The Ambassador of the European Union to South Africa, Roeland van de Geer and the Development Bank of Southern Africa (DBSA) CEO, Patrick Dlamini launched the €100m (R1.5bn) ground breaking Infrastructure Investment Programme for South Africa (IIPSA) on Thursday.

The purpose is to provide grant funding in support of loans for essential infrastructure projects in the southern African region.

The fund was established following a joint initiative between the government of South Africa and the European Union, and forms part of the EU’s broader intervention under its country strategy for South Africa.

Speaking at a media briefing, Dlamini said the DBSA views this programme as a strategic intervention to fund South Africa’s national and regional infrastructure projects, especially at the critical initial stages to prepare projects to bankability.

Van de Geer said IIPSA will provide innovative financing that will see the blending of European Union grants with long-term financing from participating South African and European development finance institutions.

It also aims to attract private financing into projects with a high socio-economic return by enhancing the financial feasibility and project quality and/or by reducing the risk associated with such projects.

Projects to be supported will be selected from an updated list of priority infrastructure projects established by the IIPSA project steering committee, and will be directly linked to the priorities of SA government, EU-SA priorities for cooperation and the SADC regional infrastructure strategy.

“The establishment of this fund could not have come at a better time, because lack of adequate infrastructure funding has been identified as a key constraint to faster economic growth and social inclusion both in South Africa and in the SADC region”, said Dlamini.

The government has prioritised infrastructure development as a catalyst to address the country’s triple challenges of high unemployment, poverty and inequality.

In order to be eligible to receive financial assistance from the IIPSA fund, projects must comply with the following criteria:

– The project must either be a South African project or

– A regional project which must be a trans-border initiative involving two or more countries in the SADC region with a demonstrable regional impact on one or more countries.

Key priority sectors will include: energy, transport, water and environment, ICT and social infrastructure.

A request for proposals will be issued in early April 2014, inviting potential recipients to propose infrastructure investments.