What is the Credit Guarantee Vehicle?

The Credit Guarantee Vehicle (CGV) is an instrument for unlocking private investment in South Africa's infrastructure to create jobs and drive sustainable economic growth through projects in electricity, water, freight transport, education, and health. The CGV is a new, privately run entity being established by South Africa's government and development partners including the World Bank Group to de-risk private investment in resilient infrastructure. By accelerating infrastructure delivery, the CGV will directly and indirectly support job creation across construction, operations, and related value chains - contributing to inclusive economic growth and helping South Africa address its structural employment challenges.

Beyond mobilizing capital, the intended impact of the CGV is to improve the daily lives of South Africans through more reliable electricity supply, better water and sanitation services, more efficient freight and logistics systems, and strengthened social infrastructure such as schools and health facilities. By reducing project risk and crowding in private finance, the CGV aims to bring forward critical infrastructure that might otherwise be delayed, lowering the cost of capital, accelerating service delivery, and expanding economic opportunity, particularly for young people, small and medium enterprises, and underserved communities.

Why did the CGV come about?

The CGV is a result of the South African government's efforts to solve pressing infrastructure challenges and achieve sustainable development goals. It has been established with the advice and support of international partners including the World Bank Group, and the State Secretariat for Economic Affairs (SECO) of Switzerland, which has been funding the technical advisory provided through the Bank's Sustainable Finance Facility. South Africa's infrastructure financing requirements are estimated to be between US$ 254 billion and US$ 330 billion through 2030. The public sector cannot finance this amount directly due to fiscal constraints, and the private sector is reluctant to invest without a full guarantee from the National Treasury, which is no longer feasible as the National Treasury wants to limit its contingency liabilities.

The CGV is expected to offer payment and termination guarantees to replace sovereign guarantees sustainably, mobilizing private financiers without distorting the market and minimizing the impact on government contingent liabilities.

How will the CGV work?

The CGV will function on a commercial basis and provide guarantees on a voluntary basis, for a reasonable fee, that private investors will pay if they perceive the risk of investment in infrastructure projects with public sector off-taker as too high. The CGV will be capitalized by the South African government - owning a minority stake - and other development partners - owning the remainder. This plan rests on the idea of "blended finance," as the CGV blends public money and development capital to leverage private capital into investments that the market itself wouldn't finance on reasonable terms.

Guarantees provided by the CGV could be applied to infrastructure-related financial instruments such as project and revenue bonds, asset-backed securities, or commercial bank loans. The confidence provided by the credit guarantees - a phenomenon known as "derisking" - will help attract investment into sectors that have struggled to raise private capital while limiting the sovereign fiscal burden. A board composed of representatives of South Africa and its development partners will then select a professional management team to set up this new entity and make day-to-day decisions.

The capital structure and governance of the CGV will aim to have the company achieve an AAA domestic credit-rating for rand-denominated investments, fortifying its ability to underwrite guarantees. Every rand invested in the GCV is leveraged multiple times to generate private investments in projects that generate employment and fuel economic growth.

How is the CGV positioned in South Africa's infrastructure and job creation efforts?

The CGV is positioned as a catalytic instrument within South Africa's infrastructure financing reform agenda, supporting the government's efforts to mobilize private capital for resilient infrastructure in priority sectors. In doing so, it advances South Africa's objective of accelerating growth and employment by addressing infrastructure bottlenecks through market-based risk-sharing solutions. This approach aligns with the World Bank Group's mission to create jobs and reduce poverty by mobilizing private capital and strengthening the enabling environment for investment.

The CGV is the first instrument of the Blended Finance Platform for Resilient Infrastructure Program to support infrastructure development in South Africa over the next ten years. It has been envisioned that the Program also supports enhancement of the Budget Facility for Infrastructure - a viability gap fund - to bridge the affordability gap, and a co-investment platform to mobilize domestic and global institutional investors.

Over the ten-year period the Program is expected to mobilize about $10 billion of capital (approximately R160 billion ZAR), including capital from private investors, commercial lenders and institutional investors, generate almost 1 million direct and indirect jobs, and contribute to the reduction of greenhouse gas emissions.

What is the financial scope of the CGV?

The National Treasury will initially fund up to US$ 100 million (approximately ZAR1.6 billion)- of a total US$ 500 million (approximately ZAR 8 billion) capital base - via a loan from the World Bank, which its board approved on 24 February 2026. The remaining part of the initial capital (US$ 400 million, approximately ZAR6.4 billion) is expected to be subscribed by domestic, regional, and international development financial institutions (DFIs), including potentially the International Finance Corporation, the World Bank Group's private-sector arm. Specialized development funds, and philanthropies may also join at a later stage.

Over time, further investment could bring the capitalization of the CGV to US$ 2.5 billion (approximately ZAR40 billion). MIGA, the World Bank Group's credit guarantee operation, may also provide risk-sharing capacity to the CGV to increase its leverage capabilities and improve risk management. In time, after the CGV has built a track record, DFIs could potentially be replaced - or further capitalized by private-sector shareholders.

What are the advantages of the CGV?

South Africa is uniquely positioned to benefit from the services provided by the CGV thanks to a sophisticated financial sector, specifically institutional investors, that are eager to invest more in domestic infrastructure. Institutional investors represent around 160 percent of GDP, split between pension funds (92 percent of GDP) and insurance companies (68 percent of GDP).

They are mostly investing in government debt, and listed equities. Up to 40 percent of pension funds are investing in foreign assets due to the lack of domestic long-term investment opportunities befitting the conservative approach of worker savings. Exposure of South African institutional investors to domestic infrastructure assets is 5-7 percent of total assets, well below the 35 percent achieved by peer countries such as Colombia, Chile, and Malaysia.

Crucially, the savings of institutional investors, their own investments, and any credit guarantees would all be denominated in South African rand. This reliance on local currency solutions eliminates any exchange-rate risk for investors while mobilizing South African savings for South African projects.

How did the government prepare for the creation of the CGV?

The South African government (the National Treasury) completed an extensive financial feasibility analysis, with its partners to assess whether there is a viable business case. A round of legal due diligence assessed how to structure the CGV as an entity eligible to issue guarantees in South Africa. An analysis of potential pipelines of investments that could be guaranteed by the CGV was carried out at the national, provincial, and municipal levels. The National Treasury also conducted a series of discussions with development partners and market-consultation with key stakeholders such as financial institutions, investors and project developers, including a roundtable discussion with development partners in November 2024 - to inform implementation of a commercially viable and sustainable CGV.

What areas of the economy will benefit from the CGV?

The CGV will support investment in the areas prioritized by the South African government's reform program, Operation Vulindlela - electricity, water and freight transport - because of their potential high impact on economic growth and job creation.

The CGV's business plan proposes to focus initially on the provision of de-risking instruments to facilitate private sector participation in the Transmission Development Plan (TDP), which estimated in 2024 that ZAR billion (US$21 billion) is needed to expand transmission systems with 14.000 km to integrate 56 GW of new generation capacity by 2032. Transmission is the principal bottleneck to scaling renewable energy, with investment needs estimated at approximately US$25 billion by 2034. Independent Transmission Projects (ITPs) are expected to require credit enhancement to attract private capital as sovereign guarantees are phased down. Other areas could include energy generation and storage, as well as distribution infrastructure, where mitigation of offtake and credit risks will be critical to mobilizing private investment at scale

The transport- and logistics sector is liberalizing to allow for private sector investment in its rails network and ports. The transport sector faced a severe crisis in 2023, losing 20 percent of its export capacity due to a failure in the railway network and port congestion. Transport and logistics is included within the CGV's indicative five-year pipeline, comprising approximately US$2 billion in rail and port projects. These investments are expected to benefit directly from CGV guarantees to enhance bankability, support well-structured PPPs, and crowd in commercial financing as sector reforms advance.

The water sector is under severe pressure in terms of access to safely managed water and sanitation. Up to 46 percent of households lack safely managed water, and 49 percent of households live without safely managed sanitation. These problems are most pressing in informal settlements and rural areas. The CGV's indicative pipeline includes approximately US$3 billion in bulk water supply, municipal water treatment and desalination projects, confirming that financially viable water infrastructure investments are expected to benefit directly from CGV credit enhancement to mobilize private capital.

Ultimately, the CGV aims to accelerate and scale infrastructure delivery, directly and indirectly supporting job creation across construction, operations, and related value chains - contributing to inclusive economic growth and opportunities for all South Africans.