FEATURE // South Africa's infrastructure crossroads
Can SA get a handle on the infrastructure businesses depend on?
On any given day in Johannesburg, the signs of infrastructure strain are hard to miss - whether in suburbs, townships or informal settlements. In some areas, taps run dry and water tankers line the streets. Elsewhere, what began as small pipe leaks have expanded into dangerous potholes.
These disruptions have become a part of a broader pattern that is reshaping daily life and business activity in South Africa. Infrastructure may be invisible when it works, but when it fails, it directly shapes productivity, investment, and the pace of growth.
Why infrastructure matters for economic growth
Sustained investment in public infrastructure is fundamental to long-term economic growth, effective service delivery, job creation and climate resilience. Infrastructure which includes energy, water, transport and digital systems lowers the cost of doing business, raises productivity and expands access to markets. It enables companies to operate efficiently, connect to supply chains and scale with confidence.
Beyond physical networks, social infrastructure such as healthcare, education and affordable housing plays a critical role in building human capital, reducing inequality and improving living standards. Integrating climate resilience into infrastructure planning helps safeguard public assets and mitigate the growing risks associated with climate change. Together, these investments shape how economies function, adapt and compete.
According to the World Bank, infrastructure connects people to opportunities, supports livelihoods and underpins economic expansion. In South Africa, Budget 2026 data reveal that public-sector infrastructure spending over the medium-term expenditure framework will reach an estimated R1.07 trillion, directed towards logistics, energy, water and sanitation. State-owned companies remain the largest contributors, with projected capital investment of R445.5 billion over the next three years - highlighting both the scale of commitment and the importance of effective delivery.
South Africa’s uneven infrastructure reform story
Infrastructure is central to sustainable and inclusive growth, and the gap between the risks of inaction and the opportunities from reform is widening.
In South Africa, the deterioration of infrastructure services in 2023 contributed to power outages that reduced GDP growth by an estimated 2% and cost around 500 000 jobs, while inefficiencies in rail and ports lowered exports by about 20%, according to the World Bank.
Despite these pressures, reform momentum is growing and with support from the World Bank and other partners, the government has begun implementing key structural changes. In energy, the 2022 Energy Action Plan opened the sector to private investment and strengthened regulation, further supported by a USD1 billion Energy Transition Development Policy Loan in 2023. Eskom’s debt relief also contributed to an improvement in energy availability, rising from 55% to 63% by late 2024. In transport, the 2023 Freight Reform Roadmap, supported by the World Bank, is aimed at improving logistics performance, attracting private capital, and stabilising Transnet’s financial position.
More recent progress is reflected in the Operation Vulindlela Progress Report, which highlights further advances in the electricity sector, including steps to enhance competition, expand generation capacity and enable additional renewable energy projects. Operation Vulindlela is a joint initiative of the Presidency and National Treasury aimed at accelerating priority structural reforms that support growth, improve service delivery and strengthen state capability.
In freight logistics, reform has gained traction through progress on port concessions in Durban, unlocking new investment and modernisation, alongside efforts to open the freight rail network to greater competition. In the water sector, preparatory work is underway to strengthen infrastructure delivery and regulation, with the aim of improving long-term water security for households and the economy.
While electricity reforms have begun to shift the trajectory of the sector, challenges remain, including ageing infrastructure and persistent disruptions in parts of the country. Water, however, is emerging as a more immediate pressure point, with recent outages in Johannesburg pointing to a system under immense pressure.
Water crisis poses economic risk
As Gauteng Premier Panyaza Lesufi noted in the State of the Province Address, the issue is not water availability, but interruptions caused by infrastructure failure, leaks and peak demand.
The scale of the problem was experienced in late January, when an explosion at a Rand Water plant disrupted supply across Gauteng, affecting Johannesburg, Tshwane and Ekurhuleni. Although the immediate damage was repaired within 72 hours, water levels across the province took far longer to recover. In Johannesburg, outages persisted for weeks, with suburbs such as Melville left without water for extended periods due to burst pipes, maintenance backlogs and system failures. These events illustrate how shocks to already fragile systems can have prolonged and widespread consequences.
A 2025 report to Parliament revealed that Johannesburg Water has a non-revenue water rate of about 44.8%, limiting its ability to generate sufficient revenue to fund infrastructure development.
To address the crisis, the City of Johannesburg has committed R760 million to infrastructure upgrades, including a new reservoir, tower and emergency pumping capacity in Brixton, alongside a planned 5km pipeline. At a provincial level, expansion linked to the Lesotho Highlands Water Project aims to strengthen long-term supply.
What’s holding water infrastructure back?
A combination of systemic constraints including governance challenges such as corruption, theft and vandalism, alongside shortages of technical skills and institutional capacity continue to undermine progress.
Execution also remains a critical bottleneck. Government data shows that infrastructure underspending between 2022/23 and 2024/25 reached about R23.3 billion, pointing to ongoing delivery challenges across national departments, state-owned entities and public institutions responsible for core infrastructure.
The 2026 Budget Speech reaffirmed infrastructure investment as a foundation for long-term growth, improved service delivery and job creation. In the water sector, this includes a focus on bulk augmentation schemes, the refurbishment of ageing assets and the completion of strategic projects that support economic activity, agriculture and household supply. Efforts are also underway to strengthen implementation through reforms aimed at improving efficiency, accelerating delivery and unlocking greater private sector participation.
Lessons from electricity reform for water
Driven by the urgency of loadshedding which cost the economy billions and forced some businesses, particularly SMEs to close shop - reforms gained political momentum and national focus. This was reinforced by regulatory changes that opened space for private sector participation, along with stronger coordination through mechanisms such as Operation Vulindlela and accountability.
Persistent water challenges which include leakages, billing failures, maintenance backlogs and limited institutional capacity, particularly at municipal level continue to constrain delivery. The World Bank notes that South Africa does not lack access to capital but rather faces challenges in mobilising and allocating long-term finance effectively, compounded by weak delivery systems.
The lesson from electricity reform is the importance of similar enabling conditions including clearer policy direction, stronger public-private collaboration and more capable institutions. Moving from reactive crisis management to long-term planning will be critical. This includes considering ring-fenced utilities, expanded private sector participation, performance-based governance and stronger national coordination to align efforts across the system.
Infrastructure as a catalyst for growth
With the right technical expertise and institutional capability, capital can be deployed more effectively where it is needed most. However, the infrastructure gap also highlights the need for stronger coordination across sectors, spheres of government and the private sector.
Rather than viewing infrastructure as a technical issue, it should be seen as central to sustainable and inclusive growth, particularly given the economic cost when reforms stall.
When systems are designed to support development outcomes, infrastructure shifts from being a constraint to becoming an enabler, allowing businesses and communities to thrive.
By Denise Mhlanga
