Funding Fair helps search for new financing solutions in Kwazulu Natal
Event will focus on helping municipalities and government departments fund their infrastructure projects. Deloitte helps municipalities package their projects into more bankable opportunities – 22 received funding last year
A search for innovative ways to fund infrastructure projects will be the focus of the 2nd KZN Infrastructure Funding Fair, to be held on 08 October. The event is hosted by professional services firm Deloitte and the Kwa-Zulu Natal Provincial Treasury.
The aim of the Fair is different from the business funding fair, which takes place in April each year.
“This Fair will bring together municipalities and government departments as project promoters and puts them in conversation with project funders” says Andre Pottas, Partner and Regional Corporate Finance leader at Deloitte.
Tim Madgwick, of KZN Treasury says the event will help them identify innovative ways to fund municipal infrastructure. “While the fiscus has been a useful source of infrastructure funding, it cannot carry the load on its own because of the scale of infrastructure projects. This requires government and the private sector to mobilise other sources of funding,” says Madgwick.
Municipalities receive a Municipal Infrastructure Grant, or MIG, from national government as informed by their needs identified in the Integrated Development Plans. However, Madgwick points out that as with any budget allocations, they rarely meet the full requested amount and some municipalities do not have the capacity to spend their entire allocation.
Other sources of funding include the development finance institutions, most notably the Development Bank of Southern Africa, the African Development Bank and World Bank, as well as sovereign wealth funds.
Pension funds can also be mobilised, with suitable investment rules, to enter the social infrastructure space. Pottas says they would like to cast the net “as wide as possible” to source funding.
Municipalities can also raise bonds to fund infrastructure, but the proportion of municipalities that can do this is relatively low and many have used up their bond issuing capacity.
Pottas says another way to make infrastructure projects viable is to cluster projects into a group rather than present them as individuals. This also helps KZN treasury keep a handle on projects.
Deloitte has successfully pioneered this method by helping to structure the R 1 billion Soitec bond for the construction of a photo Voltaic plant in Touws Rivier in the Western Cape. The plant is built by French company Soitec.
Last year, the Fair identified 63 projects that required about R30 billion in funding. Of these 63 projects, about 22 have since received funding or have been cancelled. Madgwick notes that this year the idea will be to have only about 20 to 25 projects.
Deloitte helps municipalities and other project promoters package their projects and move them from what Madgwick calls an “Integrated Development Plan wish list” to a more bankable project with clear outline of how it will generate returns and the income stream from the projects.
The KZN Funding Fair is now an established event on the business calendar with this version of the fair aimed at public sector lead infrastructure project promoters, built environment entities and funders taking part.
“Infrastructure funding remains an important source of opportunity for investors, we just need to help investors identify the opportunity and help promoters positions their projects correctly” says Pottas.