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IFC Support to EASSy


The International Finance Corporation (IFC) is the private sector arm of the World Bank Group. IFC's mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty. While the World Bank (IBRD/IDA) operation focuses on the terrestrial elements of the overall regional communications infrastructure and activities which make use of capacity, the IFC operation is focused specifically on the financing of the Eastern Africa Submarine Cable System (EASSy).

What is EASSy?
The Eastern Africa Submarine Cable System (EASSy) is an initiative to construct and operate a submarine fiber optic cable along the east coast of Africa to connect eight coastal countries and island nations to each other and to the rest of the world.
EASSy will be the first optical fiber connection for most of these countries to the global optical fiber network.

What is the exact routing of EASSy?
The route will be from South Africa to Sudan, covering about 8,500 km, and connecting the following countries: South Africa, Mozambique, Madagascar, Tanzania, Kenya, Somalia, Djibouti and Sudan.

The EASSy submarine cable will be routed from Mtunzini in South Africa going north on the bed of the Indian Ocean generally at depths of between 1,000 – 2,000 meters, approximately 50-150 kilometers off the East Coast of Africa up to Port Sudan in the Red Sea. Branches from the cable will connect to six other Landing Stations in the following countries: Mozambique, Madagascar, Tanzania, Kenya, Somalia and Djibouti. Of the total eight Landing Stations to be involved in the project, four already exist and four additional new stations will be constructed. See Map

Who are the sponsors of EASSy?
Twenty-eight leading telecommunications operators from East and Southern Africa signed a Memorandum of Understanding (MOU) in December 2003 to carry out the construction and maintenance of EASSy.

Objective of EASSy
The objective of this project is to increase accessibility of countries in the region to the world’s global backbone communications network by providing high speed broadband connectivity. This will significantly reduce the current prohibitive cost of telephony and internet services in Eastern and Southern Africa. Presently, most of the region is served by restricted and expensive satellite requiring transit through third countries outside the region for country-to-country communication and information exchange. Terrestrial backbone networks are also being built in separate developments to link all capitals and major cities in Eastern and Southern Africa to the EASSy cable and the international backbone system.

How will EASSy be financed?
A Hybrid Model for the financing and ownership of EASSy has been proposed. The financing model is composed of two parts:

  • a Special Purpose Vehicle (the SPV), which will receive funding from the private-sector arms of the involved development financial institutions (DFIs), including IFC, to create a commercially viable structure which meets open access policy objectives as well as supporting some operators (the SPV Operators) to fund their investment in the Project; and
  • a Consortium, which will be composed of those operators (the Consortium Operators) that elect not to join the SPV and, instead, make direct investments in the EASSy cable.

The SPV has recently been incorporated in Mauritius with the name of West Indian Ocean Cable Company Ltd. It will be majority owned by the SPV Operators. The SPV will have its own by-laws, Board of Directors and professional management team. It will function as a commercial entity which will manage, market and sell or lease its capacity to SPV Operators and any other authorized third parties.

IFC Support to EASSy
IFC has been asked to provide financing to the SPV, along with five other DFIs including EIB, AfDB, DBSAAFD/Proparco and KfW. The funds will be used to finance that share of the Project cost resulting from the projected capacity requirements of the SPV Operators (the SPV Project Cost), as well as certain preparation and start-up expenses. The SPV Project Cost will ultimately depend on the composition of the SPV, which has yet to be finalized; however, in the current scenario which assumes 14 SPV Operators, the SPV project cost is approximately $120 million.

Expected Development Impact
EASSy is expected to have the following development impact:

  • Significantly increase the supply of high quality reliable broadband capacity while simultaneously reducing wholesale bandwidth costs; and supporting a parallel reduction in end-user prices for telecommunications service which will boost regional competitiveness and enable Africa to participate more fully in the global information economy. This is expected to help provide the conditions for growth of existing businesses and to attract new enterprises which need modern low cost connectivity.
  • The improved access to the internet resulting from the project would also benefit educational and medical institutions and will help boost general computer usage and literacy.
  • Fostering an open, non-discriminatory communications regime that ensures that capacity is available to all at a fair price: the EASSy SPV will sell capacity to all authorized purchasers thereby ensuring competition. This mechanism is designed to encourage open access and the charging of fair prices.
  • Promoting private-sector led models for ICT infrastructure development in the region: The EASSy Cable will be financed on a commercial basis, using a combination of operator equity and debt from private sector DFIs (via the EASSy SPV). This financing and ownership structure is in line with the World Bank’s strategy of maximizing private sector participation in the ICT sector.
  • Promoting regional integration through the sharing of infrastructure facilities.

Complementary Roles of the IFC and World Bank
The IFC and World Bank roles in RCIP are highly complementary to ensure viability of the overall regional program:

  • The viability of any submarine cable in the region is directly impacted by the potential increase in traffic made possible by an acceleration of the backhaul and backbone links, the development of applications at national level, and governments use of the infrastructure to provide services;
  • Conversely, without cross-border initiatives such as the EASSy project, and the resulting reduction in broadband access costs, countries would not have the incentive to develop complementary infrastructure, and the development of applications would be seriously hampered.

The Summary of Proposed Investment provides more information on IFC's involvement with EASSy.

High resolution map of Africa's 'Missing Link' and photos are available for download and use by the media.

 




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