Agenda 2063 advocates for African solutions to African problems. In the same breath, the Development Bank of Southern Africa (DBSA) calls for Inclusive Development Finance, using tailored financial and technical tools to expand equitable access to infrastructure, encourage structural change, and reduce disparities. It aims to promote Africa’s prosperity and shared growth.
This approach “distributes infrastructure benefits, like water, energy, transport, housing, ICT, and social services, while strengthening institutions and enabling community participation,” says Zeph Nhleko, Chief Economist and Group Executive: Strategy and Sustainability at the DBSA.
While African resolutions are vital, international support and partnerships bring valuable expertise and resources. Critics point out that the concept of “African solutions” might be too comprehensive and does not account for regional differences. Africa should prioritise building local capacity and expertise in concrete ways and not just as a feel-good exercise.
The Inclusive Development Finance model seems capable. However, how will it be funded and implemented? As a multisector-based approach to sustainable development, IDF might not reach the most vulnerable communities. Without targeted efforts, it risks becoming a hopeless and expensive exercise.
Mismanagement of finance is not only a South African problem. For the IDF to be deemed successful, the DBSA must ensure transparency and accountability. For now, the model does not provide confidence that these factors will be alleviated.
South Africa’s economic transformation is 60% complete. Inclusive finance should address ongoing bottlenecks to unlock infrastructure capacity in municipalities previously unable to absorb investment. The DBSA’s transformation plan centres on gender mainstreaming, black ownership, and township economy initiatives to reshape participation and ownership in infrastructure investment, argues Nhleko.
These strategies aim to tackle structural unemployment, spatial inequality, weak institutions, and investment gaps. The Integrated Municipal Approach aligns technical assistance, infrastructure planning, project preparation, financing, and implementation within districts. It targets service delivery failures and weak financial management simultaneously.
These goals are praiseworthy. However, implementation remains uncertain. The bold plan may not address the root causes of inequality or scratch the surface of structural disparities.
Assessing the impact of macroeconomic policy coherence on inclusive development finance is crucial. When policies are misaligned, such as delays in energy regulations, fragmentation in water governance, challenges with municipal oversight, or uncertainty in procurement and State-Owned Enterprise governance, credit risks increase. Project viability slows. Investor confidence declines.
The Bank’s risk framework identifies these issues as significant operational and strategic risks. To strengthen the development environment, several improvements are required:
First, a more efficient and better coordinated reform across key economic sectors.
Second, enhancing institutional capacity through stronger local governance, predictable fiscal support, and clearer accountability.
Third, greater clarity on long-term transition pathways, including future energy systems and industrial development priorities. There are significant financing gaps in energy, water, transport, and logistics. Identifying these gaps is easy. The bigger interrogation concerns funding sources.
Energy shortages and transmission issues weaken industrial productivity and dampen investor confidence. Water and sanitation backlogs undermine service delivery and disproportionately impact low-income communities. Manufacturing faces systemic constraints. The services sector, especially digital and urban services, confronts fragmented spatial development and structural challenges.
“These factors, along with a decade of slow economic growth, have decreased competitiveness, lowered productivity, and slowed job creation,” Zeph notes.
Inclusive financing should address financing gaps for women, youth, and rural communities. Africa needs scalable and sustainable models. Without targeting, inclusive finance might not reach the most vulnerable.
Nhleko argues that the DBSA promotes inclusive development by focusing on areas with the greatest service backlogs and institutional vulnerabilities. Through an integrated approach covering planning, financing, implementation, and long-term upkeep, the Bank strengthens local systems and broadens access to essential services.
The DBSA uses blended finance mechanisms to expand access to capital for underserved markets, particularly township and rural enterprises. By reducing lenders’ risk and encouraging investment in early-stage and smaller businesses, these tools stimulate local economic activity. The emphasis on a just, climate-aligned transition ensures that vulnerable communities benefit from emerging green economy opportunities.
South Africa’s investment-to-GDP ratio remains below 15%. Expanding investment is critical. The DBSA prioritises expanding well-prepared, investment-ready projects to boost economic growth.
However, increasing investment alone is insufficient. Investments must benefit local communities. The DBSA framework is structured, but developments with high social impact require priority. Investment-ready projects also require strong institutional capacity.
Blended finance instruments may lower risk and improve project bankability. Yet blended finance is intricate and requires strong regulatory frameworks. Transparency and accountability remain central concerns. China’s targeted poverty alleviation program offers lessons in precise, community-level targeting. Zeph highlights this experience under the Integrated Municipal Approach.
However, China’s model may not directly apply to South Africa’s framework. Its success may be overstated and may not fully account for environmental and social costs. South Africa must focus on its own approach.
Successful inclusion programs also underscore the need for synchronised efforts between national and local institutions. Stronger coordination with the National Treasury, Infrastructure South Africa, and sector departments could increase overall impact.
Policy gaps and weak coordination hinder inclusive development. The DBSA must cement its role in supporting policy implementation. Reforms in energy, logistics, and water remain slow and uneven. Fragmented coordination and limited capacity impede growth and service delivery.
Operation Vulindlela demonstrates that focused reforms can deliver results. However, without broader systemic reform, impact remains limited. The DBSA can deepen district-level programmes, build institutional capacity, and fast-track the development of strong project preparation and blended finance structures.
Positive economic sentiment in 2026 presents an opportunity. Declining borrowing costs could boost capital raising. The DBSA can leverage blended finance tools to attract private investment in essential sectors.
Development Finance Institutions play a critical role in creating a single national infrastructure development system. However, they must work closely with the government and stakeholders.
There is a risk that DFIs prioritise high-return projects over high-impact projects. The DBSA can provide a platform to build a unified national infrastructure system by setting long-term direction, mobilising capital into a coherent financing framework, and strengthening government capacity.
The next five to ten years will shape development finance in South Africa. Socio-economic and climate challenges mean institutions like the DBSA must fill funding gaps, strengthen partnerships, and adopt blended finance, impact investment, and public–private partnerships.
Inclusive Development Finance South Africa offers a structured framework to reduce disparities and expand infrastructure access. However, implementation, transparency, policy coherence, and institutional capacity will determine success.
South Africa remains burdened by muted growth, weak fixed investment, high unemployment, poverty, and decaying municipal infrastructure. Global economic shifts present both risks and opportunities. Strengthening domestic financial institutions and regulatory frameworks will be essential.
The framework exists. The question remains whether governance discipline and coordinated implementation can translate vision into structural transformation.
