DBSA APPROACH TO PROJECT PREPARATION
Mohale Rakgate: General Manager, Project Preparation Unit
18 May 2016
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Role of PPU within DBSA
PPU solution offering
Key achievements
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Project preparation is one of DBSA’s competitive advantages within
our core sectors
3
Integrated infrastructure
solution provider
Early state risk taker
Tenor & developmental
returns Smart partnerships
DBSA
value
proposition
| | 4
It is of strategic importance because it allows the Bank to offer an
integrated value propositions along the infrastructure value chain
Plan Prepare Plan Prepare
1 2
Finance
3
Build
4 Maintain /
improve
5
Project identification
Feasibility
assessments
Technical assistance
Financial structuring
Project Preparation
funds
Lead arranger
Provide vanilla and
boutique financing
opportunities
Debt
Mezzanine Finance
Limited non–
recourse lending
Managing the
design and
construction of key
projects in the
education, health
and housing sectors
Project
Management
support
National and
provincial
government
departments
Municipalities
South Africa
Municipalities
SOE
PPP
Private sector
Rest of Africa
SOE
Public–Private
Partnerships
Sovereigns
Supporting the
maintenance and/or
improvement of key
infrastructure
projects
National and
provincial
government
departments
Municipalities
Through integrating across the value chain, DBSA is able drive infrastructure delivery in an effective and
timely manner
DBSA primary focus area
Se
rvic
es
C
lie
nts
South Africa
Municipalities
SOE
PPP
Private sector
Rest of Africa
SOE
Public–Private
Partnerships
Sovereigns
Municipal
assessments
Infrastructure plans
Advisory role
infrastructure
planning
South Africa
Under resourced
municipalities
| |
Africa has infrastructure funding needs of ~$120bn with ~95% of the
initiatives still in concept & pre-feasibility development stage
113 3 4
Number and value of projects in PIDA PAP lists
▪ PIDA PAP lists 139 projects,
of which 95% by value are
in concept and pre-
feasibility stage and 55%
are so ill-defined no capital
value has been estimated
▪ Most DFIs in Africa
currently participate in later
stages of the project life
cycle
▪ A growing number of DFIs
are increasingly expanding
their scope of operations
and venturing into project
preparation
#
USD Bn
45
66
111
Structuring (Pre) feasibility
17
Concept
11
Known value Unknown value
SOURCE: PIDA PAP list
1 Estimated total cost; extrapolated proportionately where values are unknown
ETC1
PIDA PAP is a set of large, priority
infrastructure projects across Africa
5
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To move potentially impactful projects to bankable stage requires
increase in project preparation investments
6
Why this is not addressed at
scale today ~ 2-3
4.7
0.4
10.0
Estimated project development and preparation costs1
USD Bn per annum
SOURCE: McKinsey MGI; World Bank; ICA; PIDA PAP
Africa SSA SADC PIDA
PAP
56
2010 2009
39
2010 2009
38 48 vs.
Increased Commitments…
Infrastructure Commitments,
USD Bn
… yet decreased
disbursements due to lack of
bankable projects
% of committed funds disbursed
African priority
projects require
~USD 400Mn per
annum (USD
100Mn in SADC) ▪ Commercial vehicles focus on
assets/ sectors where
commercial returns are good
▪ Most PPFs only solve for one
part of the equation (funding),
or for only part of the project
lifecycle (technical assistance)
▪ No credible/ independent entity
with active long-term interest in
supporting governments’
infrastructure development
1 Estimated at 5% of total estimated cost (ETC)
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Role of PPU within DBSA
PPU solution offering
Key achievements
| |
The DBSA’s Project Preparation Unit (PPU) was created in 2013 to
identify and prepare projects to bankability stage
Services
Our core services are:
‒ Funding of PP activities;
‒ Mobilising advisors to prepare bankable projects
‒ Facilitating and managing project preparation activities
3
Footprint
▪ South Africa;
▪ SADC;
▪ Selected African countries outside SADC (Nigeria, Kenya, Tanzania, Ghana, Ethiopia
and DRC)
4
Established 2013 as a specialised and dedicated Unit within the DBSA
1
Purpose ▪ To prepare sustainable priority projects within DBSA’s mandate to bankability
▪ To provide project preparation facilities and skills to prepare bankable projects
2
8
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PPU unit provides a comprehensive project developing solution to its
clients
9
Enabling
environment
Pre-
feasibility
Bankable
Feasibility
Project
Definition Project
structuring
Deal origination
Key
activities
• 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 /
owner
• Programmatic approach in developing projects to be role-out for more than one
client
PPU covers the entire cycle of project preparation
It maintains a balanced portfolio of projects at different stages of preparation
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Where the Project Preparation Unit plays is guided by the
DBSA mandate
South Africa: NDP and sectoral plans e.g. IRP
SADC: Regional Infrastructure Master Plan
Africa: PIDA
15
Geographic
Sectors
Customers
Municipalities
SOCs
Government Departments
Private companies (projects with a public good)
Core sectors
‒ Transport
‒ Water and sanitation
‒ Energy
‒ ICT
Secondary sectors (SA only)
‒ Social
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PPU’s project preparation principles are guided by the DBSA’s strategic
objectives
11
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)
3. The DBSA would aim to obtain a Mandated Lead Arranger role
on a competitive basis
4. The DBSA would aim to participate in the debt funding of the
project on a competitive basis
Key project
preparation
principles
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PPU leverage DBSA’s strategic partners to sources 3rd party funding
for project preparation
Funding partners
DBSA
sponsored 1
3rd party
funding
2
Type of funding
Project preparation own
funding
Based on cost recovery and
return (self-sustaining
model)
Joint funding with other
partners (e.g. Meridiam Capital)
Gautrain and Transnet (only in
relation to their own projects)
Project preparation funding
Grants
KfW
European Union PPDF a
IIPSA b
PPFS c
Project preparation grants &
direct capital grants with
loans
Grants
Project preparation funding
Grants
European Union
(participating DFIs: KfW,
DBSA, AFD, EIB)
AFD
6
Global
Environment
Facility (GEF)
d Project preparation grants
Capital grants
Concession loans
Interest rate subsidies
Guarantees Green Climate
Fund (GCF) e
R100m p.a
R200m
R1.8bn
R50m
Variable1
Other Project
Prep facilities f
On project by project basis:
‒ Equity
‒ Mezzanine
‒ Grants
Electra, Africa50, InfraCo,
Harith – Progeny2 Variable1
1 Based on individual projects, 2 DBSA is assisting with mobilizing seed capital from KfW
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PPU project selection criteria
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Sector / strategic fit
Co-funding
Development
Impact
Institutional capacity of
the project sponsor
1
2
4
5
Cost recovery and
return
6
Potential Investment
Value
7
National / regional
priority
3
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PPU is working on a number of initiatives with strategic partners
14
Independent Power Producer Program
RE IPP Expedited Bid Window
Small IPP
Coal baseload IPP
Gas IPP
IIPSA
R1.7 bn fund value
Gautrain extension
and expansions
SADC PPDF
R100 m
fund value
Develop Student
Accommodation
Funding Models
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Role of PPU within DBSA
PPU solution offering
Key achievements
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PPU’s pipeline projects has grown significantly over the last 12 months
to a potential investment value of ~R213 billion
8
Value, R billion
Investment values per sector
54
11
131
61
83
26
57
3
2
2
Social
3
Water
80
118
213
Transport Total ICT
0
Energy
0
11
0
Rest of Africa1
South Africa
1 Total investment values for projects outside of South Africa assumed a R15/US$ exchange rate
13 9 6 1 30 # of projects in
active preparation 1
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Regional composition of PPU projects – 72% of the potential funding
opportunities are within South Africa
1
7
Assessment of Regional Split Potential
DBSA
Participation
(R x million)
Regional %
Split
Within South Africa 30 873 72%
ERRs Approved - Due Diligence Stage 6 195
Appraisals Approved - Active Preparation
Stage / Handed over to Lending
24 678
Within SADC (Excl SA) 8 006 28% 67%
ERRs Approved - Due Diligence Stage 2 697
Appraisals Approved - Active Preparation
Stage / Handed over to Lending
5 308
Outside SADC 3 978 33%
ERRs Approved - Due Diligence Stage 1 547
Appraisals Approved - Active Preparation
Stage / Handed over to Lending
243
TOTAL 42 857
72%
19%
9%
Regional Split (%)
Within South Africa
Within SADC (Excl SA)
Outside SADC
Water Transport Energy ICT Social Total
Inside SA 9 2 5 1 1 18
Rest of Africa - 4 8 - - 12
TOTAL 9 6 13 1 1 30
Number of projects by sector and regional location
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Mohale Rakgate
General Manager: Project Preparation Unit
(+27) 11 313 3179
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