- South Africa has won $350 million of World Bank funding for a credit-guarantee vehicle designed to boost private investment in infrastructure and accelerate the rollout of its transmission grid expansion.
South Africa has won $350 million of World Bank funding for a credit-guarantee vehicle designed to boost private investment in infrastructure and accelerate the rollout of its transmission grid expansion.
The vehicle, which will be hosted by the state-owned Development Bank of Southern Africa, will aim for an initial capitalization of $500 million and is expected to raise investments of $10 billion over the next decade.
“This facility will support large-scale investment in transmission infrastructure,” South Africa's Finance Minister Enoch Godongwana said in a joint statement with the World Bank on Friday. “We expect the development partners to confirm their capital participation. We are aiming to commission the CGV this year.”
The growth of Africa's largest economy has been hampered by its inadequate infrastructure, including a limited grid, which has prevented the country from taking advantage of some of the world's best renewable energy potential.
The creation of the fund marks a step forward towards increasing investment, especially in transmission lines. These are needed to enhance energy security and promote construction of green power plants in sunny and windy parts of the country.
President Cyril Ramaphosa said last month that a transmission company independent from state power utility Eskom Holdings SOC Ltd would be created. Global energy companies including Engie SA, Adani Power Ltd and China's State Grid International Development Ltd have expressed interest in investing.
The plan is to lay 14,000 kilometers (8,699 mi) of new power lines at a cost of approximately 440 billion rand ($26.3 billion). The existing grid is strongest in the east where coal-fired power plants produce about three-quarters of the country's electricity.
The World Bank and South Africa's National Treasury said in the statement that the vehicle would use “market-based credit guarantees” to reduce investment risk and cut reliance on sovereign guarantees.
The fund will also boost investments in transport and water, the DBSA said in a separate statement.
“The mechanism is designed to be sustainable and scalable, starting with transmission infrastructure and expanding to other sectors if the model is successful,” it said.
Source: bloomberg