The European Investment Bank (EIB), the European Union's long-term financing institution, is lending ECU 40 million (1) to South Africa's Infrastructure Finance Corporation Ltd. (INCA) to support small and medium sized infrastructure projects in the country, primarily promoted by municipalities. The loan agreement was signed in Luxembourg today by EIB Vice President Dr Rudolf De Korte, Chief Executive of INCA, Mr Johan Kruger, and Mr J De v Botha, Executive Ma nager of the Development Bank of Southern Africa (DBSA), guarantor of the operation.

INCA is a private sector company, established in 1996 by South African private sector finance groups and international development finance institutions, to fund municipal infrastructure development across the country. Set up to mobilise private resources for financing public sector infrastructure, INCA finances itself by the issue of long term bonds, in its own name, in the local market and through loans from international institutions. In providing the guarantee, DBSA is fulfilling its mandate to act as a catalyst for private sector investment in the infrastructure sector in South Africa.

The EIB line of credit will fund projects developing water supply systems, waste water treatment schemes, local roads, public lighting, solid waste treatment facilities, amongst others. Although the loan is mainly directed to municipalities, other statutory bodies with responsibility for infrastructure provision, such as District Councils and Water Boards, will also have access to the funding.

The EIB's funds will be allocated to assisting with the eradication of backlogs in the provision of facilities for disadvantaged communities in many municipalities, projects that have very high priority in South Africa today.

The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects which further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union. The EIB operates in the Republic of South Africa (RSA) since 1995, in support of the economic development of the country following the establishment of a democratic government. The Bank has a lending mandate from the EU's Member States to provide long term financing for RSA totalling ECU 675 million over the period 1995-1999.

(1) Equivalent to approx ZAR 250 million. The conversion rates used by the EIB for statistical purposes during the current quarter are those obtaining on 31.10.98 when 1 ECU = LSL/ZAR , GBP 0.69, 1017159 USD.