BDC to pump P4.5bn into new projects
Mbongeni Mguni | Friday September 9, 2016 18:00
The corporation has also turned the corner from huge losses that stretched from 2012 to 2014, caused mainly by investment impairments and poorly performing projects. One of the most highly publicised impairment was a P500 million write-off in the failed Fengyue Glass project in Palapye.
Since 2014, as part of a transformation within the corporation, BDC has been off-loading its holdings in projects seen as non-strategic, raising a total of P340 million, part of which will be invested under the new strategy.
According to documents laid before a parliamentary committee recently, BDC has refined its investment strategy and tightened its oversight, and now boasts a “rigorous deal approval process” which “includes independent assessment by external industry experts.”
The new 2014-2019 strategy, the corporation says, is aimed at supporting the growth and sustenance of key industries whilst stimulating emerging sectors “to the extent that they are aligned to national goals and priorities.
“To date, all investment opportunities as guided by the strategy have been accumulated into an investment pipeline which currently stands at P4.5 billion worth of projects,” a brief to the committee reads.
“These investments are transformational in nature and target varying industries.”
Targetted sectors include infrastructure and industrial property (P1.5bn), emerging and key industries (P975m), other services (P730m), financial services (P420m), education (P248m) and agri-processing (P180m).
About P1 billion is required in the short-term for several of these projects, which, as revealed by Mmegi last week, include investments into Letshego, Ba Isago, Milk Africa, a private estate in Francistown and a paper project.
BDC also wants to invest P280 million in expanding an unidentified automotive plant, which could be the harness manufacturing plant in Lobatse established through a partnership with Malaysia’s Pasdec Automotive Technologies.
The plan for the short-term P1 billion funding was derailed recently after legislators declined to approve a government guarantee needed for the African Development Bank (AfDB) to release the estimated P850 million it had already approved for BDC. The request is due to be heard in the next Parliament in November.
BDC says it plans to finance the broader investment strategy through a mixture of domestic borrowings, funding from a Development Finance Institutions such as the AfDB and the proceeds of the divestment from projects. Other options include additional capital injection from government and addition of a strategic equity partner.
The corporation says it would be prudent to lean towards the domestic debt market, its financial history in the past few years would weight against it.
“In making this choice, the corporation has been conscious of the fact that with a brief history of success in the most recent years, it will be impossible to raise the requisite amount of funds on the right terms and conditions.
“This view has unfortunately been corroborated by the debt market players that whilst the BDC balance sheet is strong enough, it is still too early to advance significant amounts of debt to the corporation on non-secured basis,” the brief reads.