Page 42 - U4SSC Compendium of practices on innovative financing for smart sustainable cities projects

this transaction was carried out mainly through a syndicated financing structure, AFC may be
legally restricted to share the terms and conditions negotiated with other lenders. However, the
AFC contribution is fully through direct equity participation and shareholder loans, with favourable
terms and conditions.

Observations

• Leasing bandwidth to leading local telecom operators has generated activity and revenue for
these companies, further promoting sector growth.

• In 2009, approximately 80 per cent of the voice and data traffic of Africa was carried by satellite,
which was not suited for new broadband applications that required large bandwidth. The project
solved this challenge by adopting a sophisticated technology to meet broadband capacity
needs, increasing network capacity and efficiency. The Dense Wave Division Multiplex (DWDM)
fiber optic system technology provided a design capacity of 1.28 Tbps, which is approximately
10 times the speed capacity of other existing technologies.

• Early-stage equity contribution from AFC provided a de-risking opportunity resulting in a diverse
group of international financiers and accelerated time-to-market. Unexpected incurred costs, or
cost overruns, were mitigated by putting in place a standby funding contribution from investors.
• The project required development funding from major international institutions to reach
bankability. Investors were hesitant to commit to a startup company that was planning to
develop and implement a technologically advanced and complex project with multi-jurisdiction
implications. Overcoming this challenge required a well-structured and well-developed project
with a strong sponsor group, and credible international financial and technical partners.
• Differing regulatory regimes in countries of the project led to some delays in obtaining requisite
operational licences and authorization. Approvals for licences, landing permits, environmental/
waterways permits, and construction permits vary substantially per country. The cross-country
nature of the project requires knowledge of differing regulatory and market requirements for
its operation.
• At inception, the role that fibre-optic broadband systems can play in the social, economic and
commercial activities and development in the countries was relatively less acknowledged and
known. Consequently, the positive impact was generally underestimated by most countries but
has significantly improved over time.

• The project has a potential impact on the marine and terrestrial environments. Overcoming this
challenge required a detailed impact study that ensured operation with minimal impact to the
environment and avoided any marine-protected areas. Close consultation with communities of
the project, as well as provision of employment opportunities at the construction and operational
phases ensured maximum buy-in of all the communities.

• At inception, attracting and retaining skilled personnel to a start-up enterprise was a major
challenge for the project. Specialized training programmes were conducted to enhance capacity
and ensure the successful operation of the project.

30 Compendium of practices on innovative financing for SSC projects | January 2023