The African Development Bank (AfDB) has approved a loan of US$100mn to finance the third line of credit to the Development Bank of Southern Africa Limited (DBSA) for the development of infrastructure in the Southern Africa sub-region.

The DBSA is the borrower and executing agency of the line of credit, which is destined to assist the provision and improvement of infrastructure services in South Africa as well as other Southern African Development Community (SADC) countries. The financial support will strengthen the DBSA’s lending capacity to provide loans and other developmental services for infrastructure development in these countries. The LOC would be utilised mainly to finance regional infrastructure projects involving two or more of the countries in the SADC region. In this way, the LOC would contribute to the goal of improving the economic integration of African countries.

The primary beneficiaries of the LOC resources are mainly private sector entities promoting infrastructure projects that would contribute to, and advance the economic development of the respective countries. Public utility companies in SADC countries could also benefit from the resources of the LOC if they are assessed as being financially viable, as well as possessing the technical ability to implement viable investment projects.

The AfDB recognises the priority that the South African government attaches to the provision of adequate investments in urban and municipal infrastructure in order to clear the backlog in the provision and maintenance of infrastructure services to a significant segment of the population. This is one of the cornerstones of the government’s poverty alleviation programmes. The AfDB’s 2003-05 Country Strategy Paper (CSP) for South Africa, as well as previous ones, identified the improvement of infrastructure services in socially disadvantaged areas as a focus of its strategy for the country. The Bank’s support in this area has mostly been provided through the DBSA, an institution with significant expertise and long experience in infrastructure financing in the country.

Bank group operations in South Africa started in 1997. To date, the group has approved four public sector operations in the country. Three of the operations were approved to the DBSA. These were two lines of credit for R840mn and US$ 70mn), and a facility for bond guarantee for US$330mn, which was later cancelled. The fourth public sector operation was a line of credit for US$100mn to the Industrial Development Corporation of South Africa. Through the private sector window, the Bank has hitherto approved four operations. The first of these operations is the R130mn investments in the South African Infrastructure Fund in 1997. A R12mn investment in the Msele Nedventures Fund focusing on SMEs development was approved in 1998. A US$20mn LOC to the Infrastructure Corporation of South Africa (INCA) was approved in 2002 to support investment in urban infrastructure in RSA municipalities. Recently US$75mn was also approved for a regional line of credit to FirstRand Bank Ltd and RMB (Mauritius) Ltd.