News / Regional
Standard Bank announces key Beitbridge infrastructure deal
04 Aug 2011 at 12:24hrs | Views
Standard Bank has financed the entire debt requirements for the South African Infrastructure Investment Company, (SAIIC), to upgrade the Beitbridge Border Post (BBP) between South Africa and Zimbabwe.
Standard Bank is financing the transaction on the back of an export contract awarded to a South African construction contractor, to undertake construction works in the upgrade of the BBP. The Export Credit Insurance Corporation of South Africa Ltd (ECIC) will be providing Standard Bank with 100% Political Risk Insurance and 85% Commercial risk Insurance on this transaction.
Old Mutual, Southern Africa's leading private sector Infrastructure investor is the lead equity investor in the project sponsor, SAIIC.
SAIIC awarded Standard Bank the sole mandate as the lead arranger and lender of the Zimbabwean project. The total project value is US$97 million for the 18 month project to develop a one-stop border post at Beitbridge.
The project follows in the successful steps of the Chirundu one-stop border post between Zambia and Zimbabwe, near Kariba, which is part of a Southern African Development Community (SADC) strategy to speed logistics across the region. It's has generated a one-third reduction in transit times.
Ziyaad Sarang, Investment Banking head of Infrastructure Finance at Standard Bank says research has proven that as much as 30-40% of the cost of goods across the region is made up of transportation and logistics costs, much of it simply wasted time throughout the supply chain.
It currently takes as long as four hours to transit the Beitbridge border post, and Sarang says the new facility will reduce this by 75%.
Beitbridge is among the busiest border posts in the SADC economic region, with volumes rising to more than 12000 travellers and 3500 vehicles a day in the festive season. Annually, this amounts to four million people, one million vehicles and millions of tons of freight.
Traffic flows across the border have reached record levels due to growing economic stability in Zimbabwe along with the introduction of the 90-day visa exemption, which made it easier for Zimbabweans to travel to South Africa.
Therefore, no solution to SADC's logistics can afford to ignore this key border post.
"This project is to facilitate the efficient flow of goods and people, as well as a more efficient tax-gathering environment," he explains.
South African Revenue Service (SARS) chairs the border control operations coordinating committee on the South African side of the border, and recent innovations were the introduction of a 24-hour service and a new toll-bridge commissioned in 1995.
However, bottlenecks remain in the areas of parking and access/egress facilities, explains Sarang. The project will: upgrade the border post; upgrade the main access road, widening it from a single lane to multi-lane; provide a new weighbridge facility for north and south traffic; and increase staff accommodation.
The project will be on a BOT (Build-Operate-Transfer) basis, with the concessionaire solely funding the investment and generating revenue from toll fares charged to travellers and transporters using the upgraded border post infrastructure and related services. It was agreed that the tenure of the concession should be 15 years. As the border is of sovereign importance, the operation merely relates to the maintenance of the border and not the performance of functions.
South African Home Affairs Department had for the past two years piloted the one-stop border concept in peak periods on the Mozambican border, with the intention of extending it to other border posts, including Beitbridge.
"The BBP has long been identified as a major bottleneck in the smooth flow of traffic along the North-South Corridor (NSC) which links South Africa to Zimbabwe, Northern Mozambique, Eastern Botswana, Zambia, the DRC and Malawi. Alleviating this bottleneck is an imperative for improved regional economic integration and development. To this end the Government of Zimbabwe is pursuing the objective of reducing the time to transit and the number of stops incurred in a cross border process," says Sarang.
"It should also be noted that the sponsors of the project have a successful history of infrastructure development in Zimbabwe. Of particular relevance is their involvement in the oldest BOT project in Southern Africa, New Limpopo Bridge (NLB), which is the company that built and operates the Beitbridge over the Limpopo River.
"Finally, the strategic significance of the BBP to the government of Zimbabwe should not be underestimated. South Africa is a critical source of imports to Zimbabwe and any initiative that reduces the cost of transport between the two countries is desirable from both governments' perspective. Similarly, there are obvious benefits in Zimbabwe improving the transit efficiency of the NSC. These include of revenue generation, trade and economic growth."
Standard Bank won the transaction over its rivals due to its leadership position in infrastructure finance, particularly toll concessions in Africa, and its unrivalled cross-border capability in Export Credit Agency finance. It has been involved in four of the six government accommodation PPPs in South Africa and has successfully arranged ECIC supported funding in a range of sectors including infrastructure, energy and natural resources.
Standard Bank is financing the transaction on the back of an export contract awarded to a South African construction contractor, to undertake construction works in the upgrade of the BBP. The Export Credit Insurance Corporation of South Africa Ltd (ECIC) will be providing Standard Bank with 100% Political Risk Insurance and 85% Commercial risk Insurance on this transaction.
Old Mutual, Southern Africa's leading private sector Infrastructure investor is the lead equity investor in the project sponsor, SAIIC.
SAIIC awarded Standard Bank the sole mandate as the lead arranger and lender of the Zimbabwean project. The total project value is US$97 million for the 18 month project to develop a one-stop border post at Beitbridge.
The project follows in the successful steps of the Chirundu one-stop border post between Zambia and Zimbabwe, near Kariba, which is part of a Southern African Development Community (SADC) strategy to speed logistics across the region. It's has generated a one-third reduction in transit times.
Ziyaad Sarang, Investment Banking head of Infrastructure Finance at Standard Bank says research has proven that as much as 30-40% of the cost of goods across the region is made up of transportation and logistics costs, much of it simply wasted time throughout the supply chain.
It currently takes as long as four hours to transit the Beitbridge border post, and Sarang says the new facility will reduce this by 75%.
Beitbridge is among the busiest border posts in the SADC economic region, with volumes rising to more than 12000 travellers and 3500 vehicles a day in the festive season. Annually, this amounts to four million people, one million vehicles and millions of tons of freight.
Traffic flows across the border have reached record levels due to growing economic stability in Zimbabwe along with the introduction of the 90-day visa exemption, which made it easier for Zimbabweans to travel to South Africa.
Therefore, no solution to SADC's logistics can afford to ignore this key border post.
"This project is to facilitate the efficient flow of goods and people, as well as a more efficient tax-gathering environment," he explains.
South African Revenue Service (SARS) chairs the border control operations coordinating committee on the South African side of the border, and recent innovations were the introduction of a 24-hour service and a new toll-bridge commissioned in 1995.
However, bottlenecks remain in the areas of parking and access/egress facilities, explains Sarang. The project will: upgrade the border post; upgrade the main access road, widening it from a single lane to multi-lane; provide a new weighbridge facility for north and south traffic; and increase staff accommodation.
The project will be on a BOT (Build-Operate-Transfer) basis, with the concessionaire solely funding the investment and generating revenue from toll fares charged to travellers and transporters using the upgraded border post infrastructure and related services. It was agreed that the tenure of the concession should be 15 years. As the border is of sovereign importance, the operation merely relates to the maintenance of the border and not the performance of functions.
South African Home Affairs Department had for the past two years piloted the one-stop border concept in peak periods on the Mozambican border, with the intention of extending it to other border posts, including Beitbridge.
"The BBP has long been identified as a major bottleneck in the smooth flow of traffic along the North-South Corridor (NSC) which links South Africa to Zimbabwe, Northern Mozambique, Eastern Botswana, Zambia, the DRC and Malawi. Alleviating this bottleneck is an imperative for improved regional economic integration and development. To this end the Government of Zimbabwe is pursuing the objective of reducing the time to transit and the number of stops incurred in a cross border process," says Sarang.
"It should also be noted that the sponsors of the project have a successful history of infrastructure development in Zimbabwe. Of particular relevance is their involvement in the oldest BOT project in Southern Africa, New Limpopo Bridge (NLB), which is the company that built and operates the Beitbridge over the Limpopo River.
"Finally, the strategic significance of the BBP to the government of Zimbabwe should not be underestimated. South Africa is a critical source of imports to Zimbabwe and any initiative that reduces the cost of transport between the two countries is desirable from both governments' perspective. Similarly, there are obvious benefits in Zimbabwe improving the transit efficiency of the NSC. These include of revenue generation, trade and economic growth."
Standard Bank won the transaction over its rivals due to its leadership position in infrastructure finance, particularly toll concessions in Africa, and its unrivalled cross-border capability in Export Credit Agency finance. It has been involved in four of the six government accommodation PPPs in South Africa and has successfully arranged ECIC supported funding in a range of sectors including infrastructure, energy and natural resources.
Source - Standard Bank
