Tourism is a key diversification sector for Malawi’s economy and has enormous potential of becoming the major exporting sector for the country that could accelerate generation of foreign currency revenues as well as support the goal to increase job creation and widen the country’s public revenue base. However, operators in the sector face limitations in attracting financing for development of facilities such as modern hotels, which are required to promote rapid expansion of Malawi’s tourism industry, due to risks related to construction and project completion.
EDF’s Hotel Construction Guarantee and Refinancing Facility is aimed at promoting development of hotel facilities of international standards in Malawi through a risk sharing arrangement with other financiers.
The Benefits of the Facility are as follows:
- With EDF’s Refinancing undertaking, the parties financing the construction phase are provided a sound basis for providing funding to developers as they are assured of refinancing by EDF upon project completion.
- The project is afforded the opportunity of achieving a longer financing maturity than what financiers who will support the construction phases will ordinarily be willing to give
The Facility is structured as a Dual Tranche Facility:
- Tranche 1: The Original Facility (OF)- the Construction firm or the bank will fund the construction phase of the hotel project backed by EDF’s “Contingent Guarantee”;
- Tranche 2: Refinancing or Relay Facility- Upon completion of the hotel and certification by the by an acceptable independent engineer, EDF will refinance the Construction Facility while supporting the operations of the completed Hotel. EDF may also provide working capital facility and funding for furniture, fittings and equipment.
The constructed Hotel will be under the management of an operator with the following qualities:
- Holds franchise to, and/or own solid brand names that have been proved in the market;
- Must have proven track record of at least 3 years in managing/operating hotels/tourism facilities of international standards in a multiplicity of African countries;
- Must be able to offer Global Reservation Services
- Owners’ contribution for at least 30% of the total project cost.
Tourism projects in the following areas:
- Cities targeting business and conference tourism;
- Resorts targeting leisure tourism;
An application should contain the following:
- Business Profile;
- Company registration certification and memorandum and articles of association;
- Feasibility and Market Study for the Project;
- Environmental and Social Impact assessment report
- Business plan covering the financing period
- Engineering designs and Bills of quantities;
- Profile of proposed contractors;
- Profile of the proposed hotel operator; and
- Title documents for the proposed property on which the project will be developed