FINANCE Minister Enoch Godongwana has confirmed that BRICS’ New Development Bank (NDB) was among the development financial institutions that the government was engaged with in financing the country’s massive electricity transmission grid expansion.
The Ninth Annual Meeting of the NDB, which kicked off in Cape Town yesterday, will serve as a critical platform for discussions on how the NDB can finance infrastructure and sustainable projects in emerging markets and developing countries with enhanced effectiveness and excellence.
Speaking exclusively to Business Report ahead of the meeting, Godongwana said the NDB had been a critical project financier for South Africa since its establishment a decade ago.
Godongwana said the NDB meeting was going to discuss strategic issues of the bank but also give more focus on energy issues among BRICS countries.
“This meeting is in two ways. The first one is the standard annual general meeting of any company, where you do annual financial statements and so on. That is an operational issue,” Godongwana said.
“But secondly is the strategic direction of the bank moving forward for the next five years. Of course, the new president of the bank, which will come next year, will have to define his own vision. But as a board of governors, we need to create the framework.
“So that’s why we have on the side of the bank’s AGM a number of seminars. On Saturday, for instance, we'll conclude with a seminar of energy ministers within the BRICS countries, which will look at the energy strategy moving forward. And therefore, how does the bank finance sustainable development moving forward is a critical theme for the bank.
“I mean, there's an opportunity for a number of institutions to fund our transmission grid. We solicited a number of proposals at the moment. Some of the offers are based on what is called build, operate and transfer. We’re looking at all of those proposals. We’re going to have a massive expansion for our grid over the next few years.”
This comes as South Africa needs around R350 billion to build 14,000km of new transmission lines between 2022 and 2031 to accommodate the additional generation capacity from renewables not connected to the grid in the Eastern Cape, Northern Cape and Western Cape.
Over the past 10 years, state-owned power utility Eskom has built only 4,300km of transmission lines.
Godongwana said the NDB had been able to provide loans of about $3 billion to South Africa over the period under review, covering infrastructure projects such as the N2 and the N3 highways interchange upgrades.
He said that state-owned agencies, such as the SA National Roads Agency (Sanral), had received a lot of funding from the NDB
“Interestingly enough, is the New Development Bank funding is in local currencies. In other words, the funding is in rands and cents rather than in dollars. So the difference is the currency. The terms of the loan may not necessarily be different,” Godongwana said.
“For instance, we got a facility from the IMF in 2020. We had a payment holiday. We’re starting to pay that facility this year. No one gives you that kind of a loan and says you'll have a payment holiday, you won't pay, you'll pay me in year X.
“A similar thing happened when I came in in 2022. I signed a loan with the World Bank. We look at the terms, we don't look at who provides the loan. We look at how or whether those terms are acceptable or not.
“Again, the World Bank gave us a loan for a three year payment holiday, 300 basis points less than market cost. So we negotiate loans with individual banks that are suitable for our own circumstances.”
BUSINESS REPORT