39961 - Ekurhuleni Muni

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Summary of Investment Information

Project Number

39961

Company Name

CITY OF EKURHULENI

Date SPI Disclosed

Aug 8, 2017

Country

South Africa

Region

Africa

Projected Board Date

Jun 15, 2017

Environmental Category

B - Limited

Status

Active

Last Updated Date

Aug 9, 2017

Department

Regional Industry - INF ME & Africa

Industry

Infrastructure

Previous Events

Approved : Jun 15, 2017
Signed : Jul 10, 2017
Invested : Jul 17, 2017

Sector

other

Project Description

The Project is to support the City of Ekurhuleni’s (“CoE” or the “Municipality”) FY16/17 capital investment program, through an IFC investment of up to US$50 million (South African Rands equivalent) in CoE's bond issuance of ~US$106 million (~ZAR 1.3 billion).

The proposed investment in CoE will be used to support a portion of CoE’s capital expenditures in improving and expanding public infrastructure such as roads and mass transit, water and sanitation, power among other social and environmental infrastructure. These projects are of high priority to CoE in improving the quality of life for its residents, and importantly provides enhanced access to public services and infrastructure to underserved areas.

CoE’s infrastructure capex will support i) road infrastructure including pavement of up to 67 kilometers of new roads and the maintenance of over 1,300 kilometers of existing roads; ii) electrical infrastructure including the connection of over 6,000 new households in informal settlements; iii) water and sanitation infrastructure including upgrade of existing infrastructure and installation of new water and sewer pipes to expand access to services to 1,200 settlements. The infrastructure will also support the development of a bus system aimed at connecting the various areas that make up the Municipality and encourage motorists to switch to other more climate friendly modes of transport, making it an important tool in battling climate change.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

Development Impact

i) Contribution to improved connectivity and productivity: The investments in road and transport infrastructure, is expected to reduce commuting time and traffic congestion, which will contribute to improved efficiency and productivity. ii) Improved access to infrastructure services: The investment in electrical, waste management and water and sanitation infrastructure, is expected to improve the quality, reliability, and efficiency of key basic infrastructure services provided by the Municipality. It will also result in the expansion of services to new customers and informal townships reaching the low income segment of the population. iii) Contribution to social inclusion: Urban poor and other vulnerable groups tend to live in the townships and informal settlements. Enhanced connectivity with the city centers provide these groups with better access to jobs and may allow the areas where they live to be better incorporated in the municipal's economic activities. It will also benefit this segment of the population through improved access to basic infrastructure services. iv) Environmental and social benefits: The Project will result in environmental and social benefits due to reduced air pollution and traffic congestion in the metropolis, by encouraging motorists to use the public transit infrastructure that is being put into place. In addition, the investment in the upgrade of water pipes and electrical infrastructure will result in lower technical losses from the provision of services. v) Demonstration effect: IFC's involvement in the Project is expected to encourage a wider spectrum of investors, particularly from the international markets, to provide long term financing to municipalities in South Africa.

i) Provision of Long-Term Financing: IFC will provide long-term local currency funding at a time of heightened uncertainty following the downgrading of South Africa's sovereign credit rating below investment grade. IFC's funding will have a longer tenor than what CoE is expected to raise through the book building tranche and from other products currently available in the market. IFC's funding will also better enable CoE to match its liabilities with its asset life. ii) Funding Source Diversification: By providing long-term financing in the proposed transaction, IFC will be helping the Municipality to diversify/broaden its funding sources, which is currently only comprised of local investors. iii) Strategic Partnership: CoE values IFC's strategic partnership beyond its financing. Through advisory services, IFC will support the administration to implement its strategic priorities in roads, water and other sectors in a more efficient way.

E&S Category Rationale / Risks and Mitigation

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because it will create a limited number of specific environmental and social impacts that can be minimized, avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. Key E&S issues associated with this investment include: Company and borrower environmental and social management capacity; monitoring and performance of environmental, health and safety and social management systems; specifications and operating procedures for water, wastewater and residuals treatment facilities, including emission control equipment, performance and operational standards, and alignment with internationally recognized practices for the sector.

Because proceeds from IFC’s proposed investment may be used to support future but, as yet, undefined projects in addition to existing projects and those identified as under development, a condition of IFC’s investment going forward will be that CoE shall adopt IFC Performance Standards as part of applicable requirements in all of its operations, and consider issues identified in PS1 through PS8 when assessing any new business opportunities, acquisitions or mergers, or business models.

Contacts

For Inquiries About the Project, Contact

Name of Contact Person: Themba Gadebe

47 Van Buuren Road,

Genniston, South Africa

Phone 011 999-1522/0763037594

E-mail themba.gadebe@ekurhuleni.gov.za

For Inquiries and Comments About IFC, Contact

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2121 Pennsylvania Avenue, NW
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Telephone: 202-473-3800
Fax: 202-974-4384

Local Access of Project Documentation

47 Van Buuren Road,

Germiston South Africa

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. Its purpose is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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