The head of Agence Française de Développement (AFD), Jean-Michel Severino, would sign new deals worth R3,5-billion during his visit to South Africa this week, including financing arrangements with freight logistics group Transnet, as well as with the Central Energy Fund (CEF).

Severino's visit kicks off on Tuesday, November 24, and would continue until Friday, November 27.

The French government's arm for international financial cooperation had already increased its commitments to the country tenfold over the last five years, with its portfolio reaching R3,3-billion in 2008.

Besides the €200-million deal with Transnet to support the container-terminal expansion at Cape Town, and the provision of grant funding for CEF's carbon capture and storage programme, Severino would sign new capital commitments with The Desmond Tutu HIV Foundation, a €100-million deal with the Development Bank of Southern Africa (DBSA), and a €20-million deal with the National Housing Finance Corporation for affordable housing.

He will also meet with several commercial banks, the Airports Company South Africa (Acsa) and with various government officials and ministers.

The deal with Transnet forms part of a new French government mandate requiring the AFD to play a "countercyclical role in the financing of major public infrastructure projects" to stimulate economic activity during the current macroeconomic downturn.

The arrangement with the CEF, meanwhile, could be seen as part of the increasing emphasis being given to energy and climate change adaptation and mitigation programmes.

ENERGY FOCUS

In an interview with Engineering News Online ahead of his visit, Severino said that the AFD was committed to supporting energy projects that either generated additional capacity, or reduced energy consumption.

He revealed that it was in negotiations with the Industrial Development Corporation, Nedbank and Absa for a €120-million credit line for the funding of renewable energy and energy efficiency projects in South Africa.

"We are also discussing projects with the CEF and projects to support the energy strategy of municipalities," he said.

This would be over and above a R7,2-million deal signed with CEF in 2007 to increase energy efficiency and the share of renewable energies in the South African economy and its €100-million loan to Eskom for the financing of a wind farm.

The French agency saw significant further scope for increasing the role of renewable energy, particularly in supporting rural electrification.

But Severino argued that there was a need for a regulatory framework to attract financiers. Also needed, was a commitment from the South African government to a long-term course of action, as was greater coordination between the Department of Energy, the National Energy Regulator of South Africa and Eskom.

"From AFD's perspective there is a need for a coordinated and large-scale approach on this matter," he elaborated, adding that the agency would also provide "direct funding to Eskom, as long as its sustainability is addressed".

During the visit, the AFD would provide a €142 000 grant to the recently established Carbon Capture Storage Centre, which falls under the umbrella of the CEF subsidiary, South Africa's National Energy Research Institute.

This funding was part of an evolution in the funding relationship with South Africa, which initially focused on social projects, covering basic services such as water, sanitation, electricity and housing. During this process, the DBSA has become an important partner, accounting for six credit lines, totalling R2,4-billion between 1998 and 2009, focusing on municipal financing.

But the AFD now also directly funds five municipalities, including eThekwini, Johannesburg, uThungulu, Steve Tshwete and uMhlathuze, with a total amount of R691,5-million having been set aside.

Water and transport infrastructure is another key focus area, with the AFD having committed R950-million to Acsa for the upgrading and extension of the Oliver Tambo International Airport.

This year, the agency will, together with other European donors, also finance water utility TCTA to allow eThekwini to secure its access to drinking water and to extend its service coverage to the poorest areas of the city.

"We intend to deepen our involvement in the sector as water and sanitation issues are key from a social and economic point of view," Severino concluded.