Credit guarantee vehicle to unlock jobs and infrastructure investment
Government and World Bank backed insurance company to provide cover for public/private infrastructure projects. The new venture will replace the state backed guarantees that covered these state backed projects.
By Larry Claasen
THE government says its move to create an insurance company, which will take over from providing billions of rands in credit guarantees for public-private projects, is gaining traction.
A credit guarantee is a risk-mitigation mechanism where the government commits to repaying a loan to a private company if it defaults, enabling businesses to access finance, manage trade risk, and protect cash flow.
This policy of underwriting public-private projects has seen the national government commit to providing R303,1 billion in guarantees to independent power producers.
As a way to reduce the state’s risk exposure, the government is creating the Credit Guarantee Vehicle (CGV), which will be majority privately owned, to take over as guarantor.
Credit guarantee vehicle to shift risk from government to private sector
The CGV will act as an insurance company for public-private projects. This means participating private companies will soon have to pay insurance premiums, compared to the current arrangement where they pay nothing for government-backed guarantees.
The idea behind the CGV is that the government would be able to provide insurance coverage for its R940 billion infrastructure development programme without taking the credit risk onto its own balance sheet.
In creating the CGV, the hope is that private sector investors could eventually be brought in to back the new venture and underwrite the risk for the infrastructure programme.
The World Bank, which has committed to investing R5,6 billion in the CGV, said that about R160 billion in capital from private investors, commercial lenders, and institutional investors would see it generate about 997,000 direct and indirect jobs over 10 years.
Aside from the World Bank’s commitment, the National Treasury said it will invest R2 billion.
Credit guarantee vehicle to drive infrastructure and job creation
The CGV will first be used in the Independent Transmission Programme, which aims to build 14,000 km of new power transmission lines over the next 10 years.
“Investment in infrastructure is central to South Africa’s efforts to restore growth and create jobs,” said Satu Kahkonen, World Bank Division Director for South Africa. “This operation supports the government’s agenda by helping mobilise private investment for infrastructure that improves services, strengthens competitiveness, and expands economic opportunity.”
The National Treasury, together with the World Bank, is making “significant progress” in setting up the CGV, said acting DDG for asset and liability management, Ravesh Rajlal.
“The CGV will be incorporated as a company in the coming month,” he said.
Rajlal added that besides the World Bank, more development finance institutions were expected to invest. “We expect additional development partners to commit capital participation into the CGV.”
Once it receives its capital injection, it will apply for a licence to operate from the South African Reserve Bank’s Prudential Authority. Rajlal said the National Treasury was aiming to have the CGV operating in the second half of 2026.
The CGV complements reforms under Operation Vulindlela II — the government’s structural reform programme to unlock growth and investment — and broader efforts to improve governance, regulatory certainty, and project preparation capacity in the electricity, transport, and water sectors. It is also aligned with South Africa’s just energy transition by supporting investment in renewable energy, transmission, storage, and related infrastructure.
