Staying ahead of risk factors

A series of stringent feasibility programmes ensures that each project meets its targets within the set time and cost

In a constrained economy, alleviating risk as far as possible becomes increasingly imperative. The DBSA’S Project Preparation Unit (PPU) was established to accomplish exactly this in conjunction with developing projects from conceptual stage to the point where they are bankable and ready to be implemented.

Project preparation is a relatively new phenomenon within development banks, says DBSA GM for project preparation Mohale Rakgate, born in part to mitigate against the risk of projects not reaching fruition. Historically there has been little funding targeted at the preparation of projects within the public sector. As a result the percentage of projects that were successfully implemented was low.

“The biggest challenge facing most development banks is around government capacity to see projects through to completion,” says Rakgate. “Within the SADC region, SA is actually better than most, but many governments just don’t have an enabling environment when it comes to infrastructure projects. As such, mobilising funding for project preparation is particularly challenging.”

In an effort to ensure a greater proportion of projects reach financial closure, project preparation was initiated to identify and eliminate key risks at the earliest possible stage. “Both SA and the region have a huge need for infrastructure development,” says Rakgate. “However, one of the biggest bottlenecks is the development and preparation of bankable projects, given that planning and delivering a large infrastructure project is usually complex and fraught with risk.”

Rakgate says it can take several years of project preparation before a large-scale infrastructure project is ready to be implemented. When a project fails, comes in over budget or runs significantly over time, it becomes an even more costly exercise. Project preparation, therefore, seeks to mitigate against this risk by identifying problems early in the process.

The DBSA’S PPU was established four years ago to offer an end-to-end project development and preparation business that derisks projects and delivers them from concepts to bankability.

“Under the broad umbrella of delivering developmental infrastructure both in SA and the rest of the continent, our role within the PPU is to ensure that a proposed project is feasible, appropriate and ready for implementation,” says Rakgate.

“Our mandate includes conducting scoping profiles on projects while still at a conceptual stage, prefeasibility studies, detailed bankability studies, financial structuring as well as legal, environment and technical assessments on the proposed project.”

Essentially, he says, it is about assessing the degree of risk involved in the project, analysing whether the proposed teams involved in developing the project have the required capabilities to ensure the project is implemented, analysing the economic impact of the proposed project and ensuring the project is compliant environmentally, legislatively, legally and financially.

Critically, says Rakgate, every project needs to fit into the DBSA’S mandate of providing infrastruc-