liquidity that is not being deployed into sectors such as energy where investment requirements are increasing, he added.
STANLIB Chief Economist Kevin Lings outlined the report’s balance sheet mapping methodology, which examines financial linkages between banks, state-owned enterprises, development finance institutions and households.
“The system has increasingly favoured government debt and low-risk assets while private-sector investment has been flatlining for more than a decade,” Lings said. Expansion of the shadow banking sector has contributed to capital circulating within the financial system rather than flowing into infrastructure investment, including energy projects, he added.
The report states the investment gap across electricity, water and digital infrastructure is widening. NPC Commissioner Mark Swilling said the current financial configuration is insufficient to mobilise the capital required for grid upgrades, new generation capacity and energy storage needed to support the JET.
“Without realignment of institutional balance sheets and expanded blended finance frameworks, energy sector investment will remain constrained, limiting progress towards South Africa’s long-term energy security and transition goals,” Swilling said.
