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The Asset Class: Puleng Pitso · Strictly Business

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  You're listening to Strictly Business Podcast with Lindsay Williams.
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  With us today is Puleng Pitsow, who's an investment specialist at 91 in Cape Town.
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  What we're going to talk about is Operation Vulindlela Phase 2.
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  Phase 1 has been generally well received, I think.
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  Phase 2 is terribly important because it really does focus on infrastructure
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  reform.
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  And Puleng, I don't think you can...
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  overstate the importance of infrastructure for any economy, but particularly for an
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  economy like South Africa's,
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  which has underperformed economically for so long.
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  Thanks, Lindsay.
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  And you're quite correct.
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  And I think it's important to remember that infrastructure reforms are one of the
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  most practical levers to support both
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  economic recovery and long-term structural growth.
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  And at a more fundamental level, infrastructure underpins economic
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  activity.
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  And as you've mentioned earlier, you know, I think reliable electricity, efficient
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  ports and rails,
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  as well as well-functioning municipal services form the backbone of a growing
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  economy.
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  They really enable businesses to operate productively.
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  They facilitate trade and export competitiveness and ensure households have
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  access to essential services.
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  And when infrastructure fails, you know, costs rise, investment slows,
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  jobs are not created and growth.
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  ultimately fails, or stalls is a better word to use.
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  And infrastructure reforms create those conditions for greater private sector
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  participation.
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  By improving regulation and strengthening institutions, reducing policy uncertainty,
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  reforms really help unlock private capital to complement public investment.
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  And phase one of Operation Will and Lena really helped unlock that kind of capital.
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  And it unlocked approximately 500 billion in private sector investment.
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  And I think that's credible proof that, you know, reforms can mobilize capital.
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  And this is, again, why now there's a bigger focus.
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  And now we've really seen a change as we move to phase two,
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  where reforms are moving more from a diagnosis kind of stand view to more let's
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  make it actionable and
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  action on it.
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  And phase two really represents that shift.
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  towards execution, institutional capacity and delivery.
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  We've had a buy-in from the private sector to the tune of 500 billion, which is a
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  really, really big number.
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  And that's very encouraging.
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  So that's phase one has been ticking boxes, is what I understand.
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  But phase two, you've really got to, and you've hinted at this, you've really got
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  to go from the policy design,
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  which has been mooted, to the actual implementation.
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  And that's a terribly important...
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  important signal for investors.
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  The investors are already there, but another signal,
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  a sign that phase one was just a bedrock and phase two is now a building process,
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  if you like.
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  Yeah, that's exactly it.
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  And for us as investors, the real signal is commitment and credibility.
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  And in the context of Operation Hulindela, which is why we're here today, you know,
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  you've rightfully said, you know,
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  phase one ticks boxes.
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  And really for us, not only did it do that, but it removed regulatory barriers
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  that allowed for private investment to
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  participate.
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  And to that, you know, there's a real drive towards implementation and phase two
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  builds on that,
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  shifting the focus to delivery and creating institutional capacity and scale.
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  And that really creates conditions to mobilize even greater pools of capital.
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  If you're an investor, a big investor, and you're looking at this and you've maybe
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  participated in phase one and it's been good for you,
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  but now you're looking at phase two and you look at the infrastructure reform
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  focus, you say to yourself, OK,
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  which parts of the economy are benefiting the most from phase one and phase two?
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  Where are the real opportunities?
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  Can you help us there?
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  Yeah, I think there are three that stand out for me.
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  I think the first is energy, and I think energy has been on South Africa's agenda
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  for a very long time and with reason.
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  So, I mean, we saw earlier reforms in the energy space really opened up doors for
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  private generation and
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  stabilizing the system.
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  And I think what we're seeing now in phase two is a focus on expansion.
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  And especially in the transmission and distribution part of this energy value
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  chain,
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  we are seeing that more investment is needed and large projects are needed to be
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  structured with long-term
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  revenue models.
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  to become effective, to become bankable.
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  And so this is where really institutional investors become really, really well
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  suited for opportunities like this.
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  I think another sector is transport and logistics.
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  And I think there has been an underinvestment in this sector for many,
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  many years.
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  And we have been constrained as a result of the underinvestment.
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  We've been constrained in terms of our exports and our growth.
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  And I think...
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  There's been a recognition that something needs to change.
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  The focus now really is on implementation and opening rail to private
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  operators, strengthening regulation and moving towards frameworks that pilot
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  concession
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  opportunities.
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  And this is where reform really starts to turn into bankable opportunities in the
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  rail, ports and logistics corridor.
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  So that's really what's happening there.
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  And then you have local government infrastructure.
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  which I think is one of the most important.
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  Municipals are responsible for essential services like water, sanitation,
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  electricity,
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  distribution and roads.
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  And so improving governance, financial stability,
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  project preparation at a local government level is absolutely critical to unlock
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  pipeline that is investable, particularly where public and private models are
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  required and applied.
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  Pulling, you've been talking about participation in infrastructure reform
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  from the state level, from the private sector level,
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  the high-end private sector level, talking about hundreds of billions.
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  And then you talked about local municipalities,
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  and that became interesting because local municipalities filter down to local
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  communities.
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  Where does all this leave local communities, the people of South Africa,
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  or rather, where does it help them?
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  Does it help with delivery of services like electricity?
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  Does it help with jobs?
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  Please tell us.
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  Yeah, I think you've mentioned quite a few.
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  Thank you, Lindsay.
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  And so for us, I think we understand infrastructure investment to be very
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  direct and have everyday impacts.
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  And so, like you said, reliable electricity, efficient transport networks,
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  municipal services.
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  But in addition to that, I think we see it impacting local businesses.
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  So it helps support local businesses.
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  It helps lower costs.
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  It creates jobs.
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  And for us, infrastructure really improves economic activity and it makes it or helps
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  it become more stable,
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  productive and inclusive.
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  And I think we also take a look at it from a real project perspective.
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  When we say, you know, private investment plays a really critical role because its
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  significance expands the pool of capital.
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  And that is that allows for better delivery of infrastructure assets.
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  And given the scale of South Africa's needs and the limitations on the public
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  funding side,
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  private sector investment really helps accelerate delivery by complementing
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  public sector investments
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  instead of replacing it.
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  And I think that's a way that people don't necessarily always see, but that's a real
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  impact.
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  And so, again, to circle back to how it impacts municipalities and people, you
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  know,
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  it supports resilient communities and strengthens growth.
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  I think while investors' return is important, I think communities benefit
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  through improved infrastructure,
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  job creation during the construction and operation of these infrastructure assets,
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  better essential services that support the livelihoods and economic growth and
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  opportunities for people.
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  Right.
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  It all sounds very encouraging.
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  If it is successful, what's it going to look like?
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  If it delivers on its promise, what is South Africa going to look like after
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  phase two?
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  After phase two, I think that the landscape should look different.
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  And I think success would really look like us as a country, as South Africa,
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  being able to deliver infrastructure projects on a more consistent and stable
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  basis.
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  And what I mean by that is that rather than having isolated projects,
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  South Africa would want to have a steady pipeline of bankable infrastructure
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  opportunities in the energy sector,
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  transport and municipal services space.
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  I think it would also reflect stronger collaboration between public and private
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  sector,
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  which really underpins that we have a government or a system that works.
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  You know, we have clear rules.
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  We have improved institutions and rising investor confidence.
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  For private capital, including private credit,
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  success is the ability to deploy long-term funding into well-governed projects.
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  And really, that's what it is.
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  I think for the first time, 2026, the new year ahead, actually looks quite
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  optimistic.
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  2025 was good.
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  I think 2026, from what you've said, Puleng, is going to be even better.
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  Let's hope so.
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  Puleng, thank you very much for your time.
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  That's Puleng Pidso, Investment Specialist at 91 in Cape Town.
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  The views and opinions expressed in these podcasts are those of Lindsay Williams and
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  various contributors and do not reflect the policy,
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  position, or opinion of any other agency, organization, employer,
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  or company associated with StrictlyBusinessPodcast.com.
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  entity other than the speaker or the author.
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  And since we are critically thinking human beings, these views are always subject to
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  change, revision,
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  and rethinking at any time.
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  Please do not hold us to them in perpetuity.