SA is courting private investment for an ambitious plan to add 14 500 km of new lines and enhanced transformer capacity over the next decade, at an estimated total cost of $25 billion, as it looks to emerge from a decade of crippling power cuts that have battered the economy.

The proposed credit guarantee vehicle aims to help overcome transmission infrastructure bottlenecks that have held back some 20 gigawatts of renewable energy from connecting to the national electricity network, according to Standard Bank.

Many of the renewable projects are situated in the sun-baked Northern Cape or windswept Western and Eastern Cape regions, far from existing transmission corridors linking most of South Africa to the coal-powered generation plants in the north.

Operating as a stand-alone entity, the credit guarantee vehicle would issue guarantees instead of South Africa's treasury and would cover payment defaults, for instance, should something go awry during the roll-out.
"We could cover or be committed to finance half a billion US Dollars of the government of SA’s first loss or junior capital participation," Yadviga Semikolenova, a senior World Bank manager, said late on Thursday.

SA has sought not to put further pressure on its strained finances by offering additional sovereign guarantees, as it faces lacklustre growth, high debt-servicing costs and the failure to agree a value added tax hike within the government coalition this year.

The treasury has committed to providing junior or first loss capital of 20%, which will be an initial $100 million before moving up to $500 million. The credit guarantee vehicle aims to eventually grow to $2.5 billion, an April 4 treasury document shows.

The document, seen by Reuters, details a package under discussion with the World Bank Group that includes a loan from the International Bank for Reconstruction and Development to finance the treasury's junior capital and a potential $100 million direct injection from the International Finance Corporation.

--Reuters--