Infrastructure Fund project pipeline stands at R700bn, DBSA report

Infrastructure Fund project pipeline stands at R700bn, DBSA report


Photo by Creamer Media’s Dylan Slat

6th November 2019

By: Terence Creamer
Creamer Media Editor


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Development Bank of Southern Africa (DBSA) CEO Patrick Dlamini reported on Wednesday that a project pipeline valued at more than R700-billion had already been identified by the new Infrastructure Fund, which is being created to raise a blend of public and private finance to help plug the country’s infrastructure holes.

The DBSA has been given responsibility for implementing the fund, which was unveiled by President Cyril Ramaphosa as part of government’s 2018 Economic Stimulus and Recovery Plan.

Speaking at the South Africa Investment Conference on Wednesday, Dlamini said that the pipeline was likely to breach the R1-trillion level in the coming years. However, he also stressed that projects were at various stages of development and that further work was required to progress many of them to bankability.

The role of the fund would be to act as a “catalyst” for crowding-in scarce private and public capital to address the country’s transport, water, information and communications technology and energy backlogs.

To achieve this the fund would draw lessons from the country’s successful renewable-energy procurement programme, through which about R200-billion of private electricity investment had been facilitated since 2011.

Denham Capital’s Jasandra Nyker, who oversaw the development of several utility-scale renewables projects, underlined the success of the programme, which had proved that that new power projects could be developed by the private sector in partnership with government.

She lamented the recent four-year delay to the programme, however, which had undermined the local supply chain and raised doubts about the government’s commitment to honouring agreements. That said, Nyker argued that the actual risks of investing in Africa and South Africa were lower than the perceived risks.

Finance Minister Tito Mboweni added his support for the blended-finance model, arguing that public–private partnerships would be required to ensure that much-needed infrastructure was built in a context of “tremendous pressure” on the country’s public finances.

Ramaphosa, meanwhile, described infrastructural investment as a critical driver of future growth and an economy that had been stuck in a low-growth trajectory for the past ten years.

“To generate the funding needed for our infrastructure build programme, we have set up an Infrastructure Fund, which is being incubated by the Development Bank of Southern Africa.

“With an initial investment from government of R100-billion over ten years, the fund will leverage investments from financial institutions, multilateral development banks, asset managers and commercial banks,” the President told investors and potential investors from over 20 countries.

New Development Bank (NDB) VP and CFO Leslie Maasdorp stressed that the bank stood ready to support infrastructure projects in South Africa, but urged government to improve its long-term planning, which he said would help shore up the project pipeline needed for upscaled investment.

Established by the Brics bloc of Brazil, Russia, India, China and South Africa, the NDB had approved another $1.6-billion in infrastructure financing for South Africa for 2020 and was aiming to increase approvals to $2-billion in the coming months.

In 2019, the development finance institution pledged $2-billion to South African projects but by the end of October had already disbursed $2.2-billion.

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