Viability Gap Financing

Description

In this insightful presentation Vivek Kasseepursad and Thembela Mazula from the Capital Projects Appraisal Unit (CPAU) share findings from studies conducted into the use of Viability Gap Financing (VGF). When user fees are insufficient to cover the costs of a project, it is thought to have a viability gap and is unattractive to the private sector i.e., the private sector will not develop a project where the returns are insufficient. This is particularly important where the economic analysis indicates that the project makes a positive contribution to the economy. With government support, VGF projects that were previously stalled due to not meeting affordability criteria can be revisited. This will have the effect of increasing investment in economically beneficial projects. The presentation outlines how the use of VGF could be used as a tool to further develop infrastructure which would uplift economic and social conditions in a strained fiscal environment.