Infrastructure sits at the centre of South Africa’s fiscal recovery plan. In the 2026 Budget Speech, Finance Minister Enoch Godongwana reaffirmed that stabilising debt and accelerating public investment are twin priorities. For the infrastructure sector, the message is clear: reform, ring-fencing and performance will now determine funding flows.

Infrastructure remains a trillion-rand priority

Over the medium term, public-sector infrastructure spending will exceed R1 trillion. Of this amount, R577.4 billion will be spent by state owned companies and public entities, R217.8 billion by provinces and R205.7 billion by municipalities.

Transport and logistics account for the largest share, but water, energy and municipal services also feature prominently. This confirms government’s intention to shift spending towards growth-enhancing capital investment rather than consumption.

For contractors, consultants and OEMs, this signals continued opportunity. For municipalities and SOEs, it signals heightened scrutiny.

Transport and rail: Rebuilding network capacity

SANRAL will focus on maintaining approximately 27 000 km of road annually and resurfacing 2 000 km. PRASA continues corridor recovery and modernisation, targeting an increase in annual passenger trips from 77 million to between 250 million and 450 million over the medium term.

The Budget Facility for Infrastructure has already approved R21.9 billion for strategic projects, including Transnet’s coal and iron ore corridors, aimed at restoring rail capacity to 77 million tonnes and 60 million tonnes respectively.

For the logistics sector, this reinforces government’s acknowledgement that rail and ports are binding constraints on growth.

R1.5 billion is added to the provincial roads maintenance grant in 2026/27 to fund the carry through costs of the disasters that occurred between April 2024 and June 2025

Energy: Transmission unlock and credit guarantees

Energy reform continues, with particular focus on transmission infrastructure. Treasury, together with the World Bank, is progressing the establishment of a Credit Guarantee Vehicle to support large-scale transmission investment.

The CGV is expected to be operational later this year, subject to licensing by the Prudential Authority.

For private developers and lenders, this is significant. Transmission remains the bottleneck to new generation capacity. The success of this mechanism could materially accelerate grid expansion.

Water: Ring-fencing revenue and performance reform

Perhaps the most important structural shift for the water sector is the move to performance-linked metro trading services.

R27.7 billion has been allocated over the medium term to support reform in electricity, water, sanitation and solid waste services in metros. The reform requires revenue collected for a specific service to be reinvested into that service.

The Minister used Johannesburg as a cautionary example: water revenue of R11.9 billion, but only R1.3 billion allocated to Joburg Water for capital expenditure, contributing to a R64 billion infrastructure backlog. He maintains that revenue collected for a specified function must first sustain that function before any cross subsidisation can occur.

Under the new model, failure to meet operational and financial reform targets will result in reduced budgets.

For the water sector, this is a pivotal shift. Ring-fencing revenue and linking allocations to performance introduces real financial consequences for poor governance.

Qualifying municipalities, including eThekwini and City of Johannesburg, have begun implementing Council-approved improvement plans to ring-fence revenue and reinvest in water and electricity.

Data infrastructure

Data infrastructure is increasingly being positioned alongside electricity, ports and transport networks as a foundational pillar of economic growth. Government will explore options this year to support the expansion of data centres and related infrastructure in South Africa. The objective is to attract further investment, deepen digital capability and strengthen the country’s position as a regional hub for data-driven technologies.

Division of revenue

• 48.9% (R951.7 billion): national government
• 41.7% (R810.5 billion): provinces
• 9.4% (R182.3 billion): municipal government of the allocated funding to local government R86.9 billion of that allocation is to support the provision of free basic services to 11.2 million households.

Municipal Infrastructure Grant reform

63% of municipalities are in financial distress

Government is introducing a split delivery model for the Municipal Infrastructure Grant.

Municipalities with proven capacity will continue receiving funds directly. Where governance and capacity failures persist, implementation will shift to indirect delivery through capable districts or accredited agencies.

This is designed to protect citizens from chronic underperformance and misuse of funds, and it signals a stronger interventionist stance from National Treasury.

Public-Private Partnerships return

After years of stagnation, PPP reform is gaining momentum. Amended regulations have streamlined procedures and clarified institutional roles.

There are currently 63 projects at various stages of development. Six border post projects are expected to reach financial closure this year, and procurement for a new Gautrain vendor is advanced.

Final municipal PPP regulations will be published by 30 June 2026.

For infrastructure investors and transaction advisors, this could mark the revival of PPPs as a viable funding mechanism.

Budget Facility for Infrastructure: Open call

The BFI call for proposals for 2026/27 is now open. Strategic projects with funding gaps, including courts, correctional facilities, police stations, tertiary institutions and healthcare facilities, are encouraged to apply.

This positions infrastructure increasingly as an investable asset class, supported by the R11.8 billion infrastructure bond issued in 2025.

The fiscal backdrop: Discipline first

The infrastructure push is anchored in fiscal consolidation.

The consolidated deficit narrows to 4.5 per cent of GDP in 2025/26 and debt stabilises at 78.9 per cent of GDP before declining. A principle-based fiscal anchor is expected to be introduced in the Medium-Term Budget Policy Statement.

The implication for infrastructure is that capital investment will continue, but inefficiency and underperformance will no longer be tolerated.

The message to the sector

Budget 2026 does not promise a spending surge without conditions. Instead, it promises disciplined, reform-linked infrastructure investment.

For metros, the era of diverting utility revenue away from maintenance appears to be ending. For state owned entities, performance and project preparation will determine access to funding. For private partners, the door to structured participation is reopening.

The infrastructure sector is not just being funded. It is being restructured.