Part funding – Steve Tshwete capital programme

INCA project team: Ben Pretorius – Portfolio Manager Kenny Morare – Credit Analyst

Steve Tshwete Municipality, previously known as Middelburg, is situated on the banks of the Klein Olifants River on the Maputo Corridor, Mpumalanga. Middelburg is renowned in the Southern Hemisphere for the production of stainless steel.

The ongoing exploitation of coal in the district and the municipality’s proximity to Eskom’s giant power stations have contributed significantly to the establishment of Middelburg’s fast-growing industrial complex.

External funding was required for the municipality’s capital programme over a period of three years, the balance of which was financed internally. The funds were earmarked for much needed infrastructure such as water, electricity, sewerage, roads, health and other related services. This essential infrastructure is needed to stimulate economic activity and sustain local economic development, and in turn to uplift local communities.

The assets required in terms of the multi-year programme were grouped according the lifespan of the assets, between fifteen and thirty years.

With the assistance of Agence Française de Développement, the capital has been secured for three years, and the transaction structured to provide the best financial solution to the municipality.

Financial snapshot
Loan value: R105 million to be drawn down in increments of R35 millionon 30 June of 2007, 2008 and 2009 respectively.
Term: Amortised profile for 15 years, respectively for each draw down.
Interest rate: 9,59%, 9,29%, 9,02% (3 draw downs respectively).
Repayment: Capital and interest semi-annual in arrears.