DBSA’s Transport focus...2 • The DBSA is a leading Africa Development Finance Institution, with a focus on the infrastructure sector. DBSA’s mandate fits in to the national (RSA

DBSA’s Transport focus “Transforming the Southern African transport sector across the value chain for development impact” October 2017

| |

SUMMARY SLIDE

2

• The DBSA is a leading Africa Development Finance Institution, with a focus on the infrastructure sector. DBSA’s mandate fits in to the national (RSA and other SADC countries’) infrastructure sector policy and plans.

• Transport is one of its key mandate sector. • The DBSA leverages its activities across the infrastructure value chain to provide an integrated value

offering for our clients – from project preparation to implementation • The DBSA facilitate capital flows toward development priorities in response to market and coordination

failure • Lack of local industry, materials and labor hinders infrastructure development due to (1) lack of

(integrated) design, construction & maintenance capabilities; (2) restricted and expensive access to materials & equipment and (3) limited access to trained labor.

• Government and SOE’s plan to spend R327bn on Transport and logistics in the medium term 2017/18 –

2019/20

• New financing solutions and approaches to infrastructure can lead to unlock new local industry opportunities for the region.

| |

Agenda

1 2 3

DBSA overview

The Southern African Infrastructure landscape

DBSA initiatives across the region

3

| |

THE DBSA IS A LEADING AFRICA DEVELOPMENT FINANCE INSTITUTION, WITH A FOCUS ON THE INFRASTRUCTURE SECTOR

4

KEY POINTS

• DBSA 100% owned by the SA Government, reporting into the National Treasury

• Mandate – Covers entire African continent; focus on Southern Africa

• Financially sound – R84bn Assets, R32bn Equity, R3Bn+ sustainable profits

• Externally rated – DBSA foreign currency rating is Baa3 (Moody’s) – similar to Sovereign

• Well governed – Achieved unqualified audits; A+ rating from AADFI PSGRS

• Globally accredited – Global Environmental Facility, Green Climate Fund, EU 6-pillar

Mission Promote economic growth, improve quality of life and advance regional integration via infrastructure investment

| |

OVERVIEW OF THE DBSA’S PRODUCTS, SERVICES AND SECTORS

5

DBSA’s primary market DBSA’s main focus outside of SA DBSA’s secondary (and recent) focus outside of SADC

GEOGRAPHIC FOOTPRINT PRODUCTS & SERVICES

The DBSA mostly lends to its clients directly, but also provides financing to financial institutions (particularly outside of SA)

SECTORS

Primary: Energy, Transport, ICT, Water & Sanitation Secondary: Education, Health

| |

THE DBSA LEVERAGES ITS ACTIVITIES ACROSS THE INFRASTRUCTURE VALUE CHAIN TO PROVIDE AN INTEGRATED VALUE OFFERING FOR OUR CLIENTS

6

Plan Prepare Finance Build Maintain/ Improve

1 2 4 5

Set-up infrastructure programmes (e.g. REIPPP, student housing)

Finance project preparation activities (technical studies) using DBSA and third party funds (e.g. IIPSA, PPDF)

Balance sheet (recourse) loans

Limited/non-recourse lending

Mezzanine finance/ subordinated debt

Structured financing solutions

Equity (historical book)

Guarantees

Manage design and construction of key projects

Project management Support

DBSA municipal funded project implementation support

Deliver & support the development, maintenance, improvement of key infrastructure projects

Develop sector and regional master plans for clients, to enable project development and financing

In-house capability to support under resourced municipalities

| 7

DBSA’S STRATEGIC RESPONSE…WE’LL DELIVER EVEN GREATER LEVELS OF DEVELOPMENT IMPACT, BUT THROUGH A BROADER SET OF PRODUCT OFFERINGS

Sources of Competitive Advantage:

Mission: Advance development impact in Africa via infrastructure – promote economic growth, improve quality of life and regional integration

Develop structured products and

funding structures to unlock

infrastructure and crowd-in 3rd parties

Paths to Victory:

De-risk project finance structures to crowd-in third

party funding

Greater investment in early-stage

programme and project

development

Establish project management

offices and focus on maintenance of

public infrastructure

Integrated infrastructure

solutions, including early-stage risk and delivery capability

Strategic partnerships Greater risk-return trade-off and longer

tenors

Access to concessionary

financing

Continue core long-term

infrastructure lending activities

Strategic Ambition:

Catalyse R100Bn annually in infrastructure by 2019-20, while maintaining financial sustainability

|

FACT: LACK OF INDUSTRY, MATERIALS AND LABOR HINDERS INFRASTRUCTURE DEVELOPMENT

Lack of (integrated) design & construction &

maintenance capabilities

Restricted and expensive access to materials &

equipment Limited access to

trained labor

Issue

Impact

Countries facing low construction sector productivity • Lack of planning • No/ limited access to finance • Highly dependent on

international service providers

Appropriate, skilled workforce not available

• Vast array of different skills required

• Specialized skills often not available or expensive

• Low competitiveness of national industry

• Infrastructure backlog • Block industry growth, e.g.

Indonesia lacking financial & technical capabilities thus unable to internationally expand gas sector

High costs for materials & equipment

• Costs of raw materials dependent on region

• Lack of infrastructure increases transport costs

• Lack of efficient technology result in inadequate use of materials

• Fly-in-fly-out of staff to complement local staff is costly and has negative social impacts

• e.g. container of construction materials costs $2K from China to Kenya, but another $6K for 900 miles from Kenya to Kigali

• e.g. delay of six-laning of Indian NH 1 between Panipat & Jallandhar due to lacking raw materials

Source: WEF; BCG; Laboursta, IHS Global Insight

Enabling the local industry for infrastructure also increases the civil society acceptance of infra projects

| 9

Infrastructure drives large improvements in developmental outcomes

Source: Research summarized in Agenor and Moreno-Dodson (2006), and Public-Private Infrastructure Advisory Facility (PPIAF) PPPs: An Introduction, NEPAD

Better transportation increases access to healthcare • Building rural roads increased doctors visits in Morocco • Paved roads associated with lower infant and female mortality rates

Ethiopia road upgrades resulted in significant gains in agriculture sector

• Yields/ha increased by ~100-200% within 18 months

Better transportation raises school attendance • Building rural roads in the Philippines increased school enrolment

by 10% and reduced dropout rates by 55% • Paved roads have doubled girls’ school attendance in Morocco

Healthcare

Agriculture

Education

LACK OF INDUSTRY, MATERIALS AND LABOR HINDERS INFRASTRUCTURE DEVELOPMENT - OUTCOMES

|

AGENDA

1 2 3

DBSA overview

The Southern African Infrastructure landscape


10

| |

THERE ARE A NUMBER OF GLOBAL, REGIONAL AND NATIONAL PLANS AND INITIATIVES WHICH GUIDE THE DBSA’s DEVELOPMENT ACTIVITIES

11

International

Regional

National

1. Infrastructure Vision 2027 2. Regional Infrastructure Development Master Plan

| 3

SIP OVERVIEW – KEY FREIGHT TRANSPORT RELATED PROJECTS OPPORTUNITIES

SIP Projects Description

SIP 1 Unlocking the northern mineral belt with Waterberg as catalyst

SIP 2 Durban-Free State-Gauteng logistics and industrial corridor

SIP 3 South eastern node and corridor development

SIP 4 Unlocking economic opportunities in the North West

SIP 5 Saldanha – Northern Cape development corridor

SIP 7 Integrated urban space and public transport programme

SIP 11 Agri-logistics and rural infrastructure

SIP 17 Regional integration for African cooperation and development

From the 18 Strategic Infrastructure Projects (SIPs) scoped, SIP7 hold direct relevance to Logistics infrastructure, namely:

The National Transport Master Plan (NATMAP) 2050 and the 25 Year Gauteng Integrated Transport Master Plan (ITMP) provides a policy blueprint for the development of passenger and freight transport infrastructure in SA.

In fact many of the projects advocated within these infrastructure plans are adopted as part of the ongoing infrastructure programs/projects of many key SOCs: Transnet, SANRAL, PRASA, ACSA, Municipal BRT program

|

FREIGHT/ LOGISTICS

TRANSPORT

13

MARKET STRUCTURES - FREIGHT/LOGISTICS, TRANSPORT

Private Sector Mature PPPs SOCs

PPPs

• Consolidated

• Large players

(Imperial, Barloworld,

Unitrans, Bidvest,etc)

• Cash Rich

• Highly-banked

• Mature industry

• Sishen/Saldan

aha Iron ore

line, Sasol

Gas trains

• Fully funded

• No expansion

• Transnet

(MDS)

• PETROSA

• SAMSA

• TCTA

• PRASA

Smart Cities

Basic Education

telemetry

• Private Cars

• Individual Taxi

• Private Airlines

• Private Sector Mass

Transit (Minibus

industry)

• ACSA,

• Mass Rapid

Transit –

Tshwane,

Joburg, Cape

Town

• ACSA

• SAA

• PRASA

• SANRAL

• Further Mass

Rapid Transits

• SAA PPP

• N2, N3

Market

|

SOUTH AFRICA: PUBLIC SECTOR INFRASTRUCTURE SPEND PER SECTOR IN FY 2013/14 – 2019/20

32 37 39 41 4570 68 66

75 78 82 74

78 92 8191 105 106 117

31302932302626

2221201818171818

302617

2016/17

11

290

8 7

2015/16

10

261

11 14

262

15 5 5 17

10

2013/14

245

2014/15

9

2019/20 2018/19

16 12

7 7

13

8

314

2017/18

17

307 326

Public sector infrastructure expenditure and estimates, R billion

Actuals Budget Medium-term estimates

Source: National Treasury 2017 Public-sector Infrastructure Update

Administrative services Water and Sanitation

Education

Health

Human Settlements Energy

Transport and logistics

Other econ& social

Key highlights

Total public infrastructure spend for the MTEF period amounts to R687,6bn on energy, water and sanitation, transport and logistics R137,5bn on human settlements, health and education

The majority of spending will occur in transport, followed by energy and water

Actuals Budget Medium-term estimates

14

| 15

GOVERNMENT AND SOE’S PLAN TO SPEND R327BN ON TRANSPORT AND LOGISTICS IN THE MEDIUM TERM 2017/18 – 2019/20

118

37

35

45 93

328

105

117

106

PRASA

MTEF

Other 2017/18 2017/18 SANRAL PRMG* Transnet Total Allocation

2019/20

Transport and Logistics Infrastructure allocation, Rbn

Source: Public-Sector Infrastructure Update *PRMG Provincial Roads Maintenance grant

MTEF estimates SOE estimates

Transport infrastructure allocation R328bn in the medium term

|

Enables people and builds local

capacity

Enhances industries, job creation and investment

climate

Transforms quality of

life for many

Why It Needs Acceleration

Is an investable and feasible programme

NSC PROGRAMME ADDRESSES THE TRANSPORT INFRASTRUCTURE GAP IN AFRICA

Key insights and observations

Addresses a critical

infrastructure need

1

1

b

Lack of adequate infrastructure has severely impacted countries' trade

• Transport costs and times are prohibitively high – especially for landlocked states

• Infrastructure gap adversely impacting NSC states

A significant demand for transnational infrastructure in Africa

• Transport infrastructure along the NSC is insufficient and demand is increasing

a

|

AS A CONSEQUENCE, TRANSPORT COSTS AND TIMES ARE PROHIBITIVELY HIGH – ESPECIALLY FOR LANDLOCKED STATES

Landlocked African countries face comparatively high transport costs....

18.1

2.4

Africa

Days

Europe

+654%

Europe

USD

Africa

3,059

1,496 +104%

8.4

2.9

Days

Europe Africa

+190%

+135%

1,704

USD 4,000

Africa Europe

...and long transit times

Port/air Import costs for landlocked countries

Port/air export times for landlocked countries

Land export costs for landlocked countries

Land import times for landlocked countries

Note: Costs refer to 40 dry container or semi-trailer Source: World Bank report 2010 A Time for Transformation

a 1

|

TRANSPORT DEMAND IS INCREASING ALONG THE NSC FUELLED BY GROWTH IN RAIL AND ROAD FREIGHT

Rail freight dominated by SA Road freight increasing substantially

Note: Used freight volumes and most recent data on km of road and rail infrastructure to calculate expected volume / km for each year. Used this figure to extrapolate expected volume along length of the NSC. Data on volumes only available for SA, Tanzania and Mozambique; using Tanzania volume / km as proxy for other 5 countries. 2019-2020 cargo volumes calculated from average growth rate from 2011-2018. Source: Euromonitor, Google maps, BMI

b 1

20

15

10

5

0

0.2

16.9

0.3 0.2 0.1 0.2 0.2

Kt

2020

21.4

0.3 0.7 0.2

19.5

0.1 0.2

2016

18.6

0.3

+19%

0.3

0.2 0.1 0.2

2019

20.6

0.3 0.7 0.2

18.7

0.3 0.2

0.2

18.0

0.3 0.2 0.1 0.2

2017

19.2

0.3 0.6 0.2

17.5

0.3

2015

18.0

0.3 0.6 0.2

16.4

0.3 0.2 0.1 0.2

0.6

0.1 0.2

2018

19.9

0.3 0.6

Mozambique Malawi DRC Botswana Zimbabwe Zambia Tanzania SA

30,000

25,000

20,000

15,000

5,000

0

10,000

2,595

2017

27,536

4,530

8,849

1,096

Kt

9,279

2,746

1,160

2,643

3,314

4,750

29,394

2,569

2019

2,836

3,067

3,096

+17%

2020

30,470

4,886

9,545

2,917

3,260

1,127

2,670

2018

28,363

2,893

2,498

4,618

2,886

2,757

9,021

4,379

8,554

2,614

2,356

2,347

2,369

2016

26,798

4,452

8,697

2,658

2,514

1,039 2,461

2,511

2,408 1,057 2,502

2015

26,118

2,704

2,692

2,690

2,450 1,075

2,546

|

TOTAL COST OF NSC AT ~$10.9BN ALMOST HALF OF PROJECTS IN ROAD WITH ~47% OF CAPEX IN PORT PROJECTS

NSC project breakdown

44 8 7 8 No. of projects

Note: Total cost from Tripartite Regional Infrastructure Projects Database (TRIPDA) 2013 for NSC related projects that have CAPEX figures. Source: Presidential Infrastructure Champions Initiative (PICI), Tripartite Regional Infrastructure Projects Database (TRIPDA) 2013

NSC priority project ~53% of total

4 2 1 1

b 2

10

5

0

Cos

t (U

SD b

n)

Other

0.7

Aiport

0.2

Border Posts

0.2

Rail

1.5

Ports

5.1

Roads

3.2

Total cost

10.9

0,10,5

3,5

1,75,8

0

5

10

Cos

t (U

SD b

n)

Border Posts

Rail Ports Roads Total cost

6 16

|

MAJORITY OF INVESTMENT AIMED TOWARDS REHABILITATION PORT, ROAD AND RAIL ~90% OF INVESTMENT

0

12

10

8

6

4

2

10.9

0.8 0.1 0.2

1.5

3.2

5.1

USD

bn

Rehabilitation

4.0

0.0 0.0 0.2

0.7

3.1

0.0

New build

6.9

0.8 0.1 0.0 0.8

0.1

5.1

Total

Road infrastructure mostly rehab while new builds focused on ports

Other

Bridge

Border Post

Rail

Road

Port

Material and machinery account for 58% of estimated CAPEX

b 2

Note: Energy station estimates from Hydro plant cost structure, Border Post/Bridge Breakdown estimated using Road cost structure benchmark. Port and Rail breakdown calculated from global benchmarks. Source: Tripartite Regional Infrastructure Projects Database (TRIPDA) 2013, Baltic Roads, IJETCH, US Army Corps of Engineers, BSL

Ove

rall

proj

ect c

ost b

y ca

tego

ry

Maj

or s

ubca

tego

ries

USD

bn

Bridge

0.1

Border Post

0.2

Rail

1.5

Road

3.2

Port

5.1

Total cost

10.1

36%55%

43%

12%

46%18%

13%

30% 30% 30%

40%37%

60%

7%

60% 60%

5%5%5% 5%5%

5%

7%

4%

Bridge Border Post Rail Road Port Total

Machinery Materials Other Workforce

|

INEFFICIENT MOVEMENT OF GOODS HAVE HAD A DISRUPTIVE EFFECT ON TRADE – EXAMPLE BEIT BRIDGE

Major delays at Beit bridge between Southern Zim and SA inhibiting trade

Reducing wait time by 50% would yield ~$11.4bn marginal trade flow from SA to Zim over 5 yrs

3 3 a

Busiest regional transit link in southern and eastern Africa • >400 trucks cross Beit Bridge border post / day

Long delays caused by poor infrastructure design/capacity

• Revenue collector has inefficient centralized declaration system • Bill of entry documents no longer processed at border posts

– Documents processed in Harare/Bulawayo /Masvingo • Poor bandwidth further hampers clearing process • Physical inspection done 1km from border at Cargo Carriers

due to depot capacity constraint

Delays result in lost economic value for business and gov't • Cargo trucks often wait for clearance at the border for days • Firms incur significant losses, much of which goes into

demurrage fees charged by cargo shipment firms – Demurrage is a charge payable to owner of freight truck on

failure to load/discharge truck within the agreed time – Businesses moving goods from outside the country paying

US$250-500 in demurrage fees for delays • Delays shorten the sales window for some goods • 3 day delay increases price of petrol ~3.3% and sugar ~3%

1. Zimbabwe Revenue Authority Note: Assumed no constraint on traffic flowing through OSBP. Assumed 2015 customs value will be double current amount by end of 2015. Assumed perfectly linear relationship between wait time and processed traffic/customs volume . Assumed ZAR/USD at 10. Source: BCG analysis, Stats SA, BD Live, Zimbabwe Situation, The Herald, Construction Review Online, The Standard, TradeMark SA

2

50

45

40

0

12

10

8

6

4

Traffic volume ('000)

USD

(bn)

Total

11.4

2015 (proj.)

2.3

52

2014

2.4

53

2013

2.4

52

2012

1.8

45

2011

1.4

39

2010

1.1 37

Marginal customs value from shorter wait time Marginal increase in processed traffic

Chirundu OSBP saw 50% reduction in freight average wait time after 1 year in operation

|

VIGNETTE: CHIRUNDU OSBP HAS SUCCESSFULLY IMPROVED TRAFFIC THROUGHPUT AND CREATED ECONOMIC VALUE

OSBP created to streamline border process OSBP saves ~$600k per day

Aid for Trade initiative involving the NSC/Tripartite (SADC/COMESA/EAC)

• Pilot trade facilitation project aimed at reducing cost of doing business

• Programme managed by secretariat of COMESA on behalf of Tripartite

• ~$2.7bn was raised for the project Four lanes available for crossing into Zambia from Zimbabwe

• All formalities completed on the side of the border from which vehicles are crossing

Utilises a process and tool oriented approach • Fast track lane for low risk clients who have pre-

completed clearance online • Utilise non-invasive scanners in targeted manner • Plans to use scanners for individuals which eliminate

need to unload bags from buses • Less bureaucratic process lowers likelihood of

corruption – Fewer processes potentially involving bribery

OSBP has made significant financial impact for private/public sectors

• Improved customs operations led to doubling of Zambia trade tax rev. w/t tax increases between 2010-2012

• By mid-2012 the private sector was saving about $20m a month due to faster transit times

• Agriculture key sector driving development of OSBP according to Chairman of Tripartite Task Force

Financial savings driven by growth in traffic volumes

• 65% increase in border post traffic in last 4 yrs • 8500 commercial vehicles per month • Most vehicles cross within 24 hrs

Previous average wait time of 72-120 hours

Note: News source stated $2.7bn raised through funding pledges from DFID, JICA, World Bank, AfDB and DBSA. Aid for Trade refers to initiatives aimed at boosting development in partner countries through targeted assistance. Source: Trade Mark SA, Approved procedures for OSBP Operations, IPP Media

3 3 a

|

LOGISTIC INTENSIVE INDUSTRIES WITH HIGH TRANSPORT COST AS % OF SALES WILL BENEFIT MOST FROM NSC

5

6

6

8

10

10

11

25

Cellulose, paper (IG)

Oil and gas extraction

Coal mining

Agriculture basic products

Fishing

Agriculture & Forestry

Construction mining

Stones and earths

Raw materials Manufacturing and processing

industries Consumer products, services

and retail

Note: Average of 2006, 2008, 2010, 2012 figures. Sub industries averaged to create single figure e.g. Automobile parts and Automobile repair. Source: Top 100 in European Logistics , ed. 200,7 & ed. 2009, & ed. 2011, & ed. 2013 Fraunhofer SCS Institute, prof. Kille

1123344555555566667

10

Tobacco Medical technology

Machinery and equipment Construction services

Mechanical engineering Oil processing

Chemical products Solid fuel and oil products

Iron ore and steel Wood, construction material

Food industry

Furniture/jewlery

Cellulose, paper (CG)

Chemical Industry Construction products

Civil engineering Automobile manufactuirng

Metal processing (IG/CG) Waste

Electricity equipment

11111111222222222233455556

Pharmaceuticals

Consumer Automobile Electrical household goods

Gasoline, fuel, petrol stations Books, newspapers

Repair service Orthopedics and antiquity

Hotels and restaurants Drugstore, cosmetics

Consumer tobacco Houseware

Consumer broadcast/TV Broadcasting and TV

Data proc. machines, PCs

Gasoline, fuel, petrol stations Pharmaceuticals

DIY Instalation, crafts

Food and beverages Clothing

Electrical household goods Consumer Automobile

Agriculture consumer products Consumer other food

Mail order Consumer pharma products

Transport costs as % of sales1 Transport costs as % of sales1 Transport costs as % of sales1

Global data

3 3 b

|

NSC TRANSPORT IMPACT INDUSTRY MATRIX SHOWS OVERLAP OF IMPORTANCE ACROSS MULTIPLE COUNTRIES

Industry Metric SA TAN DRC ZAM BOT ZIM MOZ MAL

Mining Part of National development plan

High Growth industry (status quo)

Important industry (GDP contribution)

Agriculture Part of National development plan



Retail Part of National development plan



Manufacturing Part of National development plan



Construction Part of National development plan



✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✗ ✓ ✗ ✗ ✓ ✗ ✓ ✗ ✓ ✗ ✗ ✗ ✓ ✓ ✗ ✗ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✗ ✗ ✗ ✗ ✗ ✗ ✗ ✗ ✗ ✓ ✓ ✓ ✗ ✓ ✓ ✓ ✓ ✗ ✗ ✓ ✓ ✓ ✓ ✓ ✓ ✗ ✓ ✗ ✗ ✗ ✗ ✗ ✓ ✓ ✗ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✗ ✗ ✗ ✗ ✗ ✗ ✗ ✗ ✓ ✗ ✓ ✗ ✓ ✓ ✓ ✗

Note: Defined high growth industry as a top 3 growth industry for that county from 2009 to 2013/14 as percentage of GDP. Defined high GDP contribution as >10% of GDP Source: National Development Agendas, African Economic Outlook

3 3 c

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✗ ✓ ✓ ✓ ✗ ✓ ✗ ✓ ✗ ✓ ✗ ✓ ✗ ✗ ✗ ✗

|

NSC COUNTRY INDUSTRY BREAKDOWN

Largest industries1

• Retail (21%) • Public sector (19%) • Construction (15%)

• Services (20%) • Public sector (17%) • Retail (15%)

National agenda, strategic goals and priorities

• Mining (25%) • Public sector (16%) • Retail (16%)

• Economic diversification • Exporting to neighbours • Infrastructure/Education development

1.Percentage of GDP. 2 2009-2013 growth rate in composition of total GDP. DRC, Zambia, Malawi GDP change measured over 2009-2014 Source: National Development Plans, African Economic Outlook

• Agriculture (34%) • Retail (13%) • Services (10%)

• Diversifying economy – agriculture, energy, resources • Infrastructure development – key to trade hub • Employment creation and inclusive growth

• Agriculture (28%) • Retail (21%) • Services (17%)

• Sustainable and inclusive growth • Building diversified economy • Decentralising economy

• Diversifying economy – agriculture, energy, resources • Infrastructure development – key to creating trade hub • Employment creation and inclusive growth

• Retail (17%) • Manufacturing (13%) • Transport (13%)

• Agriculture (23%) • Manufacturing (24%) • Transport (14%)

• Agriculture (29%) • Retail (14%) • Manufacturing (11%)

Growth industries2

• Elec./gas/water (61%) • Retail (6%) • Mining (2%) • Mining (53%) • Construction (27%) • Public sector (7%) • Retail (13%) • Construction (12%) • Transport (12%)

• Construction (29%) • Public sector (28%) • Transport (16%)

• Mining (54%)

• Construction (75%) • Public service (37%) • Services (18%) • Mining (125%) • Public sector (24%) • Services (4%)

• Services (30%) • Construction (63%) • Public sector (24%)

• Boost manufacturing share of GDP from 15% to 30% • Increase manufactured exports to SADC, COMESA and

rest of world • Diversification • Education/training • Improve coordination/effectiveness of public institutions

• Integrated economy through infrastructure development • Stable rural/urban economy • Inclusive growth

• Increasing exports • Employment creation • Fiscal policy to increase consumer savings

Logistics heavy ind.1

• Manufacturing (13%) • Mining (9%) • Agriculture (2%) • Manufacturing (7%) • Transport (7%) • Mining (5%) • Mining (5%) • Construction (5%)

• Agriculture (10%) • Manufacturing (8%) • Mining (7%)

• Construction (7%) • Manufacturing (6%) • Transport (6%) • Agriculture (12%) • Mining (10%)

• Transport (9%) • Mining (4%) • Construction (3%) • Manufacturing (9%) • Transport (6%) • Mining (1%)

3 3 c

|

NSC WITH POTENTIAL TO INCREASE GDP OF IMPACTED COUNTRIES BY ~$16.1BN, GROWTH RATE BY 0.1%

600

0

1,000

800

400

200

USD bn

3.5%

2035

913

562

99

75 45

35 47

39 11

2025

701

464

66 48

31 26 30 26 8

2015

458

336

34 23 17 16 14 13 5

1,000

800

600

400

200

0

USD bn

3.6%

2035

913

2025

929 (+16)

701

2015

715 (+14)

458

458

Status quo growth Growth with NSC

Status quo South Africa value add Tanzania value add DRC value add

Zambia value add Botswana value add Zimbabwe value add Mozambique value add Malawi value add

South Africa Tanzania

DRC Zambia

Botswana Zimbabwe

Mozambique Malawi

Source: BCG analysis, see sources & assumptions slides

3 3 c

|

104.9

2025

+6% 8%

USD bn

98.8 71.6

2035

66.4

2015

34.0

47.6 14.1

+1% +1% USD bn

47.3

2035

29.9

2015

30.1

2025

2015

32.1

2025

31.4 45.1

USD bn

17.0 46.0

2%

2035

+2%

16.4

2015

USD bn +1%

1%

2035

35.6 26.5 35.2

2025

26.8

1% USD bn 1%

464.5

2035

567.4 561.8

2025

469.3

2015

336.4

10.6 10.5

2035

USDbn

0.5%

2025

7.9 7.8

2015

4.7

+1%

USD bn +3%

5%

2035

40.7 39.4

2025

27.3 26.0

2015

12.9

76.6

USD bn +2%

2%

2035

75.3

2025

49.5 48.3

2015

22.9

Growth differential1: 0.8%








Note: Difference between status quo and NSC impacted average GDP growth rate from 2015-2034 Source: BCG analysis, see sources & assumptions slides

~$16.1BN TOTAL IMPACT IN 2035 GDP AS RESULT OF NSC

SA

Zimbabwe

Zambia

Moz.

Botswana

Tanzania

Malawi

DRC

GDP with NSC Status quo % increase in size Absolute increase (USD bn)

3 3 c

0.4

5.6

0.3

4.8

1.3 1.2

0.1 0.1

1.3 1.3

5.2 6.1

0.7 0.9

0.3 0.2

|

NSC WILL CREATE 574K EXTRA JOBS BY 2035

0

150

100

200

50

250

thousands

33

16

30

16 5 4 2

2

238

94

10

35

88

10

132

52

31

9 23

16

89

13 5 5

22

43

15 7

2 0.2 1 5

34

13 4 3

11

7

4

2 0.5 0.3 0.2

1

2 3 4

2

Agriculture Manufacturing Retail & wholesale Construction Mining

Jobs created as a result of NSC


Bot DRC SA Moz Mal Tan Zam Zim

60

153

62

574

86

213

Total

3 3 c

|

+0.005

+0.004

2035

2.2

2.2 20

25

1.6 1.6

2015

1.0

+0.0006

+0.0004

2035

0.1 0.1

2025

0.1 0.1

2015

0.1

+0.043

+0.03

2035

8.9 8.8

2025

5.9 5.9

2015

3.0

INDUSTRY ACCELERATION COULD LEAD TO TENS OF THOUSANDS OF ADDITIONAL JOBS IN ALL COUNTRIES (I/III)


Ret

ail

Min

ing

+0.016

+0.014

2035

3.2 3.2

2025

2.6 2.6

2015

1.8

+0.007

+0.005

2035

2.4 2.4

2025

1.5 1.5

2015

0.7

+0.002

+0.001

2035

1.0 1.0

2025

0.9 0.9

2015

0.8

+0.01

+0.007

2035

3.1

3.1

2025

2.9

2.9

2015

2.7

+0.002

+0.002 20

35

4.5

4.5

2025

4.3

4.3

2015

4.2

+0.009

+0.008

2035

0.7 0.7

2025

0.6 0.6

2015

0.4

+0.002

+0.002

2035

0.3 0.3

2025

0.2 0.2

2015

0.1

+0.004

+0.003

2035

0.3 0.3

2025

0.2 0.2

2015

0.1

+0.005

+0.003 20

35

0.4 0.4

2025

0.2 0.2

2015

0.1

+0.0003

+0.0003

2035

0.03 0.03

2025

0.02 0.02

2015

0.01

+0.035

+0.024

2035

0.7 0.7

2025

0.5 0.5

2015

0.2

+0.0002

+0.0002

2035

0.04 0.04

2025

0.03 0.03

2015

0.02

+0.004

+0.002

2035

3.5

3.5

2025

3.5

3.5

2015

3.4

millions

SA Zim Zam Moz Bot Tan Mal DRC Increase in no. of jobs (millions) Jobs with NSC Status quo

3 3 c

43k and 16k new jobs in Mozambique and SA retail respectively

|

+0.001

3.9 3.9

+0.001

2025

3.9 20

35 3.9

2015

3.9

2025

0.01 0.01

2015

0.01 0.02 0.02

+0.0002

+0.0002

2035

1.2 1.2

+0.022

+0.018

2035

2025

1.0 0.9

2015

0.6

INDUSTRY ACCELERATION COULD LEAD TO TENS OF THOUSANDS OF ADDITIONAL JOBS IN ALL COUNTRIES (II/III)


Agr

icul

ture

M

anuf

actu

ring

+0.023

+0.02

2035

1.3 1.2

2025

1.0 1.0

2015

0.8

+0.003

+0.002

2035

4.6 4.6

2025

4.5 4.4

2015

4.3

+0.002

+0.002

2035

3.6 3.6

2025

3.6 3.6

2015

3.6

+0.088

+0.072

2035

15.0

14.9

2025

14.7

14.6

2015

14.3

+0.011

+0.01 20

35

16.3

16.3

2025

16.2

16.2

2015

16.1

+0.031

+0.023

2035

3.9 3.9

2025

2.9 2.9

2015

1.8

+0.004

+0.003

2035

0.9 0.9

2025

0.6 0.6

2015

0.3

+0.005

+0.004

2035

0.7 0.7

2025

0.5 0.5

2015

0.3

+0.005

+0.004 20

35

0.7 0.7

2025

0.5 0.5

2015

0.2

+0.0005

+0.0004

2035

0.07 0.07

2025

0.06 0.06

2015

0.04

2015

0.8

+0.007

0.9 0.9

2035

0.8

2025

0.7

+0.01

0.2 0.4

0.4

+0.002

+0.001

2035

0.6 0.6

2025

2015

1.1 1.1

+0.004

+0.003

2035

1.1 1.1

2025

2015

1.0


3 3 c

millions

~88k new jobs in Tanzania agriculture

|

+0.007

+0.005

2035

0.4 0.4 20

25

0.3 0.3

2015

0.2

+0.002

+0.002

2035

0.06 0.06

2025

0.04 0.04

2015

0.03

+0.013

+0.007

2035

0.3 0.3

2025

0.2 0.2

2015

0.1

INDUSTRY ACCELERATION COULD LEAD TO TENS OF THOUSANDS OF ADDITIONAL JOBS IN ALL COUNTRIES (III/III)


Con

stru

ctio

n

+0.052

+0.045

2035

1.8

1.8

2025

1.7

1.6

2015

1.4

+0.016

+0.011

2035

0.7 0.7

2025

0.4 0.4

2015

0.2

+0.016

+0.012

2035

0.5 0.5

2025

0.4 0.4

2015

0.2

+0.094

+0.065

2035

0.9

0.8

2025

0.7 0.6

2015

0.5

+0.013

+0.008 20

35

0.4 0.4

2025

0.3 0.3

2015

0.2


3 3 c

millions

~52k new jobs in SA construction

|

2.9

0.7 0.2 0.6 0.4

2.9

0.7 0.2 0.6 0.4

2.8

0.7 0.2 0.6 0.4

2.8

0.7 0.2 0.6 0.4

2.7

0.7 0.2

0.6 0.4

2.7

0.7 0.2

0.6 0.4

2.6

0.6 0.2

0.6 0.4

2.6

0.6 0.2

0.6 0.4

2.5

0.6 0.2

0.5 0.4

2.4

0.6 0.2

0.5 0.4

NSC impact (billions)

0.2 0.8

3.0

0.2

0.4 0.6

3.0

0.9 0.8 0.9

0.4

0.9 0.8 0.9 0.9 0.8

0.6

0.8

0.8

0.8 0.9 0.9

3.8

1.1 1.5

0.2 1.5

0.2 0.3 3.7

1.1 1.6 0.2 1.5

0.2 0.2 3.6

1.6 0.2 1.5

0.2 0.2 3.5

1.2 1.7 0.2 1.4

0.2 0.2 3.4

1.3

0.2 1.4

0.2 0.2 3.3

1.3 0.2 1.4

0.2 0.2 3.2

1.4 0.2 1.3

0.2 0.2 3.0

1.4 0.2 1.3

0.2 0.2 2.9

1.5 0.2 1.3

0.2 0.2 2.8

0.1 1.2

0.2 0.2


0.2

3.9

1.5

0.2 0.3 3.9

0.2

1.5

0.2 0.3

KEY COUNTRIES' LOGISTICS HEAVY INDUSTRIES WILL BENEFIT SUSTAINABLY FROM NSC

South Africa

Tanzania

High economic contribution from logistic heavy industries...

South Africa

Construction Manufacturing Agriculture Mining Retail & wholesale

0.0 0.0

2025

0.5

0.1 0.2

0.0 0.0

2024

0.4

0.1 0.2

0.0 0.0 0.2

0.1

0.1

0.1

2029

0.2 0.1

0.1 0.1

2030

0.1 0.2

0.1 0.1

2031

0.6

2034

0.5

2033

0.6

0.1 0.2

0.1 0.1

2032


2035

0.1

0.6

0.2 0.1

0.1 0.6

0.1

0.2 0.1

0.1

0.2 0.2 0.2 0.2 0.2 0.2 0.2

0.6

0.2 0.1 0.1 0.2

0.6

0.1 0.2

0.1 0.1

2028

0.5

0.1

0.6

0.2 0.1 0.1

2027

0.1 0.2

0.1 0.0

2026

0.5

0.1 0.2

0.2

DRC

Note: Assumed NSC completed by 2024 and then begins to directly benefit industry. Source: BCG analysis, see sources & assumptions slides

3 3 c

|

AGENDA

1 2 3

DBSA overview

The South African Infrastructure landscape


33

| |

CASE STUDY (REST OF AFRICA): NORTH SOUTH CORRIDOR

34 North-South Corridor and Beira Development Corridor MoU’s signed by Country Ministers

The signing of the NSC and Beira Development Corridor (BDC) MoU is creating more project Opportunities in the SADC region

The DBSA was requested by SADC to support

them in the establishment of the NSC and BDC Management Institutions that will drive the priority projects forward

South Africa is occupying the SADC chair position

until August 2017 – we will thus be driving the SADC infrastructure programme in support of SADC

Majority of investment need is aimed towards

rehabilitation of dilapidated infrastructure

Other Countries requested SADC to replicate these corridor institutions for their key corridors – and DBSA is their to provide the advisory support and identifying their key projects for preparation and investment

The scale of the programme requires a structured approach to avoid technical complexities Many stakeholders involved Complexity can be managed by staggering

the programme with prioritised cornerstone projects

Major risks can be effectively mitigated with proven transnational management measures

| |

NORTH-SOUTH RAIL CORRIDOR PROJECT OVERVIEW

35

Problem Statement: • NSC Rail freight market share is less than 10% • Lack of co-ordination between the respective

operators (4 countries / 5 operators) resulting in a non-competitive transport solution due to:

• Service delivery challenges • Operational Challenges • Infrastructure challenges

• Infrastructure, equipment and safety challenges

• Limited available funding Expected Outcomes: • Rehabilitation and upgrade of the existing

infrastructure and equipment • Seamless rail logistics corridor that will promote

the migration of traffic from road to rail • Innovative funding strategy for the entire

corridor

Project prep financing secured • Funding secured by the NBF through the

SADC PPDF Facility managed by the DBSA

Source: Nepad Business Foundation

| |

NORTH-SOUTH RAIL: PROJECT IMPACT

36

• Improved regional integration and collaboration • Increased volume of trade • Increased economic growth • Local economic development (Job creation - direct and indirect) • Support for industrialisation strategy through linkage of functional rail network to industrial

hubs • Reduced externalities

• Traffic congestion • Loss in economic activity • Social costs such as road accidents • Reduced carbon footprint

• Reduced transport costs • Reduced cost of import and export of goods • Increased export competitiveness • Reduced pressure on road infrastructure

(physical and cost)

|

CASE IN POINT: TRANSNET HAS GONE PUBLIC WITH A NEW DBSA-LED FINANCING ARRANGEMENT… AS PART OF OUR STRUCTURED SOLUTIONS OFFERING

37

“New Transnet, DBSA finance scheme set up to support African rail exports” - Engineering News, 28 Aug 2017

The deal creates a new facility that will extend favourable financing to African and Middle Eastern buyers of Transnet Engineering’s rail rolling stock and port equipment.

The financing scheme will be branded under the Transnet Finance Company banner, but will be operated by the DBSA, backed by a consortium of commercial banks

|

A Re Yeng is one of 12 cities’ Bus Rapid Transit (“BRT”) projects approved via government’s Public Transport Strategy & Action Plan to improve access and quality of public transport

Tshwane Rapid Transit (Pty) Ltd (“TRT”) is a bus operating company set up in terms of National Land Transport Act to operate the BRT in the City of Tshwane

TRT is to be owned by the incumbent taxi and bus operators DBSA approved R786 million for TRT for the acquisition of 171 buses Support of Integrated Rapid Public Transport Networks, part of government’s Public

Transport Strategy, a key social initiative

CASE STUDY (SA): A RE YENG TSHWANE RAPID TRANSIT – PROJECT OVERVIEW

20

|

Development Impact: Aim is to correct socio-economic

impact of poor historic spatial planning

Improved quality of life through a

safe, affordable, reliable, efficient and integrated transport system

Economic growth of R437 million

via investment in marginalized areas and R1.324 billion in provincial capital formation

1,614 new direct jobs to be created

from bus project, with 275 for the unskilled

R259m household income and

R125m fiscal impact

A RE YENG TSHWANE RAPID TRANSIT (CONT.)

21

Phase 1 A

|

IF SPECIFIC INDUSTRIES WERE FULLY UNLOCKED, THE IMPACT WOULD BE EVEN GREATER – FOR EXAMPLE: O&G IN MOZAMBIQUE

Necessary enablers Potential economic impact Description of potential

• >100 trillion cubic feet of gas in concession off north-eastern coast

– Enough to become 3rd largest LNG exporter

• Could absorb $100bn of investment over next decade

• Infrastructure ramp up – Terminals construction

within 5-6 years

• Investment from private sector to drive industry development

– Anadarko working with ENI to develop liquefaction infrastructure

• Strong industry regulator to drive transparency and competitive practices

• Favourable external market factors

– Price consistently exceeding cost to produce

20

0

10

30

2024

USD bn 30.0

2026 2022

23.6

17.3

2020

11.2

2018

5.5

Revenue from LNG

Note: Used 2025 LNG price for 2026 due to lack of data. LNG price is Natural Gas LNG for Japan in $/mmbtu. Converted mmbtu to Mt by dividing by 2x10^-8 Source: Bloomberg, World Bank Commodities Price Forecast, Oxford Institute for Energy Studies

|

MULTIPLE INDUSTRIES STAND TO BENEFIT FROM GREATER MOBILITY AND CONNECTIVITY

Hotels (including budget hotels) to benefit from

increased flow of regional tourists

Restaurant / Service industries to benefit from

higher PAX flow and greater population mass

Retailers and consumer staples (e.g. food and

beverages) benefit from greater potential market

Property

With greater mobility and urbanisation, property

value and property development activities

could rise

South African produced goods benefit through

enhanced regional access

Local Transportation

Provider of local transport (e.g. city buses, car rental) from / to near-by cities to

stations benefit from increased tourist traffic

Hotels Restaurant / Services Retailers & Consumer Staples Local Producers

Logistics

Benefit from logistic cost savings and efficient

delivery mode e.g. increased cargo capacity

at Durban/Dar ports

1 2 3 4

5 6 7 Rolling stock and Rail infrastructure

Supplier/manufacturer of rolling stock and rail

infrastructure components to benefit throughout construction

8

| |

Thank you

Mohan Vivekanandan Group Executive: Origination & Client Coverage +27 11 313 3821 [email protected]