DBSA’s PROJECT PREPARATION UNIT 01 August 2017
Overview of the DBSA Infrastructure development value chain Project Preparation Unit Project application process |
DBSA was created to catalyse economic growth through investment in economic & social infrastructure and supporting regional integration DBSA mandate Founding 1 1983 year 100% owned by SA Government through the Ministry of Finance Shareholding 2 structure A prosperous and integrated region, progressively free of poverty and dependence 3 Vision ▪ To advance the development impact in the region by expanding access to development finance and effectively integrating and implementing sustainable development solutions – 4 Mission Improve the quality of life of people through the development of social infrastructure – Support economic growth through investment in economic infrastructure – Support regional integration ▪ Sustained growth in development impact Strategic ▪ Integrated infrastructure solutions 5 objectives ▪ Financial sustainability | 3
Although DBSA’s mandate covers the whole of Africa, the bank focuses mainly on South Africa, SADC and priority countries outside of SADC Sector mandate Geographical focus ▪ DBSA mandate was recently expanded to the rest Core sectors of Africa ▪ The bank however has a targeted approach beyond ▪ Energy SADC with focus on 6 priority countries (Nigeria, Ghana, Kenya, Rwanda, Republic of Congo and ▪ Uganda) Transport ▪ ICT ▪ Water Secondary sectors (SA only) Ghana Nigeria ▪ Health Kenya Republic of Congo Rwanda Uganda ▪ Education SADC excl. SA ▪ Housing South Africa | 4
DBSA offers a unique value propositions along the value chain; playing a leading role in project preparation, funding and implementation DBSA’s primary focus 1 2 3 4 5 Maintain / Build Plan Plan Prepare Finance Prepare improve ▪ Project identification ▪ Managing the ▪ Supporting the Provide vanilla and ▪ Feasibility boutique financing design and maintenance and/or Services assessments opportunities construction of key improvement of key ▪ Technical assistance ▪ Debt projects in the infrastructure ▪ Financial structuring ▪ Mezzanine Finance education, health projects ▪ Limited non – ▪ Project Preparation and housing sectors ▪ Project funds recourse lending ▪ Lead arranger Management support ▪ National and ▪ National and South Africa South Africa ▪ Municipalities ▪ Municipalities provincial provincial ▪ SOE ▪ SOE government government ▪ PPP ▪ PPP departments departments Clients ▪ Private sector ▪ Private sector ▪ Municipalities ▪ Municipalities Rest of Africa Rest of Africa ▪ SOE ▪ SOE ▪ Public – Private ▪ Public – Private Partnerships Partnerships ▪ Sovereigns ▪ Sovereigns Through integrating across the value chain, DBSA will drive infrastructure delivery in an effective and timely manner | 5
Overview of the DBSA Infrastructure development value chain Project Preparation Unit Project application process |
Africa has infrastructure funding needs of ~$120bn with ~95% of the initiatives still in concept & pre-feasibility development stage Unknown value Known value Number and value of projects in PIDA PAP lists ▪ Most DFIs in Africa # currently participate in later stages of the project life cycle PIDA PAP is a set of large, priority ▪ A growing number of DFIs infrastructure projects across Africa are increasingly expanding 111 their scope of operations and venturing into project preparation 66 ▪ PIDA PAP lists 139 projects, of which 95% by value are 17 45 11 in concept and pre- feasibility stage and 55% Concept (Pre) feasibility Structuring are so ill-defined no capital value has been estimated ETC 1 113 3 4 USD Bn 1 Estimated total cost; extrapolated proportionately where values are unknown | SOURCE : PIDA PAP list 7
To move potentially impactful projects to bankable stage requires increase in project preparation investments Estimated project development and preparation costs 1 USD Bn per annum 10.0 African priority Why this is not addressed at projects require scale today 4.7 ~USD 400Mn per ~ 2-3 annum (USD ▪ Commercial vehicles focus on 0.4 100Mn in SADC) assets/ sectors where Africa SSA SADC PIDA commercial returns are good PAP ▪ Most PPFs only solve for one part of the equation (funding), … yet decreased or for only part of the project Increased Commitments… disbursements due to lack of lifecycle (technical assistance) bankable projects Infrastructure Commitments, % of committed funds disbursed USD Bn ▪ No credible/ independent entity with active long-term interest in 56 vs. supporting governments’ 48 39 38 infrastructure development 2009 2010 2009 2010 1 Estimated at 5% of total estimated cost (ETC) | SOURCE: McKinsey MGI; World Bank; ICA; PIDA PAP 8
Project preparation in context Project Preparation (PP) is defined as the activities required to progress projects through 1 its development stages up to bankability Preparation of projects is required to de-risk projects and to prepare good quality 2 bankable projects Projects have long lead times and require intensive management and guidance to 3 progress to financial close Preparation of projects require funding and skills to prepare bankable projects 4 | | | 9
Overview of the DBSA Infrastructure development value chain Project Preparation Unit Project application process |
The DBSA’s Project Preparation Unit (PPU) was created in 2013 to identify and prepare projects to bankability stage 2013 as a specialised and dedicated Unit within the DBSA Established 1 2 ▪ To prepare sustainable priority projects within DBSA’s mandate to bankability Purpose ▪ To provide project preparation facilities and skills to prepare bankable projects Our core services are: ‒ Funding of PP activities; Services ‒ Mobilising advisors to prepare bankable projects 3 ‒ Facilitating and managing project preparation activities ▪ South Africa; ▪ SADC; Footprint 4 ▪ Selected African countries (Nigeria, Kenya, Tanzania, Ghana, Ethiopia and DRC) ▪ Other African countries | | 11
PPU unit provides a comprehensive project developing solution to its clients Enabling Project Pre- Bankable Project environment Definition feasibility Feasibility structuring Deal origination ▪ PPU covers the entire cycle of project preparation ▪ It maintains a balanced portfolio of projects at different stages of preparation • Actively originating deals by: - Identifying project opportunities from a project developer/sponsor perspective - Define project concept and scope • Engage with clients and obtain a mandate to act as project developer / sponsor / Key owner activities | | 12
Where PPU plays is guided by the DBSA mandate ▪ South Africa: NDP and sectoral plans e.g. IRP ▪ SADC: Regional Infrastructure Master Plan Geographic ▪ Africa: PIDA ▪ Core sectors ‒ Transport ‒ Water and sanitation ‒ Energy Sectors ‒ ICT ▪ Secondary sectors (SA only) ‒ Social ▪ Municipalities ▪ SOCs ▪ Customers Government Departments ▪ Private companies (projects with a public good) | | 15
PPU’s project preparation principles are guided by the DBSA’s strategic objectives 1. The principle of co-funding shall apply – sponsors are required to contribute towards the funding of the PP activities and stages 2. The DBSA’s PP funding is provided on commercial terms – expect recovery of PP funding invested as well as a return for the risk taken (PP funding provided is not a grant) Key project preparation principles 3. The DBSA would aim to obtain a Mandated Lead Arranger role on a competitive basis The DBSA would aim to participate in the debt funding of the 4. project on a competitive basis | 14
PPU Project selection criteria 1 7 Sector / strategic fit Potential Investment Value 2 6 Development Cost recovery and Impact return 5 3 Institutional capacity of National / regional the project sponsor priority 4 Co-funding | 15
PPU is working on a number of initiatives with strategic partners Development of Gautrain Renewable IPP Base Load extension and Energy IPP Establishment of Programme expansions Program Small IPPs (<5MW) MOU with Develop Student IIPSA SADC PPDF Transnet to Accommodation develop PSP Funding Models R1.5 bn fund R100 m Projects value fund value | 16
Overview of the DBSA Infrastructure development value chain Project Preparation Unit Project application process |
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