R50m grant to help crowd in private capital through outcomes-based financing model
South Africa faces increasing pressure on its water systems due to climate change, land degradation and the spread of invasive plant species, all of which reduce water availability and threaten biodiversity. Picture.
Thapelo Morebudihas approved a R50m grant through its Green Fund to support the implementation of the Cape Water Outcomes-Based Bond, an initiative aimed at strengthening South Africa’s water security and restoring ecosystems.
The transaction, led by Rand Merchant Bank , introduces an outcomes-based financing model that links investor returns to measurable environmental results, including the clearing ofThe bond is expected to raise about R2.5bn from institutional investors under RMB’s domestic medium-term note programme, reflecting growing interest in blended finance instruments that combine public and private capital.
Under the structure, investors subscribe to the bond while concessional capital, provided by outcomes-based funders including the DBSA, supports an outcomes fund that finances ecological restoration. Returns are performance-linked, with investors receiving a premium if predefined environmental targets are met and independently verified.
The DBSA said its funding would play a catalytic role by de-risking the transaction and enabling the mobilisation of larger pools of private capital into environmental infrastructure. Group executive for programmes Phindile Masangane said the bank is focused on developing financing solutions that bridge public development priorities and private investment, particularly in sectors critical to sustainable development.
South Africa faces increasing pressure on its water systems due to climate change, land degradation and the spread of invasive plant species, all of which reduce water availability and threaten biodiversity. Public funding alone has proved insufficient to address the challenges at scale.
The Cape Water Outcomes-Based Bond is designed as a replicable model for financing large-scale ecological infrastructure by blending public, private and concessional capital. It builds on similar international instruments, including outcomes-based bonds used to finance conservation projects, while adapting the structure to local market conditions.
The DBSA said the programme would also support job creation and improve the resilience of local economies by protecting water resources and restoring ecosystems. The bank said it is committed to advancing climate-resilient and nature-positive infrastructure investment across South Africa and the broader African continent through innovative financing mechanisms.Sign up or sign in now.
The Development Bank Of Southern Africa Cape Water Outcomes-Based Bond Water Security
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