Guarding against the risk of ‘unbankable’ community projects in South Africa

The legacy of apartheid in South Africa has left much of the country without basic services such as housing, water and electricity. The government initiatives in place to tackle the issue do not have enough resource to meet the scale of the need so commercial finance programmes will play a key role in delivering these services.  But poor planning without enough information makes it difficult to recoup the costs of a project, thereby making it unattractive to potential commercial financers – in other words, ‘unbankable’.  

For example, an engineer might design a high-specification water system.  However, the focus on design may make it over-complex and therefore expensive – with the end result that it does not meet the needs of the community, the government or the financing organisation.

Bigen Africa, a consulting company that describes itself as a ‘development activist’, tackles this issue with risk analysis.  It uses @RISK as a tool to enable it to identify, manage and mitigate the risk associated with each project and ensure it attracts funding and is successful.

@RISK risk modeling software helps Bigen Africa to understand and demonstrate that it is the number and type of houses that drives the demand for services, where this demand is, what it will be in the future and who will use the services.  It forms the basis of engineering / planning, the financial risk analysis model, the revenue model and strategy, affordability analysis and the integration between the services (housing, roads, solid waste, water, sanitation, electricity, etc).

@RISK provides the level of detail that banks require before making a decision on whether to finance a project.  At the same time, the methodology benefits from simplicity and is easily understood by the wider audience involved in the project but not necessarily familiar with the specific concept of demand risk.

» Case Study: Bigen Africa uses @RISK to encourage funding for basic community services in South Africa

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