Financing ICT’s Development

Presentation to the Public & Private

Sector Partnership Forum

Kampala Uganda

31 October – 2 November 2004

Representatives

Mr Lewis Musasike

Executive Vice President, Private Sector and International Investments Cluster

Tel: +27 11 313-3066

Ms. Desnei Leaf-Camp

Project Manager, International Finance Unit

Tel: +27 11 313-3126

Introduction

DBSA is a Development Financial Institution (“DFI”) wholly owned by the South African Government

DBSA is the primary vehicle for promoting infrastructure development in South Africa

Operates in the Southern African Development Community countries, focusing on infrastructure sectors supportive of economic growth

DBSA had total assets of about ZAR 23.7 bn (*US$3.6 bn) at the end of March 2004, and currently employs 500 people

SADC lending and investment portfolio has grown to ZAR 8.3 bn (US$1.28 bn)

DBSA is one of the largest DFI’s in Southern Africa

Who is the DBSA?Who is the DBSA?

* Exchange rate of R6.5/1$

Vision and Mission

Vision To further the progressive realisation of an empowered and

integrated region, free of poverty, inequity and dependency

Mission To maximise the Bank’s contribution to development by

mobilising and providing finance and expertise and by establishing partnerships to develop infrastructure to improve the quality of life of the people of Africa

Triple Role Investor Advisor Partner

Our GoalsOur Goals

Financial Structure

Self Funding The Development Bank is a self-funding institution and raises its

funding from domestic and international capital markets, bilateral and multilateral institutions, and internally generated resources.

The Bank has access to a callable capital facility of R4,8 billion, which is part of its capital structure

Investment grade rating Fitch: AAA: domestic rating (stable) Moody’s: Baa2: international rating (positive outlook) Standard and Poor’s: BBB: international rating (positive outlook)

Financial Strength (FYE 2004) R23.7 bn total assets R11.2 bn capital and reserves R1.4 bn operating income

Financial StructureFinancial Structure

Lending and Investment Strategy

Sustainable projects

Focus on projects and programmes with maximum development impact

Job creation Poverty alleviation GDP contribution Regional and Economic integration

Technical assistance for capacity building

Partnerships Government Private sector Other DFIs

Business StrategyBusiness Strategy

DBSA and its Business

Loan Finance Long-term loans Co-financing

Equity Finance Limited ability for equity participation

Guarantees

Technical and preparation assistance

Non-Financial Advisory services Agency functions Capacity building Development information Public/Private sector facilitation Policy research, analysis and support

Products and ServicesProducts and Services

Financing Terms and Conditions

Terms are dependent on the nature of the project and risk assessment

Maturity: Up to 20 years for Rand financing (depends on

currency)

Repayment: Capital grace during construction

Ranking: Senior and subordinated debt

Fees: Upfront and commitment fees, but negotiable

Interest Rate: Fixed rate or floating rate

Currency: Rand, US, Euro

Co-financing: Aim for maximum DBSA contribution of 50% of

financing needs

Loan TermsLoan Terms

The DBSA and NEPAD

The Bank currently supports the goals of NEPAD through:

Providing logistical support

Providing advisory services to the secretariat

The establishment of a R25 million Project Preparation Facility in partnership with Agence Française de Développement

Focus of DBSA support:

Advocacy

Policy support and agency role

Resource mobilisation

Investment within SADC

Support to NEPADSupport to NEPAD

Strategic objectivesStrategic objectives

DBSA’s SADC Portfolio Coverage

• R8,3 billion committed to projects in SADC (excluding South Africa)

COMMITMENTS WITHIN SADC (excl SA) in ZAR

Namibia10%

Seychelles1%

Malawi3%

Mauritius6%

Swaziland10%

Tanzania1%

Moz41%

Zambia10%

Lesotho19%

Botswana6%Angola

3%

Sectoral Analysis of DBSA Funding to SADC

SECTORAL ANALYSIS FOR COMMITED SADC PROJECTS

Tourism3%

Education0%

Sanitation1%

Institution building

0%

Water19%

Roads and drainage

12%

Commercial20%

Social infrastructure

2%

Residential facilities

0%

ICT (Communications)

7%

Energy36%

Importance of ICT Sector for Development

Enables efficient business to business communications and trade

Improvement in productivity and economic efficiency

Attracts foreign direct investment

Role of information and communication in promoting good corporate governance and democracy

Information and communication as essential elements in global knowledge-based economy

Understanding the ICT Sector in the SADC Region Separation of posts and telecommunications, and from

Government departments

State owned public in telecommunication operators corporatised

Privatisation is slow

Liberation of telecommunications market segments (e.g. mobile; IPS, etc)

Growth in mobile services has overtaken fixed line services growth

Establishment of autonomous regulatory authorities

ICT policy and legislation relatively underdeveloped

DBSA’s Role in the ICT Sector

Demand for Development Finance is high

Current review of DBSA strategy on Privatization of telecoms; digitization of fixed line

networks Implementing country specific ICT strategies Prioritization of projects for investment Expand current focus on communications to include

information services such as broadband high-speed data transfer

Therefore two Roles Policy and Regulation development Provide finance for the privatisation of the ICT Sector

DBSA’s Capabilities in the ICT Sector

Swaziland Post and Telecoms Corporation I Project Description: Refinancing of the upgrading of the Swaziland

telecommunication network to be Y2K compliant and installation of cable/switching infrastructure. Total project cost ZAR 42.9 million

DBSA Loan: ZAR 42 million senior loan with maturity of 20 years

Swaziland Post and Telecoms Corporation I Project Description: Expansion of switching capacity through

installation of a wireless local loop system and upgrading of the billing and customer care system. Total project cost ZAR 113 million

DBSA Loan: ZAR 113 million senior loan (in 2 tranches) with maturity of 10 years

Celtel International B.V. (formerly MSI – Africa) Project Description: Short-term corporate loan DBSA Loan: US$ 30 million with 3 year maturity

DBSA’s Capabilities in the ICT Sector

Cell C Project Description: Cell C was granted the 3rd mobile phone license in

South Africa in 2001. The funding was for rolling out the GSM network countrywide. Project cost = R7.4 billion

DBSA Loan: R300 million senior loan with 9 year maturity

Telecom Lesotho Project Description: Corporate funding for fixed line and mobile network DBSA Loan: R 2.9 million loan with 5 year maturity

TDM Transmission Backbone - Mozambique Project Description: submarine optical fibre cable and corresponding

transmission equipment along the Maputo – Beira line. The total project cost US$ 33 million and included financing from TDM the state-owned utility (equity) and KfW.

DBSA Loan: Limited recourse US$ 21.3 million senior loan with 12 year maturity including 2 year capital grace

(Continued)

DBSA’s Capabilities in the ICT Sector

Maputo Network Expansion and Modernisation – Mozambique

Project Description: Expansion and modernisation of the telecom network in Maputo. The total project costs US$ 37.5 million.

DBSA Loan: Limited recourse US$ 14 million senior loan with 10 year maturity including 2 year capital grace

Celtel Zambia Limited I - Zambia Project Description: Installation and operation of a

nationwide GSM-based digital cellular telecommunications network at a total project cost of US$ 16.9 million.

DBSA Loan: US$ 4.5 million loan with 7 years maturity

(Continued)

DBSA’s Capabilities in the ICT Sector

Celtel Zambia Limited II – Zambia Project Description: Expansion of the existing nationwide GSM-

based digital cellular telecommunications network. Total project cost US$ 11 million

DBSA Loan: US$ 3.3 million with 7 years maturity

(Continued)

DBSA’s Capabilities in the ICT Sector

Financing of concession and privatization initiatives in fixed line telecommunications networks

Issue of Second Network Operator license

Fiber Optic installation for additional ICT services such as broadband internet, intra-bank clearances, high-speed data transfer

Projects in 5 SADC countries

(Continued)

PROJECTS UNDER CONSIDERATION

The DBSA’s Strengths

Flexible and competitive lending terms and conditions

Diverse and deep skills in development

Understanding of the region

Strong track record

Quick response and turnaround time

Strategic alliances with other DFI’s

Well capitalised, profitable and access to diverse funding sources

Investment grade ratings

The ideal regional development partner

The ideal regional development partner

Contact details

Development Bank of Southern Africa

Registered office Postal Address Telephone

1258 Lever Road

Headway Hill

Halfway House

South Africa

1685

PO Box 1234

Halfway House

Midrand

South Africa

1685

+2711 313 3911

Fax +2711 313 3086

WEBSITE ADDRESS: www.dbsa.org