The head of the Export-Import Bank of the United States (Ex-Im Bank) expects the $2-billion recently set aside to support the export of US products and services into South Africa’s energy sector to be absorbed over the coming eight to ten years. The package was unveiled by US Secretary of State Hillary Clinton during her recent visit to South Africa.
Speaking at a media roundtable in Johannesburg, chairperson and president Fred Hochberg stressed that there was no expiry date associated with the financing arrangement. It had been approved in line with the identification of South Africa as one of Ex-Im Bank’s top-nine priority markets – the bank operates in 180 countries globally.
Most of the loan finance would flow towards clean-energy projects, but the capital was also available for conventional energy projects, as well as transmission and smart-grid-related developments.
The bank provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance and financing to foreign buyers.
Hochberg signed a declaration of intent with South Africa’s State-owned Industrial Development Corporation, which was financing a number of renewable energy projects. “This agreement will help ensure that Ex-Im Bank continues to provide financing to South African buyers that want to buy high-quality US goods and services,” he elaborated.
The self-funding government agency was confined to supporting US products and services deployed in such projects and would only be disbursed in instances where firm power offtake agreements were in place.
South Africa was in the process of procuring 3 725 MW of renewable energy capacity for deployment between 2014 and 2016, while State-owned power utility Eskom was in the middle of a R330-billion investment programme to add 11 719 MW and 6 596 km of transmission by 2018.
Ex-Im Bank extended a $805.6-million direct loan to Eskom in 2011, enabling the utility to purchase engineering and construction management services from Black & Veatch, which is involved with the construction of the Kusile coal-fired power plant, in Mpumalanga. It also approved a loan guarantee of more than $100-million as part of General Electricity Transportation’s sale of locomotives to Transnet.
The agency, which was established by President Franklin Delano Roosevelt in 1934 as part of the New Deal, approved a record $32.7-billion in loans last year, of which about $1.5-billion was associated with exports to sub-Saharan Africa.
During the same period, it authorised more than $930-million in financing to support US exports to South Africa, including a commitment to finance Comair’s purchase of eight Boeing 737-800 aircraft.
Hochberg indicated that the growth in authorisations had been underpinned by President Barak Obama’s National Export Initiative, but had been spurred further by a growing appetite among US firms to export to emerging markets that US commercial banks saw as high risk.
He expected that 2012 authorisations would exceed the 2011 record, which itself was more than double the $14.5-billion in approvals recorded in 2008, the year Obama was elected.
Besides the infrastructure programme, he saw potential in South Africa and Africa for US exports into the extractive and mining sectors, as well as the aviation, transport and healthcare markets.