The future looks bright for big infrastructure projects in SA with the state financier, the Development Bank of Southern Africa, saying it has approved more than R39bn in loans it is yet to disburse.
The bank said on Friday it paid out R3.2bn less in infrastructure development loans during its year that ended in March as the demand for infrastructure funding was weakened by a faltering economy. However, its transacting executive and acting CFO, Zodwa Mbele, said it had nevertheless experienced one of its highest levels of project funding approved.
While the high rate of infrastructure finance approvals has not yet translated to implementation of projects, the approvals are an indicator of an expected uptick in infrastructure development activity.
The bank, which is one of SA’s biggest development finance institutions, funds economic infrastructure and social projects locally and in other African countries, mostly in the Southern African Development Community (Sadc). The projects it finances range from road and energy infrastructure to building schools and hospitals, as well as providing support to municipalities to build infrastructure for service delivery.
The bank disbursed R9bn in infrastructure development loans in the year to March, the lowest level it has recorded in the past five years.
However, with R39bn in infrastructure funding applications approved, Mbele said the bank has started its 2020 financial year on a strong footing. It has already signed loan commitments for R17bn of the approved projects, meaning that money is ready to be spent.
“We have solid and committed projects coming on stream. It's not like a pipeline that is exploratory,” said Mbele.
She said some of the approved projects took longer to convert into commitment or disbursement because of their complex nature. She cited a Mozambique gas project as an example.
“Those are highly structured and complex projects by their nature. Thus you would not disburse the funds in the year in which you approved them.”
In SA, approved projects include seven student housing pilots and another project consisting of 300,000 beds to be built over 10 years. A further project is SA Connect, an ambitious government scheme that aims to provide broadband access to people in underserviced areas and to cover 100% of the population by 2030.
Mbele said that the bank is no longer dependent on projects formulated by the government. Its project preparation initiative, which began about five years ago, was starting to attract private sector finance into infrastructure funding.
“There’s a lot of money out there. The issue is to source bankable projects which are largely nonexistent or ready. So, as a bank, we've taken one step back to get involved in the upstream work, which is where project preparation comes in,” she said.
The bank will manage R400m of the R625m that President Cyril Ramaphosa earmarked for a project preparation facility when he announced the country’s economic stimulus and recovery package in September 2018.
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