INFRASTRUCTURE PLANNING – FUNDING & IMPLEMENTATION
We all know that infrastructure is a key determinant in the growth of our economy. So, what holds back infrastructure investment? Kirsten Kelly talks to Shaheed Alli from Nedbank CIB about bankable projects and the variety of available financial instruments for infrastructure finance.
Reducing South Africa’s infrastructure deficit with more funding
I Shaheed Alli, principal: Infrastructure Water and Telco Finance Division, Nedbank Corporate and Investment Banking
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IMIESA August 2021
nfrastructure projects can be challenging to structure into a bankable transaction. Some of these projects are meant to be funded purely by government funding. Other infrastructure projects will fall within the public-private partnership (PPP) space. Then there are smaller projects that could fit purely within the private sector. It really is a mixed bag, and there will never be a single finance model that can apply to all projects,” says Shaheed Alli, principal: Infrastructure Water and Telco Finance Division, Nedbank Corporate and Investment Banking. Alli believes that PPPs are a good model to alleviate pressure on the fiscus. “Infrastructure projects are capital intensive. PPPs allow for the upfront capital to be raised in the private sector and this makes it more affordable for government, as government usually pays a unitar y payment over an extended period of time
– as opposed to raising the capital required up front. This also allows for government to deploy multiple projects. In addition, one of the benefits of a PPP is that the risk of the build itself, as well as the operations side once the build is completed, is transferred to the private sector. Also, jobs are created for the private sector – making a broader contribution to the fiscus.”
Guarantees While a lot can be done to reduce pressure on the fiscus, some projects will always need guarantees. “In my experience, I have never seen a project (yet) call on a government guarantee. There is a benefit to having guarantees in place. One such benefit is that if one looks at a pricing model, pricing with a guarantee will always be better than pricing without such support. This benefit flows into pricing the transaction, which is then passed on to the private sector that is doing the build
