Infrastructure South Africa (ISA), an entity of the Department of Public Works and Infrastructure (DPWI), has entered into a memorandum of agreement (MoA) with the National Treasury and the Development Bank of Southern Africa (DBSA) for the R100-billion Infrastructure Fund launched by President Cyril Ramaphosa.
Announced in 2018, the fund is aimed at building on efforts to transform public infrastructure development in South Africa, and is meant to “fundamentally transform the State’s approach to the financing of infrastructure projects and reduce the current fragmentation of infrastructure spend and, thereby, ensure more efficient and effective use of resources and improve the speed and quality of delivery”.
During Engineering News’ virtual attendance of the MoA signing on August 17, it was said that the Infrastructure Fund is intended as government funding and ancillary support for co-financing of blended finance programmes and projects.
This includes financing from the local capital market and international financing institutions as a complement for the broader budgeting reforms that the government is undertaking to address problems in the infrastructure value chain.
Limited government finances, which have been worsened by the Covid-19 pandemic, affect the availability of investment resources and there is, therefore, a greater need for government to work together to create an enabling environment for effective partnerships with the private sector, development finance institutions (DFIs), international financiers and the local capital market to enable the leveraging of additional resources.
The Infrastructure Fund opens opportunities to partner with the private sector and international financiers.
Provision has been made for R100-billion over ten years, with R10-billion funding in the current medium-term expenditure framework baseline.
The Infrastructure Fund will be used as viability gap funding for large-scale infrastructure investments, and support will take on different forms, including fund-deserving infrastructure projects, blended co-funding, capital subsidies or interest rate subsidies and guarantees.
The ISA’s responsibilities will be to coordinate the infrastructure value chain through the development, assessment, management, project preparation, implementation and monitoring of a comprehensive infrastructure pipeline and related investment for South Africa.
The National Treasury’s responsibility will be to facilitate government’s contribution of the funding by putting in place defined budgeting processes for the Infrastructure Fund.
The DBSA, meanwhile, will establish the Infrastructure Fund through a dedicated implementation unit housed in the DBSA. It will also manage and administer the fund.
The DBSA will also facilitate the financial structuring, procurement and implementation of priority blended-finance projects and programmes, as identified by ISA.