Two 30 million EUR loans for the co-financing of urban infrastructure were provided by the European Investment Bank to the cities of Tshwane (Pretoria) and eThekwini (Durban). The EIB, the European Union's long-term lending institution, is supporting multi-sector investment programmes in water and electricity supply, roads, environment, urban renewal, health and education in these two major South African cities.
The loan agreements, whilst benefiting entirely Tshwane and eThekwini, were signed with Infrastructure Finance Corporation (INCA), the South African municipal financing institution, acting as financial intermediary INCA is well acquainted with the EIB from previous operations and is well equipped to pass on the advantage of the EIB's long-term funding conditions to the final beneficiaries and, thus ultimately, to the municipal taxpayers. Since 1998 INCA has already been the intermediary for three infrastructure global facilities; these two operations are the first two focussing on single large municipalities and the first "framework facilities" outside the EU.
The infrastructure investments to be financed by the EIB will be selected out of the multi-annual expenditure programmes of the two municipalities, for their contribution to the social cohesion and for sustainable development. Lending through INCA will facilitate the monitoring of the investments. EIB's attractive funding cost for the required long maturities will make the expenditure schemes more affordable over-all.
EIB finances projects in the Republic of South Africa under a succession of mandates given by its Board of Governors. Since 1995, EIB has lent slightly over EUR 1.3 billion to projects in South Africa, 12% of which went to global loans for the financing of small and medium sized enterprises and 48% to small and medium sized ventures in municipal infrastructure. 15 and 11% respectively went to energy and water projects.
The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects that 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.
European Investment Bank support for RSA is being provided following an invitation from the Council of the European Union to the Bank to participate in project financing in South Africa, in support of the economic development of the country after the establishment of democratic government.
In June 1995 the Bank was authorised to grant long-term loans for a total amount of up to 300 million EUR for a period of two years. In April 1997 the mandate was extended to mid - 2000 for a further EUR 375 million and in June 2000 for a further period (2000-2006) for an amount of EUR 825 million, bringing the total facilities for South Africa over the period to EUR 1.5 billion.