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Financing project development in Namibia

Day Month Year. Financing project development in Namibia. Geoffrey Qhena Chief Executive Officer. International Investor’s Conference, Windhoek, Namibia 31 October – 01 November 2007. The IDC: Corporate profile.

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Financing project development in Namibia

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  1. Day Month Year Financing project development in Namibia Geoffrey Qhena Chief Executive Officer International Investor’s Conference, Windhoek, Namibia 31 October – 01 November 2007

  2. The IDC: Corporate profile • Established in 1940, the IDC is a self -financing, State-owned development finance institution • The vision of the IDC is to be the primary source of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent • Provides financing to entrepreneurs engaged in competitive industries and enterprises based on sound business principles • Pays income tax at corporate rates and dividendsto the shareholder The IDC’s Head Office in Sandton (Johannesburg) • Aims to maximisedevelopmental and financial returns within an acceptable risk profile

  3. Leadership in Development strategy The main objectives are: • Development of new entrepreneurs • Regional development • Rural areas • Underdeveloped Provinces • Previous townships • Targeted development regions • Small and medium sized enterprises • Job creation • Black economic empowerment • Social transformation • Exports and beneficiation • Creation of new industries Furthermore, the IDC acts in support of Government’s African strategies/ NEPAD and therefore also has the following objective: • Industrial development in Africa The IDC’s Leadership in Developmentstrategy pursues job creation and equitable development as its prime objectives

  4. The IDC: Actively supporting Africa’s revival The SA Government is committed to support economic development throughout Africa, to underpin the African Renaissance vision encapsulated in NEPAD. As such, the IDC’s core strategies for the continent is to: • Leverage private sector investment for economic development throughout the continent • Play a major role in the development of industrial capacity • Strengthen South Africa’s constructive role in regional economic development • Leverage foreign direct investment by bringing in foreign partners using international networks • Transfer experience and expertise to African DFIs • Promote supply of goods & services from SA • Establish credit lines for financially sustainable regionally-oriented financial intermediaries • Support NEPAD and regional spatial development initiatives (SDIs)

  5. The IDC: Actively supporting Africa’s revival • Principal sectoral focus for project development throughout the African continent: • Mining and Beneficiation • Agro-Processing and agriculture • Tourism • Industrial infrastructure (e.g. energy, water & sanitation, telecommunications, retail/ wholesale, etc.) • Forestry (e.g. wood, paper, etc.) • Manufacturing in general • Franchising

  6. Financial instruments • IDC offers a wide array of financial instruments, including : • Equity • Quasi-equity • Commercial debt • Wholesale finance • Guarantees • Export and import finance • These may be provided singly or in combination Flexible deal structuring

  7. Financingcriteria • Greenfield projects, expansions & rehabilitations • Relatively sizeable projects • Profitability & sustainability within a reasonable time frame • Developmental impact (jobs, value addition, exports) • Fixed assets and the fixed portion of growth in working capital requirements • Reasonable financial contribution from owners • Security • Environmental standards

  8. Role in project development • Co-sponsors feasibility studies • Identifies project opportunities • Provides and arranges funding (e.g. export and import finance, equity and loan funding) • Identifies suitable international and local DFIs, commercial and merchant banks and companies and export credit agencies as potential participants • IDC acts as a financial adviser in partnership with other financial institutions • Shares project risk with the sponsors and financial partners • Identifies strong operating partners • Off-take and supply agreements

  9. Role in project development (cont.) • Assists with the early negotiations of project agreements to improve and ensure their bankability and shorten the funding schedule • Structures appropriate limited recourse funding packages by allocating project risk to the appropriate stakeholders • Assists with implementation via steering committee • Serves on board of directors • IDC does not seek shareholding controlor management participation

  10. Typical Project Risks and Mitigation • Completion & development cost overrun: • Completion guarantees by quality sponsors until financial completion • Experienced EPCM contractor • Experienced Owners Team • Raw materials and energy: • Long term contracts from reliable suppliers • Production & operating: • Experienced technical partners • Training of local workforce & skills transfer Logistics: • Infrastructure built by project sponsors • Water & telecommunications supplied by Government • Marketing & sales: • Long term off-take agreements

  11. Typical Project Risks and Mitigation Contractual arrangements: • Legislative framework important • Adopted to the host country’s legal framework Political: • Government involvement • Involvement of Development Finance Institutions, Export Credit Agencies & MIGA • Environmental: • Environmental Impact Assessment • Technology - Environmentally friendly • Financial & Macroeconomic: • Escrow accounts • Stability of tax regime

  12. Rest of African portfolio (outside SA) • Over80 projectsunder implementation or consideration in25 African countries(excl. SA) • More than 30 purely export finance applications approved or under consideration • OverUSD 1 billion approved to datefor African projects outside of South Africa • Financing inAfrican countriesother than South Africa represented21%of the totalvalue of approvalsin the past 5 financial years

  13. NIGERIA • Energy • Telecoms • Manufact. • Tourism • ALGERIA • Water • Power • MALI • Agro-processing • EGYPT • Agriculture • D.R. CONGO • Energy • Mining • Tourism • TOGO • Fin. services • THE GAMBIA • Infrastructure • Tourism • UGANDA • Energy • RWANDA • Energy • BENIN • Energy • Manufacturing • KENYA • Pharmaceuticals • Agro-processing • Telecoms • Mining • Financial services • GHANA • Mining • Tourism • Energy • TANZANIA • Energy • Mining • Manufacturing • Pharmaceut. • Transp. Infra. • EQ. GUINEA • Infrastructure • MOZAMBIQUE • Mining • Tourism • Manufacturing • Agro-processing • Wood processing • Energy • Ind. Infrastructure • Transport infrast. • GABON • Infrastructure • ANGOLA • Infrastructure • ZAMBIA • Mining • Agric. • NAMIBIA • Agric. / agro-processing • Mining • Energy • Tourism • Storage infrastructure • MALAWI • Agriculture • Tourism • Retail infra. • SWAZILAND • Agro-processing • Mining • Manufacturing • Ind. infrastructure • MADAGASCAR • Mining • BOTSWANA • Infrastructure • Mining • Manufacturing • LESOTHO • Mining • Manufacturing • MAURITIUS • Air transport African portfolio (outside SA) IDC’s African portfolio (excluding South Africa)

  14. The IDC: Investing in Namibia

  15. Why Namibia? • Strong economic performance • Stable political environment • Substantial resource base • Positive FDI inflows (driven mainly by portfolio investments and, more recently, by investments in the mining sector) • Positive investment environment (Namibia ranks 3rd in Sub-Saharan Africa i.t.o the World Bank’s 2008 “ease of doing business” ranking) • Good infrastructure (road, rail, telecoms, electricity, etc) • Significant potential for development • Strong relations with South Africa

  16. The IDC and Namibia: investment activities to date • TABLE GRAPES • R11.7 million Namibia • MINING • R6.7 million Windhoek • QUARRYING • R9.5 million

  17. The IDC and Namibia: Investment opportunities Some of the more significant opportunities for possible IDC involvement in Namibia • Power generation and transmission • Energy (gas, oil exploration, etc) • Mining, quarrying and mineral processing (cement, cutting and polishing semi-precious and precious stones, etc) • Tourism (hotel and conference facilities, eco-tourism, etc) • Port and harbour infrastructure facilities • Aquaculture and mariculture • Services (ICT services, etc) • Agriculture and agro-processing

  18. Way forward The IDC will enhance its support to Namibia in pursuit of our objectives by: • Targeting sectors that have strong growth and development potential • Continue support co-operative initiatives between the two countries • Collaboration with Namibian institutions (e.g. Development Bank of Namibia) • Financing viable and sustainable projects • Your partner in development finance !

  19. Day Month Year Thank you The Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055, Sandton, 2146 South Africa Telephone (011) 269 3000 Facsimile (011) 269 2116 E-mail callcentre@idc.co.za

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