The European Investment Bank has called for closer co-operation between development finance institutions, government and the private sector to ensure that investment commitments become functioning projects capable of supporting economic growth and job creation.
Jim Hodges, the EIB’s head for Southern Africa and the Indian Ocean region, said South Africa had both ambition and capital, but needed a more effective connection between financing and projects that were ready to proceed. He was speaking at the Kgalema Motlanthe Foundation’s Drakensberg Inclusive Growth Forum on Saturday.
“South Africa did not lack ambition or capital but needed stronger links between financing and viable projects.”
Reducing the barriers to investment
Hodges said development finance institutions could help overcome obstacles that often discourage private investors. These included insufficient information about investment risks and the difficulty small businesses face when they seek conventional lending. For companies that cannot obtain affordable finance, the result can be slower expansion, fewer hiring opportunities and less ability to invest in equipment or working capital.
The EIB’s work includes improving access to finance for small and medium-sized enterprises, as well as supporting electricity grids, transport corridors, water infrastructure and undersea cables across Africa. These areas are important to the real economy because they influence whether businesses can move goods, access reliable services and reach customers beyond their immediate markets.
For households, the financing gap is not only an issue for banks and investment institutions. Projects that proceed can create jobs during construction and operations, while stronger infrastructure can affect the cost and reliability of services used by families and businesses. However, the comments did not amount to a promise of new funding for a particular South African project.
Data to clarify emerging-market risk
The EIB has operated in South Africa since 1994, completing its first transaction with the Industrial Development Corporation in 1995 and later working with the Development Bank of Southern Africa. Hodges also pointed to the Global Emerging Markets Risk Database, which brings together lending-performance information from development finance institutions.
| Indicator | Figure | Period or scope |
|---|---|---|
| Average private-sector lending default rate | About 3.5% | Africa over 30 years |
| Recoveries on that lending | About 73% | Africa over 30 years |
| EIB presence in South Africa | Since 1994 | National operations |
According to Hodges, the database’s figures could help investors judge risk more accurately. Better information may encourage banks, pension funds and insurers to consider investments that they might otherwise regard as too uncertain. The figures do not remove the risks attached to emerging-market lending, but they provide a basis for assessing those risks rather than relying only on limited or inconsistent information.
Finance must match the needs of smaller businesses
Hodges used the Kulima agricultural financing initiative in Malawi to illustrate why development finance needs an integrated approach. Small farmers can struggle to obtain bank funding because their businesses are too small for commercial lenders, while grants on their own cannot address all the challenges facing them.
The example reflects a wider problem for small businesses: access to money is only one part of building a sustainable operation. Suitable financing must be matched with a clear project, reliable information about risks and the practical conditions required for the business to operate. Without that alignment, capital can remain committed on paper while communities see limited economic benefit.
Hodges’s argument places responsibility across the financing system. Development institutions can help reduce information gaps and support projects in sectors such as energy, transport and water, while governments and private companies need to develop proposals that can be evaluated and implemented. For South Africa, the central challenge is therefore not simply attracting more capital, but converting available funding into viable projects that expand economic activity and employment. WE NEWS does not provide financial advice; businesses and investors should assess their own circumstances and risks.
