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Nangamso Matebese-Maponya, Principal Investment Banking and Project Finance Professional at the DBSA - YouTube
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We focus on providing
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project preparation funding,
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through recoverable grants
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and sometimes through loans
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and equity instruments or
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convertible instruments.
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Our core business requires us
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to put in senior debt into a project.
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We also have an instrument
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that is called BEE Equity -
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Black Economic Empowerment equity.
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In South Africa,
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we have a strategy that is called “BEE”
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Black Economic Empowerment.
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This means that parties that
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were previously disadvantaged,
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predominantly black investors,
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are supported through loans
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where they can purchase equity
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into lucrative investment opportunities.
[76]
There is a BRT strategy
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in South Africa,
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where cities, since 2009,
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started implementing BRT networks
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within municipalities.
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DBSA is one of the institutions
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that played a magnificent role
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in ensuring that the BRT strategies
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in various cities are implemented,
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by financing the parties
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that are ordinarily not able
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to attract financing
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from conventional banks
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and other institutions.
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The structure of the BRT
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in South Africa is such that
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you have an infrastructure asset owner
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who is the municipality,
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but the operator is the private sector.
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And in this instance,
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the private sector is
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previously an informal taxi operator.
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That private sector party
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needs to raise funding
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to purchase the buses
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in which they can operate
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under the operating contract
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with the municipality.
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We have played a role
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in supporting those parties
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in acquiring funding
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to be able to purchase those buses.
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When the country adopted
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the BRT strategy,
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it came up with a piece of legislation
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that governs how that implementation
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should be done
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and how municipalities
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should finance
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and own the various companies
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that are involved in the entire system.
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Therefore,
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there is very little maneuver you can do,
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if I can put it that way,
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in terms of structuring
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the BRT transaction.
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The contract between
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the municipality and the operator
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who is the DBSA client
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is also centered around
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the National Land Transport Act
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which is the legislation
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for the implementation of BRT.
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Then, it follows the process
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of forming various required companies
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for the implementation of the system.
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Then it enters into an agreement
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with the operating company.
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That agreement is then
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what DBSA uses, in finances,
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to come up with a financeable structure.
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And in this instance,
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and all the instances
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we have been exposed to,
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the only instrument
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that we could apply
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is a loan facility
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because there is
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guaranteed cash flows
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on the other side.
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[To assess] the risk that
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you have to take,
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you have to look at how
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that agreement between
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the municipality and the operator,
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how it could be structured
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and then you have to see
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how best you can manage
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your risk under that agreement
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and therefore what structure
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is best suited to manage the risk
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that you are exposing yourself to.
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Because the operating company,
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who will be our borrower,
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is a previously informal taxi operator,
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they do not have the equity
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to contribute into the structure.
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You end up with a 100% state
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financed structure,
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because you are dealing with
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a party that does not have the cash
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to contribute towards
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the capital requirements.
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But the mitigator
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against that risk of not having equity
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from the sponsor
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is the guaranteed cash flows
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for municipalities.
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The cities role is
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that they will manage
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the entire operations of the business,
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except for the driving of the buses.
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Making sure that the bus is early,
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it is clean,
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at the right place at the right time,
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moving commuters
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from one place to another.
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Fare collection, IT system,
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station management…
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These are the responsibility
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of the municipality.
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So, the support that the city
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provides is that they break down
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the system
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and make sure that
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you don’t bug yourself with
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the scheduling of buses,
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collecting fares,
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managing security in stations.
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The support that, over and above,
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they provide
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to this operating company
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is the setting up
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of the actual company
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because you are dealing with
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previously fragmented industry players,
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hundreds of them,
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so now you have to assist them
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in forming an entity.
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You have to assist them
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in negotiating the contracts
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among themselves,
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as well as (help them)
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be able to entail the contract
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with the municipality.
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That concession agreement
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is usually broken up in two parts
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with the initial 2-to-3-year period
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used to assess and stabilize
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formulate themselves in a question
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that makes them capable
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to run the contract on their own.
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In that process
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they are setting up structures,
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they are making sure that
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they have the requisite experience,
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they are testing up the systems.
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Then they extend the contract
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into a longer-term contract.
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In terms of the size of the loan,
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we have done a range of about
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35 to 50 million US dollars
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for the purchasing of buses.
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And the duration is again tied
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by the concession agreement
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and the profile of the cash flows.
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The longest we have considered
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is exactly 12 years,
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which is the length of the contract.
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One is the private actor participation.
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That for me is key as you are dealing with
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a transport industry
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that already has private sector operators.
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In order for you to successfully
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implement the BRT system,
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you need to have
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the private sector on board
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in one form or the other,
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and those negotiations
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with the private sector
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are very important.
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You need to bring them
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on board for planning,
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for implementation
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as well as for operations.
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Their participation
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and their experience
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is very key.
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And it can add serious value
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in how the system is planned and managed.
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The second one is
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integrating services
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to increase efficiency.
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One of the biggest mistakes
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many cities make
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is running parallel services
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and not integrating
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the various transport systems.
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If one would pay attention
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and make sure that
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as they implement
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one form of a system,
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it actually can talk to different systems.
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Commuters do not want to
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be jumping from one system
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to another ;
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because it is more expensive,
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it is time consuming and
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it becomes very inefficient.
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The third one is the funding.
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How do you manage
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government subsidies
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and fare collection?
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It is also very important
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and at the same time
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balancing the cost to
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the actual consumer:
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which is the passenger.
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How do you come up
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with a funding model
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combining different forms
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of financing
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that are available to you?
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It is also an area that needs
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to be paid attention to.
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Lastly, managing that
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private sector domination.
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Because, in many cities
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in urban areas,
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the private sector,
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and when I say private sector
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I mean informal operators,
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dominate the space,
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they are more agile,
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they operate anyway anyhow,
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and they are usually
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more available to the commuters.
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Though they are less efficient,
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they are more available,
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and commuters choose them
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because when they want
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to access transport,
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they are the most available
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form of transport
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and therefore they dominate
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the environment,
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so you need to manage
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that carefully.
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