Infrastructure Fund green lights $1.4b for four projects

Infrastructure Fund

Infrastructure Fund green lights $1.4b for four projects

The Infrastructure Fund (IF) has approved four projects valued at the sum of $1.4 billion.

The IF initiative is part of the Development Bank of South Africa, a wholly-owned subsidiary of the South African government and one of the top African development finance institutions.

Mohale Rakgate, Chief Investment Officer and IF Head at the Development Bank of Southern Africa (DBSA), made the announcement during a press conference at the two-day Sustainable Infrastructure Development Symposium (SIDSSA).

The $6.7 billion blended finance fund, announced by President Cyril Ramaphosa in 2018, was projected to provide catalytic funding over ten years, enabling up to $67 billion in fresh investment for important infrastructure projects.

The IF had already gone through the Infrastructure South Africa (ISA) protocols in order to get the four projects approved.

Mohale Rakgate said, “What we’re excited about is that even in the first year of the IF’s operation, there was a commitment from Treasury under the current tight fiscal situation, $268 million this year, $403 million the following year, and $538 million the following year.

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 was critical because it allowed the Fund to begin looking at its programs and projects. In the first year, significant progress had already been made.

He also stated that in the previous year, they have been able to bring this project to a position where it can be presented to the market, including external funders and developers interested in collaborating with the government on project implementation.

The projects have already been approved and prioritized using the ISA prioritization criteria, and they have been accepted into the pipeline.

“In addition, we proceeded through the National Treasury protocols to gain access to a portion of the R24 billion, and we are nearing completion. We should hear from them in the coming weeks,” Rakgate added, referring to the Medium Term Budget Policy Statement.

The $833 million Mokolo project is the first of the four projects. Rakgate stated that the IF is proposing the mobilization of a $336 million standby credit facility, with $100.8 million coming from IF funds, to ensure that the project is not further delayed.

He revealed that base on the water-scarce in Limpopo’s Waterberg region, the initiative is “extremely important.”

“It’s an area where development is already restrained, and we believe it will truly address the political economics challenges… around job creation, economic growth, and all the multiplier benefits that come with it,” said Rakgate.

The second project to be funded is the country’s 300,000 student housing infrastructure bed backlog. Considering the collaboration between the Department of Higher Education, Science and Innovation, Treasury, and the IF’s dedicated program management office, it is projected that the objective would be cut by 9,600 beds.

The 9,600 is hoped to grow to a total of 24,000 in the following year. According to Rakgate, the IF is very enthusiastic about the program. And once the target is reached, the rest will follow suit until the total number of beds reaches 300,000.

The Department of Human Settlements’ social housing program was expected to take a similar approach. In this regard, the IF is launching a $73 million initiative from the $6.7 billion budget in the current fiscal year.

Rakgate stated that they are currently working on developing frameworks that will allow investors to come in and play a part in the project for a 30 percent stake, which the project’s sponsors should be able to raise on their own. The state is responsible for 70% of the funding.

Bottlenecks at the Lepelle Northern Water Project in Limpopo were also expected to start to clear. To make this idea a reality, the fund is collaborating with the Water Board and the Department.

From the standpoint of mobilizing the social infrastructure part of this project from the start, so that you don’t leave indigents behind as you provide your commercial users. A total of $302 million was required, of which $94 million had already been requested from the $6.7 billion.

“We’re in talks with the department about raising $80.6 million from business users to cover the $134 million shortfalls.” Polokwane had reached an agreement with the water board on an uptake.”

He added that the IF was also looking to help the project with governance and procurement concerns in order to gain investors’ trust. The one-stop border management post with the Department of Home Affairs and the Border Management Agency was the last project scheduled to move forward.

“We haven’t appealed for government financing because we believe we can support ourselves.” At this point, all we’re doing is assisting with the structuring. Except for Namibia, we’re talking about border posts with all of South Africa’s neighbors.

You may be aware that when you travel to Beitbridge or Lebombo, lorries can take up to seven days to cross from one country to the next. As a result, this aims to make travel between the countries as easy as possible,” he explained.

The ISA, along with National Treasury, was supposed to play a key role in resolving numerous issues.

“IF is assisting in the structuring of the project so that we can identify the best optimal model to ensure that the government gets value for money.”

He stated that all five initiatives were in advanced stages of implementation. In the fourth quarter of this year and the first quarter of 2022, they will all be released to the market.

He referenced the $3.5 billion SA Connect program and the $1.5 billion Umkomaas water projects while discussing projects in the pipeline. Both projects are in advanced planning phases, having been approved by the ISA governing bodies but not yet submitted to National Treasury for funding.

The SA Connect program aimed to improve digital connectivity in the country, particularly in poor rural areas and government facilities. A feasibility study had been completed previously. A number of municipal projects were also still in the works.

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