'All of those fundamentals that an investor would be looking at are in place,' says CEO of Infrastructure South Africa
Canadian pension funds scanning the globe for emerging market returns may want to take a harder look at South Africa, if they haven’t already.
Often overlooked in favour of Asia and Latin America, the country is positioning itself as a stable, scalable, and investable gateway into Africa’s underdeveloped infrastructure sector. And leaders there say it’s time for global capital, particularly from Canada, to engage more directly.
“South Africa itself is the most diversified economy on the African continent,” said Mameetse Masemola, CEO of Infrastructure South Africa. “We've got deep financial markets, a stable macroeconomic environment, sound fiscal and monetary policies, a rules-based judiciary. Your investments from a Canadian perspective are protected in the country. All of those fundamentals that an investor would be looking at are in place.”
But Masemola didn’t frame the investment case as static. She noted that South Africa is actively pushing forward with structural reforms to attract more private capital, including dismantling state monopolies in key infrastructure sectors such as freight, energy, and water. These reforms are part of a deliberate strategy to shift investment leadership to the private sector.
For Sithembiso Khoza, South Africa offers a strategic and underutilized gateway for investors seeking emerging market exposure - particularly those already familiar with larger markets like China and India. He argues that that the country’s structure offers a rare blend of accessibility and opportunity.
“If you're just looking for government bonds, there is a very liquid market, currency that's very liquid, so easy to get in and out,” said Khoza, head of balance sheet management at the Development Bank of Southern Africa (DBSA). “And then for other investors who look for more yield than just government investments, then there are assets that offer some credit enhancement.”
Khoza emphasized how South Africa offers institutional investors stable and attractive returns, especially in comparison to developed markets. He pointed to the country's low and predictable inflation, managed under a strict monetary policy framework.
Against that backdrop, according to Khoza, government bond yields of 9 to 10 per cent. For investors willing to take on more credit risk, he said, returns become even more competitive, particularly when benchmarked against OECD economies, where interest rates remain significantly lower. He credited the South African Reserve Bank’s proactive stance for keeping volatility in check and sustaining investor confidence.
“The Reserve Bank has to keep inflation between 3 and 6 per cent, and they've been able to keep it around 4, 4.5 per cent,” he noted.
However, David Kletz, lead portfolio manager at Forstrong Global Asset Management, expressed caution about investing in South Africa, pointing to the country’s unreliable power grid as a major concern, particularly for established players in sectors like materials, where energy supply is critical.
While he sees potential in infrastructure investment to address these issues, persistent political instability also poses a risk, albeit one that is common across emerging markets.
“Regardless, the tumultuous political environment does act as somewhat of a deterrent for foreign investment,” Kletz noted in a statement.
Despite these risks, he acknowledged that South African equities are trading at modestly attractive valuations compared to other emerging markets and suggested that ongoing interest rate cuts could support both markets and the broader economy.
Khoza emphasized the strong institutional framework already in place to safeguard investor capital in South African infrastructure projects, highlighting a multi-layered system of oversight, while also pointing first to state auditors who conduct annual reviews and issue reports, providing a foundational layer of accountability.
“Investors have full transparency,” he said. “Twice a year, annual financials are released, so there’s a lot of protections built into the system.”
He added that when issues do arise, they surface quickly, and market discipline tends to follow. Poor performers struggle to attract capital, reinforcing the importance of regulatory compliance and governance standards.
Masemola outlined how South Africa is working to make its infrastructure pipeline clearer, better prepared and easier for foreign investors - especially long‑term institutions - to engage with. She pointed to the Infrastructure Investment Handbook as a starting point, saying it offers investors visibility into projects that have already cleared key government hurdles.
She stressed that these projects are structured to attract private capital. The current portfolio includes roughly 100 billion rand in opportunities, with 32 billion rand already allocated from the fiscus. Some schemes, like the Lesotho Highlands Phase 2 water project, extend beyond national borders.
Alongside this sits what she described as the construction pipeline across water, energy, transport and rail, an area she expects to expand, particularly now that Infrastructure South Africa serves as the secretariat for the Presidential Infrastructure Coordinating Initiative.
Still, Masemola underscored that pipeline growth requires stronger project preparation. In her view, without dedicated funding and coordination for early‑stage development, governments can’t produce bankable, investable public-private partnerships (PPPs) or blended‑finance projects at scale.
According to Masemola, Infrastructure South Africa is now pooling resources with other preparation facilities to close that gap and support “major government infrastructure or high‑value, high‑impact” projects, with the goal of presenting investors with more fully prepared opportunities in the months ahead.
Masemola ultimately frames Canada as a logical and valuable collaborator for South Africa’s infrastructure ambitions, particularly in the energy sector. She pointed to Canada’s technological depth in renewables and nuclear as directly relevant to South Africa’s current gaps, adding that the country sees clear opportunities to draw from Canadian experience on both implementation and regulation.
While South Africa is still working through the policy and technical questions surrounding nuclear’s role in its future energy mix, she believes Canadian expertise, particularly in small‑scale nuclear, offers practical guidance. At the same time, Canada’s strengths in solar align with South Africa’s aggressive plan to scale renewables.
“We have a huge green energy ambition. Canada would be a great partner to learn from and partner with,” she said.
Khoza emphasized that investors can no longer afford to focus solely on traditional markets, warning that such concentration poses long-term risks, while noting that “market diversification is the new norm,” adding that the limitations of overexposure to developed markets have already become apparent.
He framed Africa as the next major growth frontier, with the African Continental Free Trade Area (AfCFTA) opening up new possibilities for cross-border investment and regional integration. Within that context, he believes South Africa stands out as a logical entry point.
“South Africa is that soft launch pad into the rest of the region,” he said.
