PARTNERSHIPS FOR FINANCING DEVELOPMENT PROJECTS AND INFRASTRUCTURE

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PARTNERSHIPS FOR FINANCING DEVELOPMENT PROJECTS
AND INFRASTRUCTURE CAIAPHAS HABASONDA (DIRECTOR
OF CREDIT) PRESENTATION TO THE AFRACA 2ND
CENTRAL BANK FORUM HELD IN LIVINGSTONE
ZAMBIA 23RD 25TH SEPTEMBER 2008
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HISTORY

• DBZ set up in 1972 and commenced operations in
  1974
• DBZ financed a significant number of industries
  
• The 1990s, liberalization and Development
  financing in Zambia.
• DBZ post Liberalization

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RESTRUCTURING
2003 Restructuring
Sourcing of Equity and debt finance

• Exim Bank of India
• DBSA
• DBZ Bond
• AFREXIM Bank

Shift of Focus

• Bank begins lending again
• Debt Finance raised through lines of credit and
  DBZ bond issue
• Limited equity raised
• Shift focus from debt to raising equity
• New strategic focus

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Development Objectives

• GDP growth
• Stronger business linkages and greater access to
• economic opportunities
• Promotion of social and economic infrastructure
  development
• Strengthening entrepreneurial and managerial
  capabilities and
• good governance principles
• Creating a more conducive business and
  investment climate
• Supporting business practices that are
  consistent with
• environmentally sustainable development and
  natural resources
• management principles

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• FINANCING DEVELOPMENT
• Traditional Development Banking interventions
• Public Private Partnerships (PPP)

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PPPs Public Private Partnership (PPP) refers to a
contractual agreement formed between a government
agency and a private sector entity that allows
for greater private sector participation in the
delivery of the public infrastructure projects
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• RATIONALE
• Gap between needs and resources
• Pressure on traditional government budget for
  funding infrastructure
• Unlocking capital in land and buildings other
  assets
• Infrastructure as source of profit-incentive for
  private business

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• FINANCING GAP
• Evidence- congested roads, hospitals, poor
  sanitary facilities, dilapidated schools etc
• Consequencies
• Increased cost of economic activity
• Lower productivity
• Reduced competitiveness

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• Problem or Opportunity
• If Risk only, then Problem
• If Return only social goals suffer
• Risk Retun Opportunity
• In Comes PPP

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• PARTNERSHIPS FOR FINANCING PROJECTS
• DELOITTE REPORT CLOSING THE GAP INFRASTRUCTURE
  GAP THE ROLE OF PPPS
• Governments increasingly turning to PPP
• Private Sector Perfect Partner for
• Financing
• Design
• Construction
• Executing and Managing

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• PARTNERSHIPS FOR FINANCING PROJECTS
• Models
• Design Build (DB)
• Design Build Maintain (DBM)
• Design Build Operate (DBO)
• Design Build Operate and Maintian (DBOM)
• Build Own Operate Transfer-(BOOT)
• Build Own Operate (BOO)
• Design Build Finance Operate (DBFO, DBFM or
  DBFO/M)

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• PARTNERSHIPS FOR FINANCING PROJECTS
• Models
• Service Contract
• Management Contract
• Lease
• Concession
• Divestiture

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• PARTNERSHIPS FOR FINANCING PROJECTS
• BENEFITS
• Augmenting Traditional Sources of Funding
• Spreading Cost of investment over Life time of
  Asset
• On Time On Budget Delivery
• Transfer of Risk (and Return) to Private Sector
  (incentive for maintainance)
• Lowers Construction and Life Cycle costs
• Satisfaction matrix embedded in contract-strong
  customer service orientation

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• PARTNERSHIPS FOR FINANCING PROJECTS
• BENEFITS
• Allows public sector to focus on outcomes and
  core business

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• PARTNERSHIPS FOR FINANCING PROJECTS
• CHALLENGES
• Policy, Legal and Regulatory Framework
• Capacity management, process and transaction
• Choice of Appropriate Model
• Financing-Huge outlays of capital required/lack
  of appropriate funding

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• PARTNERSHIPS FOR FINANCING PROJECTS
• SECTOR OPPORTUNITIES
• Transport-roads, railways ports
• Water and water waste management
• Education
• Health
• Public Housing and Area Development
• Prisons
• Storage

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• PARTNERSHIPS FOR FINANCING PROJECTS
• ROLE OF DBZ
• King maker
• Lead Arranger and Financier
• Technical Adviser
• Promotions and Advocacy

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• PARTNERSHIPS FOR FINANCING PROJECTS
• PRE-REQUISITES AT DFI LEVEL
• Large Capital Base
• High Quality Human Capital
• High Quality Technical/technological Capacity
• Strong Risk Management Regime

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• PARTNERSHIPS FOR FINANCING PROJECTS
• PRE-REQUISITES AT PRIVATE SECTOR LEVEL
• Entrepreuership-eye for opportunity
• Good Corporate Governance
• Technical/technological Capacity
• Strong Risk Management Regime

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Contact Details Development Bank of
Zambia Development House Katondo Road P.O. Box
33955 Lusaka Tel [phone] Fax
260-21-1222426, 1227006 Email dbzmail_at_dbz.co.zm
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THANK YOU