A newly formed government agency set up to mobilise private sector participation in public infrastructure has concluded a cooperation agreement with the International Finance Corporation (IFC) in a bid to unlock investments in water, sanitation and waste management projects, especially at the municipal level.

Established in March, the Infrastructure Finance and Implementation Support Agency (IFISA) has consolidated the Public-Private Partnerships and the Capital Projects Appraisal Units of the Government Technical Advisory Centre, the Neighbourhood Development Partnership Programme of the National Treasury (NT) and the Infrastructure Fund - which was established by a memorandum of agreement between the Development Bank of Southern Africa, NT, and the Department of Public Works and Infrastructure, operating as a ring-fenced unit within the Development Bank of Southern Africa.

Acting head Mohale Rakgate tells Engineering News that because IFISA is a consolidation of pre-existing entities, it has an established pipeline of infrastructure projects across various sectors, including projects that have already been approved to receive more than R50-billion from the fiscus under the Budget Facility for Infrastructure.

However, the pipeline of projects deemed “bankable” for private sector participation is currently limited and the agreement with the IFC is designed to enhance the project preparation process, with an initial focus on water, sanitation and waste management projects.

A pipeline of 13 such projects with an estimated combined capital cost of about R40-billion has been identified by IFISA, including the uMkhomazi Water Project Phase 1 Raw Water project, in KwaZulu-Natal.

The IFC, with support from the Swiss State Secretariat for Economic Affairs, is already collaborating with IFISA to review key aspects of the project, where the Trans-Caledon Tunnel Authority is the implementing agent, and Rakgate expressed optimism that it would be advanced to bankability in the not too distant future.

IFC Regional Director for Southern Africa Cláudia Conceição says the cooperation agreement will enable IFISA and IFC to strengthen project preparation, improve bankability, and accelerate the delivery of high-impact infrastructure through blended finance, public-private partnerships and other financing structures.

IFISA will focus on project origination, coordination and implementation support within the public sector, while the IFC will play a key role in enhancing the technical and financial readiness of projects.

Besides project preparation, Conceição also underlines the importance of good governance, arguing that when governance is in place, private capital typically follows, as it offers investors the certainty they need and helps to derisk projects.

On how the services arising from projects involving the private sector will be paid for and kept affordable, Rakgate says that, while the ‘user pays’ principle will apply, IFISA will draw on various instruments, including direct fiscal support, to ensure affordability.

Conceição adds that the broader World Bank Group has several mechanisms, including guarantee schemes, to help lower the cost of capital to public infrastructure projects.

Rakgate says the initial focus of its cooperation with the IFC will be on the areas of water and sanitation, owing to the stresses being experienced in the sector, and that fact that more than 50% of IFISA’s work to date has been focused on the water sector. However, it could be expanded to other infrastructure sectors in future.

“By combining our efforts, we believe we can better prepare and deliver projects that address this critical service delivery need, while attracting private sector investment at scale,” he adds.