Kennedy Mbekeani South Africa currently comprises 62.5% of the bank’s $7.9-billion active portfolio in Southern Africa
South Africa is currently the largest component of the African Development Bank’s (AfDB’s) active portfolio in Southern Africa, comprising 62.5% of the bank’s $7.9-billion exposure to the 12-country region – the second-largest beneficiary is Mauritius, which makes up 10.5% of the portfolio, followed by Mozambique (8%) and Zambia (5.7%).
But Kennedy Mbekeani, who is the bank’s officer in charge in Pretoria, tells Engineering News that there is still headroom for increased lending to Africa’s second-biggest economy, particularly for projects that encourage regional integration.
The development finance institution’s South African portfolio is currently dominated by lending to large-scale power and transport projects being undertaken by Eskom and Transnet, including a $1.86-billion loan to support the construction of the Medupi power station and $400-million for Transnet’s rail-investment programme.
Part of the reason for the dominance of South Africa in its portfolio relates to the fact that the country’s economy is large enough to absorb higher levels of borrowing. In addition, there is a strong pipeline of bankable projects, particularly in the infrastructure milieu.
In fact, Mbekeani says weak project preparation is a major constraint on its lending activities in the rest of the region, where there is strong pent-up demand for infrastructure, but a dearth of bankable projects.
The AfDB already has a number of funds designed to bridge the project-preparation gap, but is likely to upscale these resources as part of the proposed ‘Africa 50 Facility’.
“Once you have a bankable project, it is not only the AfDB that is willing to support the project. But there are just not enough well- prepared projects for attract that funding.”
Lead specialist for energy infrastructure Farai Kanonda believes there is particular potential for increased lending in the South African energy environment, with the AfDB having recently approved a $142-million loan to help finance the construction of the 100 MW XiNa concentrated solar power plant, in the Northern Cape.
“While the bank is regularly providing diversified support to Southern African countries, the current portfolio is dominated by the energy sector, representing nearly half of the bank’s total commitment in the region,” Mbekeani reports.
Commitments to the finance and the transport sectors represent about 19% and 15% respectively, while the balance of the portfolio covers the social, agriculture, water and sanitation, mining, environment and communication sectors.
Kanonda says the bank is particularly keen to raise its exposure to the regional transport sector, where the AfDB recently approved a R2.9-billion loan to help finance the Port of Walvis Bay’s new container terminal, in Namibia.
Overall, the bank is focusing on five core lending areas, including infrastructure development, regional integration, private-sector development, governance, and skills and technology.
Mbekeani says it is acutely aware of the infrastructure needs in the region and hopes to use the ‘triple-A’ credit rating to lower the cost of finance for countries in the region keen on addressing their infrastructure backlogs.