Why do the sponsors and the banks want IFC involved with the deal? What does IFC

Question

Why do the sponsors and the banks want IFC involved with the deal? What does IFC bring to the deal? Will IFC and the sponsors (Alusaf and IDC) share similar objectives? Should IFC play only an advisory role only or should it also invest in the Mozal Project. Why do the sponsors and the banks want IFC involved with the deal? What does IFC bring to the deal? Will IFC and the sponsors (Alusaf and IDC) share similar objectives? Should IFC play only an advisory role only or should it also invest in the Mozal Project. Why do the sponsors and the banks want IFC involved with the deal? What does IFC bring to the deal? Will IFC and the sponsors (Alusaf and IDC) share similar objectives? Should IFC play only an advisory role only or should it also invest in the Mozal Project.

Explanation / Answer

International Finance Corporation (IFC) is the largest multilateral source for the provision of debt and equity finance to the private sector projects. Additionally, IFC provides loan which are not backed by sovereign guarantees, further, the capital provided by the IFC is not callable on demand instead it is paid in. Meanwhile, IFC also plays a key in promoting the private sector investments in the developing countries. Therefore, sponsors and the banks want IFC to be involved in the Mozal project so that the project can be supported by the IFC in order to achieve its objectives.

In addition to this, IFC will bring many benefits into the Mozal project such as the project appraisal facilities, an assessment of environmental and social impact of the project and due diligence services, which will provide the assurance to the potential lenders of Mozal projects regarding the feasibility and suitability of the project. Meanwhile, IFC is known for being an “Honest Broker” because it works in the best and balanced interest of all the affected parties, hence, the involvement of the IFC will ensure that the project will lead to the satisfaction of all the parties involved in the project. Further, the involvement of the IFC will enable the Mozal project to adhere to the legal system in Mozambique because IFC also helps in integration of legal systems in Mozambique and other parts of the world. In addition to this, IFC will also help in finalization of the contractual terms in order to define the financial and technical enactment of the deal.

However, IDC’s objective is to promote the private entities so that the sustainable development can be achieved in South Africa, which is a developing country, meanwhile, the prime objective of Alusaf if to earn returns from the Mozal project, which are similar to its previous project, Hillside smelter, and to acquire the ore inputs at an attractive rate for the extraction of aluminium. On the other hand, the objective of IFC is to promote the investment in the private sector of the developing countries so that the poverty levels can be controlled and the peoples live in developing countries can be improved

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