Nedbank CIB has merged its project finance and export credit teams into a repurposed Africa Infrastructure Finance unit.

The newly formed Africa Infrastructure Finance unit is client and sector focused, providing a single point of access for infrastructure and risk mitigation solutions that delivers both on-balance sheet and off-balance sheet project financing across the continent.

Sekete Mokgehle, Nedback CIB Co-head

“Infrastructure, often regarded as the heartbeat of any thriving economy, lays the foundation for robust economic growth and development. Infrastructure is pivotal in bridging trade supply chains, thus facilitating seamless goods and services movement across borders,” explains Sekete Mokgehle, the unit’s co-head.

Risk

While infrastructure is a key determinant for economic growth, the financing of infrastructure on the African continent is marked by economic and political uncertainties with global events such as the COVID-19 pandemic, unpredictable climate changes, financial crises, conflict and acts of terrorism.

To counteract this, Nedbank employs strategic risk mitigation tactics. Export credit agencies (ECAs) serve as a primary tool, offering government-backed guarantees that safeguard lenders.

ECAs provide financing and insurance services to domestic companies involved in international trade and investment. Their primary purpose is to support and promote a country’s exports by providing financial assistance, such as loans, guarantees, and insurance, to domestic companies engaged in exporting goods and services. ECAs play a significant role in facilitating international trade and investment by mitigating risks for exporters and encouraging foreign buyers to purchase goods and services from domestic companies.

“I believe that ECAs can play is key role in filling South Africa’s infrastructure funding gap. South Africa (due to its own liquidity) has not made extensive use of ECAs like the rest of the continent, and we are missing a huge opportunity. South Africa should look beyond its own pockets to fund infrastructure,” states Mokgehle.

Nedbank’s approach to risk mitigation also incorporates political risk insurance, private insurers and leveraging multilateral agencies such as the Multilateral Investment Guarantee Agency (MIGA), the Advanced Technology Institute (ATI) and the Economic Development Agency (EDA).

“We believe in exploring diverse funding methods to accelerate Public-Private Partnerships (PPPs) and concession-backed infrastructure financing, reducing reliance on sovereign balance sheets. The unit plans to tap into ECAs and insurers alike (that are a catalyst for development) to secure sustainable infrastructure financing,” adds Mokgehle.

Priorities

Zakhele Mayisa, Nedbank CIB Co-head

Zakhele Mayisa, the other co-head of Nedbank CIB’s Africa Infrastructure Finance unit, states that focus must be shifted towards the future asset class of infrastructure that supports resilience to shocks of health systems and services, climate change, digitisation of services, decarbonisation across the sectors, as well as inclusive and transforming infrastructure to achieve the sustainable development goal (SDGs).

Nedbank has chosen nine SDG goals and have made them part of a priority as far as lending is concerned:

4: Quality Education                                                                                                          

6: Clean Water and Sanitation                                                                                                           

7: Affordable and Clean Energy                                                                                                         

8: Decent Work and Economic Growth                                                                                                          

9: Industry, Innovation and Infrastructure                                                                                                         

10: Reduced Inequalities                                                                                                         

11: Sustainable Cities and Communities                                                                                                          

12: Responsible Consumption and Production                                                                                                         

15: Life on Land

Mokgehle points out, “Nedbank believes in responsible lending, considering both social and environmental factors. We have developed a Sustainable Finance Solutions Business Unit that assists our clients in getting structured finance solutions that have sustainable funding elements to them. Nedbank were the first African bank to embrace the Equator Principles in 2005, a testament to our dedication to sustainable infrastructure development. Another example is our Energy Policy that serves to guide the transition away from fossil fuels, while accelerating efforts to finance non-fossil energy solutions needed to support socioeconomic development and build resilience to climate change.”

The new unit plans to focus on the following sectors:

• Transportation and logistics
• Water and sanitation
• Social infrastructure
• Energy infrastructure
• Digital infrastructure
• Equipment

“We are developing a team that comprises specialists in each of these sectors. We will continue to interface with the private sector that can pay a key role in the roll out of infrastructure,” adds Mayisa.

He explains that the relationship between government and the private sector is complicated, and establishing PPPs can be a lengthy process. “We are beginning to see PPPs in the infrastructure space gain momentum, with many currently out to market.”

“Africa has an estimated annual infrastructure financing deficit of $100-170 billion, which urgently needs to be addressed. The formation of the Africa Infrastructure Finance unit is indicative that infrastructure is a key priority to Nedbank. Innovative solutions are paramount. Through Nedbank’s Africa Infrastructure Finance solutions team, we are committed to narrowing this gap. By leveraging our robust risk management and diverse financing options, we aim to champion critical infrastructure projects that will not only bolster economic growth and foster regional ties but also contribute to job creation and enhance living standards across the continent,” he concludes.