Winning Deal - Global Trade Review Awards 2021:
Best Deals of 2021
Beitbridge border post secures finance for much-needed makeover
- Deal name: Beitbridge border post
- Borrower: Zimborders
- Amount: US$194mn (senior debt facility), US$21.9mn (mezzanine debt)
- Mandated lead arrangers: Absa, Nedbank, RMB, Standard Bank
- Lenders: Absa, Afreximbank, Emerging Africa infrastructure Fund, Nedbank, RMB, Standard Bank
- Insurers/ECAs: Afreximbank, ECIC
- Law firms: Bowman Gilfillan; Gill, Godlonton & Gerrans; Herbert Smith Freehills South Africa; Manokore Attorneys
- Tenor: 11 years (senior debt), 12 years (mezzanine debt)
- Date signed: November 2020
Beitbridge border post, a crossing that connects Zimbabwe and South Africa, is known for its ageing infrastructure that acts as a chokepoint for the movement of goods and people. Delays at the post are common; truckers carrying goods can wait as long as five days to cross the border, states RMB in its deal submission.
Upgrading the crossing is paramount to ensuring a more efficient trading system in Southern Africa because the border post is “not only the gateway to Zimbabwe but also to Zambia, Malawi and the DRC [Democratic Republic of the Congo]”, says the bank.
This deal will provide Zimborders, a border facilities provider, with the finance to rehabilitate the crossing. With improved infrastructure and increased capacity, the region’s exporters can expect to benefit from reduced waiting times. The project will also extend to the upgrade of local trading stores, and the construction of staff housing, water pipelines, sewage treatment plants and electrical supply lines. As such, it will also contribute greatly to local job creation.
The complex transaction took nearly three years to structure and negotiate with the various public and private entities involved.
The senior debt facility makes up the majority of the US$296.9mn project cost, with the outstanding balance obtained via a mezzanine debt of US$21.9mn and through equity.
The Export Credit Insurance Corporation (ECIC), the South African export credit agency (ECA), acted as a commercial and political risk insurer for the senior debt facility and, alongside Afreximbank, was a political risk provider for a portion of the shareholders’ equity and loan investments.
By structuring tranches with ECAs, the banks were able to deliver competitive financing terms through longer tenors and lower interest rates.
“In the midst of the global Covid-19 pandemic, the oil crash, the various country downgrades in Sub-Saharan Africa, S dollar funding shortages, and the Zimbabwe currency crisis, the project managed to bypass these hurdles and reach financial close,” says RMB.
IJ Global Awards 2020:
African Transport Deal of the Year 2020
Beitbridge Border Post Modernisation Project:
www.ijglobal.com/Magazine# – Magazine issue #383 – Summer 2021 p144
The $300 million Beitbridge Border Post Modernisation Project closed in November, concluding financing for the upgrade and rehabilitation of the Zimbabwean side of the border post, under a 17.5-year concession.
It is the busiest border post in southern Africa, connecting South Africa to Zimbabwe and providing a key access point for trade with countries further to the north. Under the concession, La Frontiere is tasked with upgrading the ageing infrastructure, which for some time has caused significant waiting periods at the border, slowing trade and causing many haulage operators to use less-efficient alternative routes. The concession also requires the delivery of social infrastructure to the adjacent town of Beitbridge, including a water treatment plant, housing and fire station.
RMB was financial adviser to the sponsor from 2018, helping structure a bankable project financing and bring in co-shareholders like the Pembani-Remgro Infrastructure Fund and the Pan African Infrastructure Development Fund. The financing package includes a $130m commercial debt tranche from ABSA Bank, Nedbank, RMB and Standard Bank with political and commercial risk cover provided by the Export Credit Insurance Corporation of South Africa, alongside a $65m DFI tranche funded by Afreximbank and the Emerging Africa Infrastructure Fund and a US$22m loan from EAIF as well.
Daniel Zinman, RMB project lead for Beitbridge, says: “This project comes at a time when infrastructure development and PPPs are more critical than ever to stimulate economic growth, and further enhances RMB’s reputation as the leading investment bank in the African concessions and PPP sector, through the provision of an end-to-end infrastructure finance solution which enables our client to deliver this landmark infrastructure development, despite a challenging jurisdiction and an unprecedented and uncertain global backdrop.”
Judy Cobus, co-head RMB Infrastructure Sector Solutions, adds: “A truck moving through the border can currently take 2 days or more, with this project it will take a fraction of that time. It delivers infrastructure that makes a difference by not only stimulating sustainable economic growth and job creation but by also providing much-needed social.