Investing in the future of Africa

TP Nchocho, group executive for South African financing at the DBSA. (Supplied)

TP Nchocho, group executive for South African financing at the DBSA. (Supplied)

The Development Bank of Southern Africa (DBSA) is dedicated to supporting and accelerating socioeconomic growth development in Africa through investment into infrastructure and improving the quality of life for the people and the region.

The bank has played a significant role in building the physical, social and economic infrastructures of the continent and has the ultimate goal of a prosperous and integrated region through access to finance in the creation of sustainable solutions.

“Our hope is to work with governments, including the South African government, to potentially influence policy in the right direction — this is to open up the markets and enable more private capital to flow into the sector, creating an atmosphere of vibrant competition,” says TP Nchocho, group executive for South African financing at the DBSA.

“This will hopefully create conditions that will enable investment and private enterprise. One of our areas of focus is the energy sector.”

In South Africa, the DBSA has worked closely with government and utilities to help bring about some impressive changes in the power infrastructure.

The bank is committed to supporting the government’s national priorities through financing infrastructure programmes that are geared towards improving the security of energy supply, which is needed to accelerate the economic growth of South Africa.

Within the renewable energy sectorthe DBSA has played a pivotal role in creating an enabling environment for independent power producer (IPP) investment, working with the South African government on the electricity regulations on New Generation Capacity, a revision of the Electricity Regulation Act, a revision of the National Energy Regulator Act, a new draft bill on the establishment of an Independent System and Market Operator and the issuance of three Ministerial Determinations that allowed for the procurement of varied levels of renewable energy.

The government of South Africa has responded well to the support and value added role of the DBSA, while following an ambitious plan to expand the power infrastructure and manage increasing demands on the existing supply.

The Integrated Resource Plan aims to increase investments into new power projects by 40 000MW by 2030 and has a strong focus on renewable energy that is projected to rise by 42% in the share of total new generation capacity.

“In South Africa the numbers show that growth is happening, quite substantially, and the picture going forward is encouraging as government decisions have been made to procure power using the private sector along with new legislation and development,” says Nchocho.

In addition, the DBSA partnered with the department of energy and National Treasury with a mind to create a stable market environment for IPP projects and the implementation and support of specific IPP projects, including those around the renewable energy programme.

“The department of energy (DOE) is making all the right moves and we believe they are moving at a pace that’s appropriate,” says Nchocho.

“Seven years ago there was no investment in the IPP market and now we have had over R68-billion put into in the renewable energy market in just the first few rounds of bidding alone.

“There are serious pressures on the system and there is a need for more investment in South Africa. We have a special team here at the DBSA who work with officials from the Treasury and DOE to make IPP investments happen, striving towards a ministerial determination that will pull in private investment and funding into energy projects across the country.”

In another arena the Integrated National Electrification Programme, part of the government’s plan to accelerate and eradicate electricity backlogs in time for the 2015 millennium development goals, received a R205-million loan from the DBSA to fast-track projects to 14 000 households in the rural communities of Matatiele, Mbizana, Thulamela and Umzimvubu municipalities.

The initiative allows low capacity municipalities to secure loans to implement electrification projects and bring power to households in these regions.

“During the 2013/4 financial year the DBSA approved bridging finance to seven municipalities with a combined value of R445-million to connect to 28 700 households, and we expect to approve another R600- million for the programme in 2014/5,” says Nchocho.

“This is a huge part of our commitment towards contributing to the development of social infrastructure in all municipalities, which is much needed to give a better quality of life to millions of South African citizens.”

The rest of Africa is not left untended by the DBSA. There are some impressive initiatives underway to address the unique problems that this area poses and to create solutions that will bypass politics and geography to bring power to the continent.

Their work with governments and state-owned utilities comes into greater play as they shift into gear within countries such as Tanzania, Zambia, Nigeria and the Democratic Republic of the Congo (DRC).

“If you look at the World Bank report on infrastructure, the majority of energy generation, transmission and distribution is in the hands of government utilities, so governments matter in this respect,” says Moe Shaik, group executive for international financing at the DBSA.

South Africa and Angola have signed a trilateral cooperation treaty with the DRC with regards to an initiative known as the Inga Project, which will ultimately generate 45 000MW of much-needed power across the region.

The Inga project has the potential to light up Africa and, as such, is something the DBSA is very passionate about.

Central to the success of the African continent’s electrification challenge is to ensure the sustainable trading of power among, and between, the different regional power pools. All countries, particularly South Africa, need to ensure this happens as it would benefit everyone and provide a muchneeded resource to the area.

Inga is one of the biggest projects currently sitting on the DBSA’s Sub- Saharan desk, but there are plenty of success stories that show how their financial support is bringing about tangible results.

In Zambia, the bank facilitated the empowerment of the local community by providingfinance to a small project producing only 28MW of hydroelectric power.

Today that company has grown to produce 56MW and is looking to expand their operations downstream. The Kariba North project was another to benefit from DBSA support and resulted in a rehabilitated power plant on Victoria Falls.

The DBSA has placed significant investment into areas such as Zambia, Tanzania and Mozambique, and already those are beginning to show signs of growth.

Mozambique now has substantial electricity distribution projects with Tanzania and Zambia taking all the right steps towards a brighter future.

“We are ensuring that we develop a paradigm that starts to resolve what the client’s problems are and find solutions to them,” says Shaik.

“We are becoming much more proactive as we have the tools and we want to help these utilities solve their own issues, become financially independent and provide electricity to all those in their domain.”

The contents and photographs in this article were compiled with, paid for and signed off by the Development Bank of Southern Africa. This article forms part of a larger supplement