The Development Bank of Southern Africa (DBSA) has been mandated by the National Treasury to host a ring-fenced project implementation unit to support the establishment of South Africa's Credit Guarantee Vehicle (CGV) – a new credit enhancement mechanism designed to unlock private investment in strategic infrastructure projects.

Structured with an initial target capitalisation of about $500-million, the vehicle will, once operational, provide credit guarantees to enhance the bankability of qualifying infrastructure projects.

Formalised through a memorandum of agreement signed in January, the dedicated project implementation unit ring-fenced within the DBSA will support the development partners, including the World Bank Group with the vehicle’s incorporation, licensing and capitalisation.

"This appointment by the National Treasury reinforces the DBSA's position as the leading infrastructure enabler in South Africa. The bank is capacitated to catalyse infrastructure investment by providing the coordination and technical expertise that complex financing mechanisms such as this one require,” says DBSA CEO Boitumelo Mosako.

The DBSA explains that the Treasury selected it based on the bank’s demonstrated capabilities.

This includes the DBSA’s deep project preparation expertise, dedicated resources and technical capacity to structure complex infrastructure programmes, as well as its strong record with development partners, proven experience managing funds and compliance for international development finance institutions and multilateral partners.

The bank adds that this also includes its programme delivery infrastructure and established capability in operating national programme management offices, such as the independent power producer procurement office, Water Programmes Office and the Infrastructure Fund.

The DBSA explains that the CGV is intended to complement government's limited fiscal capacity to provide sovereign guarantees for infrastructure.

It notes that this credit enhancement will make projects in transmission, transport, water and social infrastructure more viable for long-term private sector participation.

The DBSA posits that the CGV will fundamentally change how public infrastructure gets financed in South Africa by shifting risk away from government, while unlocking new sources of funding for critical infrastructure.

It explains that the mechanism is designed to be sustainable and scalable, starting with transmission infrastructure and expanding to other sectors as the model proves successful.

The DBSA-hosted project implementation unit will coordinate with Treasury, the World Bank Group, prospective capital providers and regulatory authorities to deliver each phase.