The Japan Bank for International Cooperation (JBIC) has signed an untied loan agreement of up to ¥17bn (around US$137mn) with Eskom Holdings, in South Africa.
The loan is co-financed by Bank of Tokyo-Mitsubishi UFJ, and the Tokyo branches of Deutsche Bank, ABN AMRO and Citibank, with JBIC providing a guarantee for their co-financing portions.
The loan is to finance two projects undertaken by Eskom: the Eastern Grid Transmission and Distribution Facilities Installation Project in the KwaZulu-Natal province; and the Northern Grid Transmission and Distribution Facilities Installation Project in the Limpopo province. The objective of both projects is to enhance and stabilise transmission and distribution systems in these areas.
South Africa is attracting growing attention from Japanese car companies as well as other manufacturers, as an export hub for Europe and the Middle East. The country has large volumes of rare metals, such as platinum, nickel and chrome ore, and a number of Japanese companies are engaging in resource development in South Africa.
Meanwhile, additional capacity is necessary in order to avoid the shortage of electricity brought on by sudden economic growth.
The development of power infrastructure is an urgent issue for both South African and local Japanese companies. The Accelerated and Shared Growth Initiative (ASGISA) was launched by the South African government in February 2006. ASGISA objectives include; creating employment, alleviating poverty, improving services and promoting good governance.
Eskom supports this initiative by creating jobs, growing its asset base, training new employees and exploring opportunities to increase local content. To meet the ever-increasing power demand, Eskom is pushing forward a large-scale power generation and distribution infrastructure development programme. Given the value of South Africa to Japan, JBIC has signed the declaration of intent (DOI) on comprehensive strategic partnership with its government in December, to support ASGISA.
This loan is expected to strengthen relations between the two countries while improving the business environment in South Africa, to which JBIC is committed.