Background and Key Principles
The Government of South Africa (GoSA) and the European Union (EU) jointly developed the Infrastructure Investment Programme for South Africa (IIPSA) for a total amount of €100 million. The action was approved as part of the EU's Annual Action Programme for 2012 and forms part of the EU's broader intervention under its Country Strategy Paper for South Africa for the period 2007 to 2013. The GoSA earmarked infrastructure development as one of its top priorities to assist in addressing the country's triple challenges of high unemployment, poverty and inequality and a national infrastructure programme was introduced in 2012 for the development of both national and regional infrastructure over the long term.
The key aim IIPSA is to assist the GoSA to address its Medium Term Strategic Framework and the National Development Plan which seeks to improve the conditions of life of South Africans by addressing poverty and unemployment, as well as contributing to enhancing regional economic integration in the South African Development Community (SADC) region.
The main purpose of IIPSA funding is to enhance sustainable economic growth and the delivery of key services affecting development in South Africa and in the SADC region. IIPSA is expected to support the implementation of the government's infrastructure programme and to address the constraints to infrastructure development in South Africa and in SADC region. The programme will support the development of both national and regional infrastructure projects. Financial leverage is a key principle of the IIPSA.
The Development Bank of Southern Africa (DBSA) has been appointed as the Secretariat and Fund Manager to implement the IIPSA Programme and invites project proposals from eligible public entities and private entities with a public service mission to apply for IIPSA Grant Funding for the financing of infrastructure investment projects in support of long term financing by participating DFIs. This funding can take the form of technical assistance or direct investment grants. Although the DBSA is the implementing agent, an IIPSA Project Steering Committee that comprises the National Treasury, Department of Economic Development, Department of Public Enterprises and the Department of International Relations and Cooperation will make the final funding decisions regarding the IIPSA programme.
Key Principles Underlying the IIPSA Funding
1. Financial leverage
IIPSA is expected to provide innovative financing involving the co-funding of EU grants together with loans from participating DFIs. It is estimated that a leverage effect of at least 5 to 10 times the amount of financial non-refundable contributions could be achieved. The participating DFIs are the following: the DBSA, the European Investment Bank (EIB), Agence Française de Développement (AFD), and the German Investment Bank, KFW. In order to be eligible, projects should preferably be supported by more than one of the participating DFIs in consortium. Regional finance institutions active in South Africa, like the African Development Bank (AfDB), as well as South African financial institutions, like the Industrial Development Corporation (IDC), may be associated in projects supported by IIPSA. This means that they can co-finance projects together with one or more participating DFIs, but they cannot directly access the IIPSA as in the case of the participating DFIs.
IIPSA interventions must bring additionality. Any replacement of other financing resources already or potentially available will be avoided, in particular in relation to projects which could normally be financed by the market.
3. Added value
Much of the added value of IIPSA will be in the technical exchange that takes place both during project preparation and implementation, in the provision of long term financing, in enhancing cooperation between development partners and local financiers allowing for bigger projects with greater impact, in lowering the cost of money and in the financial leverage itself.
Procurement of services, goods and works will be subject to open tendering processes meeting DBSA’s Supply Chain Management (SCM) policies which may be modified, by exception, in line with international standards as required by the participating DFIs. Unsolicited proposals will not be entertained.