NDB ramps up operations in South Africa, supporting sustainable infrastructure development

In line with its mandate of mobilizing resources for infrastructure and sustainable development projects, the New Development Bank (NDB) is ramping up operations in South Africa and strengthening its project pipeline in the country. The Bank is fully committed to bridging the infrastructure gap in South Africa, supporting projects tailored to the country’s needs and fully respecting its development priorities and strategies.

New projects approved in 2019

On 31 March 2019, the Board of Directors of the NDB approved three projects from South Africa with loans aggregating to approx. USD 780 mln, bringing the total amount of approvals for South Africa to over USD 1.4 billion.

In the energy sector, the approved projects contribute to reducing pollution and support South Africa’s transition to environmentally sustainable and low-carbon economy. In the water sector, the Bank will finance construction of water transfer infrastructure aimed at reducing water scarcity in Gauteng Province, South Africa’s economic powerhouse.

Environmental Protection Project for Medupi Thermal Power Plant

In line with its focus on supporting clean energy in South Africa, the Bank will provide a loan of USD 480 million to ESKOM Holdings SOC Limited (Eskom) for Environmental Protection Project for Medupi Thermal Power Plant (TPP).

Medupi TPP is approaching its end of construction and with its planned capacity of 4,800 MW will represent around 10% of the total generating capacity in South Africa, hence being a critical element of the solution to the problem with reliable electricity supplies.

The loan will be used for financing of retrofitting flue-gas desulfurization equipment to make Medupi TPP compliant with South Africa’s environmental standards coming into force, thus preventing suspension of its operation.

Renewable Energy Sector Development Project

The proceeds of the Bank’s ZAR 1.150 billion (approx. USD 80 mln) loan will be on-lent by Industrial Development Corporation of South Africa to renewable energy sub-projects in the country that contribute to the reduction in carbon dioxide emissions, improvement of RSA’s energy sector mix, as well as to the increase of energy efficiency of the economy.

The NDB loan provides IDC with attractive long-term financing to implement the IDC’s financing program in renewables focused on the support of private investors in this sector, both large companies and small and medium enterprises, having a significant transformational impact on the South Africa’s energy sector. The loan will be provided in the local currency (South African Rand) to avoid currency risk for IDC.

It is planned that as an outcome of the implementation of the Project not less than 500 GWh of electricity will be generated annually from renewable sources leading to savings in CO₂ emissions of around 480,000 tons annually.

Lesotho Highlands Water Project

The NDB will provide a project loan of ZAR 3.2 billion (approx. USD 220 mln) to Trans-Caledon Tunnel Authority (TCTA) for the implementation of Phase II of Lesotho Highlands Water Project and financing the construction of water transfer infrastructure to the benefit of South Africa.

The project will augment the water supply in the Vaal River Basin, home to South Africa’s most economically important province, Gauteng. This province is the smallest in the country, but is highly urbanized with almost 15 million people (25% of total population) and it is responsible for 36% of South Africa’s GDP. Three other provinces (the North-West, Mpumalanga and Free State provinces) will also be directly benefiting from an increased water supply.

The project will support economic growth and foster sustainable livelihoods of people by increasing the yield of the Vaal River System by almost 15% in the long run, thus reducing water usage restrictions.

Two loan agreements signed

Greenhouse Gas Emissions Reduction and Energy Sector Development Project

On 1 April 2019, New Development Bank and Development Bank of Southern Africa (DBSA) signed the Loan Agreement for Greenhouse Gas Emissions Reduction and Energy Sector Development Project. Under the Agreement, the NDB will provide a loan without a sovereign guarantee to the national financial intermediary DBSA with an amount of up to USD 300 million.

The objective of the Project is to facilitate investments in renewable energy that will contribute to the power generation mix and reduction in carbon dioxide (CO₂) emissions in South Africa, in line with the South African Government’s Integrated Resource Plan 2010 and its target of reducing greenhouse gas emissions as articulated in the National Development Plan 2030.

Renewable Energy Integration and Transmission Augmentation Project

On the same date, New Development Bank and ESKOM Holdings SOC Limited signed the Loan Agreement for Renewable Energy Integration and Transmission Augmentation Project. Under the Agreement, the NDB will provide a loan with a sovereign guarantee to Eskom with an amount of USD 180 million.

The project will integrate a total of 670 MW of renewable energy into the Eskom’s grid. Modern grid connection infrastructure will be used for renewable energy projects and augmentation of the Eskom transmission network to the identified areas. The project will also help increase electricity supply to the targeted areas for sustainable development.

Local currency financing and ZAR bond programme

In line with the NDB’s Strategy, the Bank is committed to contributing to the development of financial markets in its member countries and raising funds in local currencies, including South African Rand. The NDB aims to build a diversified fundraising portfolio in order to efficiently meet its funding needs across various markets and instruments.

The next local currency bond issue of the NDB will be in South Africa. Currently, the NDB is in an advanced phase of preparations for launching a domestic bond programme in South Africa with the size of ZAR 10 billion. Proceeds from the bonds issued under the programme will be used for financing infrastructure and sustainable development projects in South Africa in Rands, supporting economic growth in the country.

Africa Regional Center

The Bank’s Africa Regional Center (ARC) of the NDB was opened in Johannesburg in August 2017. The ARC is the face of the Bank for the African continent and it is progressively supporting a growing range of the Bank’s work. In a very short period, the ARC has demonstrated its critical role in scaling up the Bank’s lending in the country. The ARC is working closely with the Government of South Africa, public and private sector agencies, and other relevant stakeholders to identify projects that have strong development impact to be supported by the NDB.

Background information

The NDB was established by Brazil, Russia, India, China and South Africa to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development. To fulfill its purpose, the NDB will support public or private projects through loans, guarantees, equity participation and other financial instruments. According to the NDB’s General Strategy, sustainable infrastructure development is at the core of the Bank’s operational strategy for 2017-2021. In August 2018, the Bank received AA+ long-term issuer credit ratings from S&P and Fitch.