There are signs that the long-promised change to the composition of government spending – from consumption to capital investment – is at last taking shape.

In his Medium-Term Budget Policy Statement (MTBPS) address, Finance Minister Enoch Godongwana announced that capital payments will be the fastest growing expenditure item over the coming three years, at 7.5%. This is significant, as gross fixed-capital formation has been in decline as a share of GDP since the 2008 global financial crisis, and currently stands at about 14%; below pre-Covid levels and less than half of the 30% targeted by the National Development Plan.

The MTBPS documentation explains that government’s focus on growth-enhancing infrastructure reforms aims to reverse this systemic underperformance. Importantly, though, the objective is backed by practical initiatives aimed at improving the efficiency of capital spending by the public sector, while also mobilising much-needed private finance, skills and spending discipline.

On the financing front, the National Treasury is preparing a minimum R15-billion infrastructure bond issuance for the Budget Facility for Infrastructure (BFI) special window projects, having recently reconfigured the BFI to accommodate four yearly bid windows instead of one.

Godongwana says the bond forms part of efforts to introduce dedicated financing instruments to support the infrastructure push, while director-general Duncan Pieterse indicates that such bonds will become part of government’s routine fundraising efforts.

It is now worth paying attention to the BFI bid windows, which enable public institutions to request funding for part of the cost of a project, as a basis to attract additional private funding.

In the first two quarters since the reconfiguration, 28 submissions with a total capital cost exceeding R379-billion were received and key approvals were made for projects in the science, water and logistics sectors. In rail, some R937-million and R3.4-billion are reflected in adjustments made for non-interest expenditure for the North Corridor and Iron Ore Corridor respectively.

The BFI is but one instrument that is being used to shift the spending composition.

On the governance front, for instance, the National Treasury will begin showing borrowings for infrastructure as a separate category of government borrowing from the 2026 Budget onwards.

A consultation paper assessing the design of the long-term instruments for mobilising institutional and retail investor funding for infrastructure will be published early next year.

Regulatory reforms in support of public-private partnerships, including the introduction of new guidelines relating to unsolicited bids, are being implemented.

Partnership offices have been set up by the Department of Transport and the Department of Water and Sanitation to structure their engagements with the private sector.

Preparations are under way for the launch, in the second half of 2026, of a credit guarantee vehicle, developed with the World Bank, which will be used to de-risk private investment in grid infrastructure without recourse to State guarantees.

Also worth noting is the new performance-linked incentive grant to assist the country’s eight metros to provide electricity, water, sanitation and waste services.

The infrastructure rubber may finally be hitting the road!