Africa's Public Procurement & Entrepreneurship Research Initiative – APPERI



Standard Bank Group is leading investor in South Africa procurement process


By Nilima Choudhury

November 13, 2012

South Africa’s Standard Bank Group has emerged as the leading investor in the first round of the country’s renewable energy independent power producer (REIPP) procurement process, backing a total of 11 solar and wind projects.

The South African government has allocated 1,416MW for this first round of the procurement process, worth about R47 billion (US$5.3 billion) of fixed investment, of which the majority, around R27 billion (US$3.1 billion), will be funded by debt.

Standard Bank Group will provide comprehensive corporate and investment banking services to all its clients in the REIPPP programme, including underwriting R9.4 billion (over US$1 billion) worth of debt, providing interest and currency hedges, carbon trading credits and corporate bonding and guarantee facilities.

The bank’s clients include 338MW of wind and 235MW of solar PV, out of the combined 1,416MW per year expected to be produced by all the projects. Standard Bank Group itself has also taken an equity stake in four projects.

Alastair Campbell, Executive Vice President, Power & Infrastructure Finance at Standard Bank Group said: “Standard Bank will be ready to disburse funding for most of the projects as soon as all documentation is finalised and hedges are closed.”

Developers will have until 16 November 2012 to finalise all their documents and foreign currency hedges, after which projects can be rolled out.

“This confirms that there is considerable appetite from developers and banks to invest in renewable energy projects in South Africa. Standard Bank has been involved in the emerging story of power generation from inception. We participated in the Integrated Resource Planning public hearings which re-affirmed REIPP procurement process as an accepted way of diversifying our energy mix and reducing carbon emissions,” continued Campbell.

Further bidding rounds are expected to take place roughly six months apart from 2013 onwards to allocate the total 3725MW. In line with the country’s long-term power plan, South Africa aims to secure a total of 17,800MW of renewable energy or 42% of South Africa’s new generation capacity by 2030.

Standard Bank Group said it is already preparing for the financial close of the second bidding window and is supporting the third bidding window. The second bidding window is expected to close in the first quarter of 2013.

“We have already committed a total of R6.1 billion of debt out of a total R19 billion to preferred bidders on the second bidding window. The second programme is smaller than the first and will have a total of 19 projects. Standard Bank is supporting preferred bidders on five of these projects,” said Ntlai Mosiah, Head of Power and Infrastructure SA Advisory and Coverage at Standard Bank Group.

“As the programme unfolds, an increasing number of benefits are expected for the South African electricity consumer. Chief amongst these is the expected fall in tariffs bid due to increasing interest and competition in the process. We are expecting that renewable energy prices will reach grid parity in the foreseeable future.”

Mosiah continued: “An aligned major benefit will emerge from increased local component manufacturing with its associated industrial development and job creation, an aspect that government has insisted should be accelerated.”

South Africa: Infrastructure inputs to be designated for local procurement – Davies

September 22, 2011
The initial products to be “designated” by the Department of Trade and Industry (DTI) as ones that should be procured locally by all spheres of government and State-owned enterprises in line with the amended Preferential Procurement Policy Framework Act regulations would be products used in infrastructure programmes, as well as those regularly purchased by government departments, Trade and Industry Minister Dr Rob Davies revealed on Thursday.

Speaking to the business community in Cape Town about the second iteration of the Industrial Policy Action Plan (Ipap2) at an event hosted by Wesgro and Webber Wentzel, Davies stressed that the designation of products was part of a government plan to leverage procurement in order to raise domestic production and employment.

The main vehicle would be the new preferential procurement regulations, which become effective on December 7. These amended regulations allow the DTI to designate particular parts and products that will have to be procured locally by all organs of State and Davies intends that the effect will be felt immediately.

“The 7th of December is actually when the first group of designations takes effect, not the date that we start the work,” he said.

The idea behind the designation was also to stimulate South Africa’s struggling manufacturing sector, the economic importance of which should not be “underestimated” in a developing country such as South Africa. Manufacturing, Davies averred, should not be considered to be dispensable simply if other sectors in the economy are flourishing.

“The lessons of economic history tell us that there is no case anywhere in the world, at any time, of any country that has taken itself out of being an underdeveloped economy to become a developed economy without this being led by manufacturing,” said Davies.

Acknowledging the challenges present in the manufacturing sector as a result of factors such as the 2008/9 global economic crisis, the rand’s overvaluation (which was now rebalancing) and industrial action, Davies said that Ipap2 was attempting to address some of the structural issues around manufacturing, though in an economic climate that is itself not ideal…Read more.

South Africa -Industrial policy attracts investment

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SouthAfrica Info, March 23, 2011

Transnet’s decision to assemble 90 of the 100 locomotives on order from General Electric, and the securing of R14-billion in planned automotive investments, are some of the immediate achievements of South Africa’s new Industrial Policy Action Plan (IPAP)…This is part of the pledge by state-owned enterprises to introduce more localisation and supplier into their procurement policies. The department’s deputy director-general of industrial development, Nimrod Zalk, said government departments were also looking to promote local manufacturing. Read more

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