Midrand, 3 April 2026 - The Development Bank of Southern Africa (DBSA) has approved a R50 million grant through its Green Fund to support the implementation of the Cape Water Outcomes-Based Bond, an innovative financing instrument led by Rand Merchant Bank (RMB).
The transaction represents a pioneering approach to financing nature-based solutions, aimed at improving water security and restoring critical ecosystems in South Africa. By linking financial returns to the achievement of measurable environmental outcomes, the bond mobilises private sector capital to address the growing challenges of water scarcity, biodiversity loss, and land degradation.
The Cape Water Bond leverages an outcomes-based financing model, where institutional investors subscribe to a bond issuance, while concessional capital provided by Outcomes-Based Funders (OBFs) including DBSA, supports outcomes funds that finances ecological restoration activities.
“The DBSA is committed to pioneering innovative financing solutions that bridge the gap between public development priorities and private capital. By providing catalytic finance, we can de-risk investments and attract private sector participation into sectors that are critical for sustainable development,” Phindile Masangane, Group Executive Programmes at the DBSA.
Investors are incentivised through performance-linked returns, receiving a success premium when predefined targets such as hectares of land cleared of invasive alien plants are achieved and independently verified. DBSA’s contribution will help to de-risk the transaction and crowd in private investment. This structure ensures that public and concessional funding is used efficiently to unlock significantly larger pools of institutional capital.
South Africa faces increasing pressure on its water systems, exacerbated by invasive alien plants, climate change, and land degradation. Traditional public funding mechanisms alone are insufficient to address these challenges at scale. The Cape Water Bond offers a replicable model for financing large-scale ecological infrastructure by blending public, private, and concessional capital. The bond is expected to raise approximately R2.5 billion from investors under RMB’s Domestic Medium Term Note Programme, with strong market interest already demonstrated. The initiative also builds on global precedents such as the Rhino Bond issued by the World Bank, adapting the model to the South African investment landscape and context.
“Through this approach, we are enabling the protection of critical water resources, restoring ecosystems, and strengthening the resilience of communities and local economies. The DBSA is particularly encouraged by the programmatic approach underpinning this initiative, as it ensures continuity in supporting a pipeline of biodiversity and nature-based projects across South Africa and the broader region,” concluded Masangane
DBSA remains committed to advancing climate-resilient and nature-positive infrastructure investments, and to supporting innovative financing mechanisms that deliver measurable development impact across South Africa and the broader African continent.
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About DBSA
The Development Bank of Southern Africa is one of the leading development financial institutions on the continent. Our primary purpose is delivering impactful development finance solutions that ignite transformative change in South Africa and on the rest of the African continent. Improving the quality of life of people in Africa is the fundamental focus of our development impact. We aim to bend the arc of history towards shared prosperity through multifaceted investments in sustainable infrastructure and human capacity.
Our product solutions span all phases of the infrastructure development value chain from infrastructure planning and project preparation, across a range of financing and non-financing investments to infrastructure implementation and delivery. Our primary areas of focus include Energy, ICT, Transport, Water and Sanitation. Our secondary area of focus includes Education, Housing and Health.