HomeIndustry SectorsAsset MaintenanceInfrastructure fund to boost four projects valued at $1.4bn

Infrastructure fund to boost four projects valued at $1.4bn

The Infrastructure Fund, housed in the Development Bank of South Africa, has given the green light to four projects worth a collective $1.4 billion.

Development Bank of Southern Africa (DBSA) Chief Investment Officer and IF head, Mohale Rakgate, made the revelation during a press briefing of the two-day long Sustainable Infrastructure Development Symposium (SIDSSA).

Unveiled by President Cyril Ramaphosa in 2018, the blended finance $6.7 billion fund was expected to provide catalytic finance over 10 years, leveraging as much as $67 billion in new investment for strategic infrastructure projects.

In relation to the four projects, the IF had already gone through the Infrastructure South Africa (ISA) processes to get the projects approved.

Rakgate commented: “What we’re excited about is that even in the first year of the operation of the IF, there was commitment from Treasury under the current constrained fiscal environment, $268 million in the current year, $403 million and $538 million in the following years. So we’re talking about $1.2 billion of the $6.7 billion. We’re excited about that because there’s always this trust gap that we make commitments, but we don’t follow up.”

This, he said, was very important, saying it enabled the Fund to start looking at their programmes and projects. Significant progress had already been made in the first year.

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Projects funded by the Infrastructure Fund

“In the past year, we have been able to get this project to a point where now they can be exposed to the market; the external financiers, as well as developers [who], will be keen to partner with government in the implementation of the projects,” he said

The projects have already been through their approval processes and prioritised through the ISA prioritisation criteria and admitted into the pipeline.

“In addition to that, we went through the National Treasury processes to access a portion of this R24 billion and we are at advanced stages. We should be hearing from them within the next few weeks, leading to the Medium Term Budget Policy Statement,” said Rakgate.

The first project was the $833 million Mokolo project. Rakgate said what the IF was putting on the table is the mobilisation of a standby credit facility of $336 million, with $100.8 million coming from IF allocations to ensure that the project did not delay any longer.

Based in the water-scarce Waterberg region in Limpopo, he said the project is “very key”. 

“[It is] an area that already has got constrained development and we think it will really address the political economy issues… around employment creation, economic growth, and all that multiplier effects that come with that.”

The second programme was the country’s 300,000 student housing infrastructure bed programme backlog.

Having worked with the Department of Higher Education, Science and Innovation, Treasury and the IF’s dedicated programme management office, it was anticipated that 9,600 beds would be shaved off the target. This, he said, would be through blended funding with market participation.

“We are creating a funding SPV (Special Purpose Vehicle) so that you can get your institutional investors, DFIs and banks to come in and augment the [state’s] contribution.

The 9,600 will in the following year cumulatively increase to 24,000.

“This is a programme we are excited about. And once we prove this one to happen, we will plug and play with the rest that will come through up until you reach the 300, 000 beds,” he said.

A similar approach was expected to unfold in the Department of Human Settlement’s social housing programme. In this regard, the IF was in the current financial year piloting a $73 million programme from the $6.7 billion.

“We’re seeking now to develop structures that will enable investors to come in and play a role for a portion of 30%, which sponsors of the project should raise on their own. The state is contributing 70% of that.”

Bottlenecks were also expected to begin to clear in the Lepelle Northern Water Project in Limpopo. The fund is working with the Water Board and the department to help make this project happen.

“From the perspective of mobilising social infrastructure aspect of this project from this day, so that as you supply your commercial users, you don’t leave behind indigents.”

A figure of $302 million, of which $94 million had already been applied for from the $6.7 billion, was needed.

“We are in discussions with the department around the $80.6 million to make the shortfall of $134 million to come from commercial users. Polokwane had concluded an uptake with the water board.”

He said the IF was also seeking to support the project around issues of governance and procurement to earn the confidence of investors.

The last project that was expected to proceed was the one-stop border management post with the Department of Home Affairs and the Border Management Agency.

“We haven’t applied for government funding because it can stand on its own. All we are doing at this stage is to help with the structuring. We’re talking about border posts with all South Africa’s neighbours, except in Namibia. As you may know, you go to Beitbridge, Lebombo, it takes up to seven days for trucks to move from one country to the next.

“So, this seeks to really ensure that it’s smooth to go between the countries,” he said.

Along with National Treasury, the ISA was also expected to play a significant role in unblocking various challenges.

IF is helping to structure the project so that we can find the best optimal model to ensure that there’s value for money for the government.”

All five projects, he said, were all at advanced stages of implementation. They will all be going out to market in the last quarter of this year and the first quarter of 2022.

Glossing over projects in the pipeline, he mentioned the $3.5 billion SA Connect programme and $1.5 billion Umkomaas water projects. The two projects are also at advanced planning stages, having already been approved by the ISA governance structures but still yet to be submitted to National Treasury for support.

The SA Connect programme sought to address the country’s digital connectivity, especially in underdeveloped rural areas and government buildings. A feasibility study had already been concluded.

Several municipal projects were also still in development, he said.

Source: SAnews.gov.za

Nomvuyo Tena
Nomvuyo Tena is a Content Producer at Clarion Events Africa and is as passionate about the energy transition in Africa as she is about music and Beyonce.