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Financing Critical Infrastructure - Uzenzele blog

Financing Critical Infrastructure

In its 2018 economic outlook, the African Development Bank (AfDB) says the continent’s infrastructure requirements run to $130–170 billion a year, far higher than earlier estimates of $93 billion.

 

President Cyril Ramphosa recently announced a R400bn infrastructure fund for South Africa’s creaking infrastructure and with the Africa Infrastructure Summit 2018 having just ended, it’s appropriate to explore some of the opportunities for grants and incentives for infrastructure finance.

The Department of Trade and Industry provides two incentives that address some of the challenges to infrastructure finance;

 

  1. Critical Infrastructure Program (CIP)
    1. The CIP covers bulk infrastructure such as bulk water supply, electrical infrastructure, access roads, industrial infrastructure etc
    2. Providing up to R50mil in cost sharing incentive for infrastructure projects in South Africa
    3. Most infrastructure projects run into hundreds of millions of rand. The R50mil incentive can go a long way to subsidizing equity contributions that lenders may require to finance the project
    4. As at October 2018, a level eight contribution to BBBEE is necessary – this is subject to change.
  2. Capital Projects Feasibility Project (CPFP)
    1. The CPFP co-funds up to 55% and R8mil toward bankable feasible studies promoting the exporting of goods and services at feasibility and implementation stage of at least 70% of the project cost
    2. This provides construction and engineering firms with the potential to contribute to the feasibility of infrastructure projects on the continent
    3. A prefeasibility is required on application which includes foreign government approvals, indicative letters of intent and interest from financiers for both the matched component of the feasibility and the implementation of the project.

 

Financing the infrastructure gap in Africa is going to take public and private collaboration, time and dedication.

 

For infrastructure projects, there’s immense opportunity – Use it, Don’t Use it.