41382 - IPM Debt Facility

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Summary of Investment Information

Project Number

41382

Company Name

INCA PORTFOLIO MANAGERS (PTY) LTD

Date SPI Disclosed

May 24, 2019

Country

South Africa

Region

Africa

Projected Board Date

Jul 31, 2019

Environmental Category

FI-2 - Limited

Status

Pending Approval

Last Updated Date

Jan 30, 2020

Department

Regional Industry - INF Africa

Industry

Infrastructure

Sector

other

Project Description

The proposed project is an investment in INCA Portfolio Manager's (“IPM”) Infrastructure Debt Facility (“the Facility”), a debt facility that is being set up to on-lend to creditworthy secondary municipalities (“munis”) in South Africa (“SA”). The Facility aims to enable access to commercial finance for creditworthy secondary cities in SA, where more than 80% of municipal financing is directed towards only 8 large metropolitan municipalities (out of over 200 municipalities in SA). In addition, the Facility is expected to be supported by a capacity building fund separately funded by the Switzerland State Secretariat for Economic Affairs (“SECO”), which will support these munis in prioritizing investment needs and in preparing bankable proposals for commercial financing. This would enable access to commercial financing for the munis to help them establish a borrowing track record and ultimately to reduce dependence on transfers from the national government..

Sponsor / Cost / Location

Development Impact

(i) Stakeholder effects: The Facility will improve access to finance for secondary cities in South Africa with limited access to commercial debt. The Facility supports implementation of a portfolio of municipal infrastructure projects, and by leveraging the municipalities balance sheets, these municipalities can accelerate much needed infrastructure investments. Furthermore, the Facility will support projects that address climate change, with potential implications on access to urban infrastructure services. (ii) Integration: The Project would mobilize capital for municipal finance, with the potential to engage new investors to the underserved secondary cities. Furthermore, IFC's engagement will create a demonstration effect, which is expected to mobilize greater commercial financing in future fund-raising efforts by these municipalities. (iii) Resilience - By enabling secondary municipalities to establish a borrowing track record, the Project contributes to reducing dependence on government transfers for municipal infrastructure projects. The Facility will also provide technical assistance to build capacities of secondary municipalities, including in financial planning.

Financing structure: IFC's additionality stems from provision of up to 15-year financing to a Facility targeting the under-served secondary municipalities. IFC team will help structure the Facility, ultimately enabling the Facility to achieve better maturity matching between its liabilities and the long-term assets being funded by the municipalities. Non-commercial risk mitigation, including trusted partnerships: IFC's and other development partners' support to the Facility helps to establish a track record of positive returns in municipal finance, and provide a signal to other potential investors in the market.

E&S Category Rationale / Risks and Mitigation

This project has been categorized as FI-2 in accordance with IFC's Policy on Environmental and Social Sustainability. The Infrastructure Debt Facility will provide finance to creditworthy secondary municipalities in South Africa to support a portfolio of municipal infrastructure projects, mainly related to the provision services such as water, electricity and waste management. The environmental and social risks and impacts associated with these activities are considered limited and can be readily addressed through mitigation measures. The infrastructure portfolio will not include large-scale infrastructure projects with the potential for significant and irreversible impacts. The overall portfolio risk is thus considered medium. The identified applicable requirements are the IFC Exclusion List, the applicable national environmental and social laws in South Africa and the Performance Standards. Given the use of proceeds, the fund is not expected to support higher-risk projects that may include: (a) involuntary resettlement; (b) potential adverse impacts on Indigenous Peoples; (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or (d) significant occupational health and safety risks.

The main E&S risks and impacts relate to the ability of the fund manager to identify, assess and manage the E&S risks and impacts associated with the activities of the municipalities in line with requirements of Performance Standard 1. The fund manager, INCA Portfolio Managers, has developed an Environmental and Social Management System (ESMS) for identifying and assessing the E&S risks associated with the activities of the municipalities. The assessment process includes a review of E&S regulatory compliance based on the South African Auditor General's report prepared for each municipality. In addition, INCA has an E&S officer who is responsible for the overall implementation of the ESMS; the E&S officer is also supported by other members of the INCA team in the day-to-day implementation of the ESMS. For this project, the fund manager will be required to make minor changes to the ESMS to reflect the applicable requirements for this project - the IFC Exclusion List, the applicable national environmental and social laws in South Africa and the Performance Standards . INCA will also be required to provide training to its officers once the ESMS has been revised. In addition, to complement the E&S management system, INCA will be required to develop an external communication mechanism for receiving and addressing concerns raised by third parties about the activities of the municipalities

Contacts

For Inquiries About the Project, Contact

INCA Portfolio Managers Pty. Ltd.
Attie van Zyl
Chief Executive Officer
+2783 701 2443
attie.vanzyl@inca.co.za
Unit F14, Pinewood Office Park Square, 33 Riley Road, Woodmead Ext 3, Sandton, P.O. Box 1847, Gallo Manor, 2052
www.incaportfoliomanagers.co.za

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII 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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Task Title & Description	Anticipated Completion Date
Amendment of ESMS	08/02/2019
Capacity Building	01/29/2020
Development of an external communication mechanism	01/29/2020

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