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South Africa Banks Infrastructure Facility-Absa
Summary of Proposed Investment
This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
Absa Bank Ltd
Commercial Banking - General
Reg Ind, Financial Markets, CAF/CLA
Date SPI disclosed
May 18, 2009
Projected board date
June 18, 2009
Signed: September 3, 2009
Approved: June 18, 2009
The Project is for IFC to provide a credit line dedicated to infrastructure financing of up to $250 million to Absa Bank Limited (“Absa”), a member of Absa Group Limited, headquartered in South Africa as part of IFC’s South African Bank Infrastructure Facility (“SABIF”). The Project would be critical to helping Absa bring selected infrastructure projects in sub-Saharan Africa to financial closure.
Absa Group Limited is one of South Africa’s largest financial services groups, with total assets of over $80 billion and a Long Term national IDR of “AAA” and a Long Term international IDR of “A” from Fitch Ratings. Absa Group Limited reported a Capital Adequacy Ratio of 14.1% as of 12/31/2008.
The SABIF is part of IFC’s multi-faceted global financial crisis response dedicated to infrastructure. It is a funded investment program comprising a dedicated infrastructure credit line of up to $500 million to be lent to selected South African banks who will then on-lend these funds to projects that they are financing. The focus of the SABIF is on infrastructure projects in IDA countries in sub-Saharan Africa.
Project sponsor and major shareholders of project company
Absa Group Limited is a subsidiary of Barclays Bank PLC, which holds a stake of 58. 6% in the Group and the balance is traded on the Johannesburg Stock Exchange.
Total project cost and amount and nature of IFC's investment
The Project is a dedicated infrastructure credit line from IFC to Absa of up to $250 million in the form of a long term senior loan.
IFC investment as approved by Board
150 million (USD)
IFC Investment (million USD)
* These investment figures are indicative
Location of project and description of site
Absa is headquartered in Johannesburg South Africa. IFC’s loan will be used to finance infrastructure projects within sub-Saharan Africa.
Anticipated development impact of the project
The Project will enable Absa to continue lending to viable projects. Cancellation or delay of such projects would have direct consequences for poverty alleviation and social programs in many SSA countries. This operation will help to counteract the global economic slowdown which risks eroding the gains achieved in many of these economies over the past decade.
IFC's expected development contribution
The global financial crisis has seen an abrupt slowdown in the financing and implementation of infrastructure projects. The global decline in commodity demand has meant that mining exploration has been truncated; the growth in cellular demand has fallen, though the market continues to expand. Underlying demand for transport and power services remains high; but the costs and risks of developing projects are now even higher. In each case, however, the ability of the commercial market to finance those projects that remain viable has dropped much more dramatically – so that, across the cluster of sectors, even for CIN, in the short-term, there are more bankable projects than there is finance available.
IFC’s expected development contribution is:
In the immediate term, USD funding for long-termed projects cannot be easily found in the current credit markets, IFC will support infrastructure projects that may not otherwise achieve financial close. This will allow commercial banks to prioritize longer termed infrastructure projects.
In addition to lending through Absa, IFC also expects to provide co-investment in some of the same infrastructure projects that Absa is expected to use the IFC credit line for. In doing so, IFC will also play a direct role in helping close the financing gap for infrastructure projects in sub-Saharan Africa.
Environmental and social issues - Category FI
This project has been categorized as Category FI according to IFC's Environmental and Social Review Procedure.
As such, Absa is required to screen and review all sub-projects against the IFC FI Exclusion List and IFC Performance Standards. Furthermore, Absa is also required to:
Establish/maintain a Social & Environmental Management System (SEMS) to systematically identify, assess and manage the social and environmental performance of sub-projects in compliance with IFC and national requirements;
Retain suitably qualified professionals to implement the SEMS, including performing sub-project due diligence;
Share sub-project due diligence with IFC in the case of Category A sub-projects;
Incorporate appropriate environmental and social conditions in investment agreements, and monitor the implementation of these conditions; and
Submit annual reports to IFC concerning sub-project environmental and social performance.
For inquiries about the project, contact:
Mr. Brian Irvine
15 Alice Lane
Gauteng, Republic of South African
For inquiries and comments about IFC, contact:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
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