Michelle Green, Credit Analyst and Chair of the ESG Committee, at Prescient Investment Management

South Africa has bold ambitions to unlock over R1 trillion in infrastructure spend. If this is realised, this will translate into a series of transformative projects across energy, water, student housing, internet infrastructure and logistics hubs – the trick will be creating an enabling environment for investors to participate.

Consulting firm Mckinsey have recently released a new report entitled: “The infrastructure moment” where they forecast that over $106 trillion is on the cards to be invested by 2040. In this report, it breaks this down further with transport and logistics requiring the largest share ($36 trillion), followed by energy and power ($23 trillion), digital ($19 trillion), social ($16 trillion), waste and water infrastructure ($6 trillion), agriculture ($5 trillion), and defence ($2 trillion).

Domestically, looking at our own funds, we launched the Prescient Clean Energy Debt Fund 10 years ago. Five years ago it stood at R1bn; we’ve since grown it to R5bn and launched our Prescient Infrastructure Debt Fund, now at R2.8bn, taking our total infrastructure investment to approximately R8bn. This is a very real investment trend.

This is important if we consider that our analysis suggests that a one percentage point increase in infrastructure investment as a share of Gross Domestic Product (GDP) is correlated with a 1.242 percentage point increase in GDP growth rates.**

Private sector participation in the global infrastructure theme is growing as the asset class offers the benefit of being un-correlated from mainstream equity and bond markets while offering predictable – and attractive – income profiles. On top of this, infrastructure projects typically offer a multiplier effect by supporting economic growth and developmental impact.

This is well illustrated in the performance of the South African Renewable Energy Independent Power Producer Procurement Programme (REIPPP) which we would argue has not only been one of the most critical infrastructure initiatives undertaken in South Africa but should be providing a blueprint for us going forward across other infrastructure segments.

For this market to succeed in South Africa, there are a couple of challenges and structural issues which need to be addressed.

Breaking down barriers around public and private sector engagements

A key determinant of success will be creating an enabling environment for public-private sector collaboration. While the REIPPP serves as a valuable precedent for what’s possible, the programme experienced a six-year hiatus between 2015 and 2021, during which no new bid rounds were concluded. The resumption of the programme with Bid Window 5 in October 2021 marked a turning point. Further momentum was created when the government lifted the 100MW cap on unlicensed power projects in July 2022, which has since enabled larger private investments to proceed to financial close.

This in turn has led to iterative developments in future bid windows which include storage, distribution and transmission opportunities.

South African asset managers have dry powder to deploy in infrastructure projects, but they need to find ways to mitigate the risks. This means bringing together public and private sector operators with a shared vision.

We need to take the REIPPP programme success story and replicate it.   

Liquidity and the secondary market

Currently, the infrastructure investment market is experiencing significant downward pressure on margins as competition intensifies and the market matures.

For any investment committee, the subject of liquidity – and the ability to exit an investment – remains key. When it comes to infrastructure projects, this is becoming increasingly topical as many asset managers want to participate at different stages of a project’s life-cycle. Some managers are prepared to take early-stage development risk, while others prefer to come in as owner-operators later in the process.

This represents a second major challenge for the industry—dispelling persistent myths about infrastructure as an asset class. There remains a perception that infrastructure is completely illiquid and has no place in pension fund portfolios. This is simply not true. Infrastructure investments are long-term in nature, which aligns perfectly with the investment horizons of long-term investors such as pension funds. The asset class provides uncorrelated returns, offers valuable portfolio diversification, and continues to demonstrate low default rates. Moreover, liquidity can be effectively managed through careful structuring and staging of investments. As we have seen substantial growth in private debt funds and infrastructure funds in recent years, investors are becoming more au fait with the intricacies of infrastructure projects and recognizing the compelling risk-return characteristics these structures offer.

ESG, SDGs and impact

If we look at the Prescient Responsible Investing reports released in 2024 and 2025, the subject of Environmental, Social and Governance (ESG) and the measurement of “impact” has been a key theme.

When we published the 2024 report, the industry was navigating strong debates around ESG investing principles. In 2025, our report is released alongside the Just Share Asset Manager Responsible Investment Benchmark 2025 report, which assessed asset manager performance on governance, climate change, biodiversity and social impact.

The deployment of capital is increasingly being measured against ESG, UN Sustainable Development Goal (SDG) and impact frameworks—all of which continue to evolve and mature as the industry develops more sophisticated measurement approaches.

A look at our most recent Responsible Investing report provides an alternative perspective around how we assess factors including Environmental, Social, Governance, Risk and Sustainability – a framework we have developed over time as the industry has developed and our investments have matured.

With a pipeline of over R1 trillion of potential projects, infrastructure funds are going to play an increasingly important role in the portfolios of South African investors. For the industry to truly mature, we need to look at the evolution of the REIPPP projects and look for ways to emulate these successes across markets including logistics, water, student accommodation and other areas where the country is crying out for investment capital.

** However, this relationship is likely to operate with time lags and may reflect bidirectional causality between infrastructure development and economic performance, requiring careful interpretation for investment decision-making.

ENDS