CAPE TOWN – The Development Bank of Southern Africa (DBSA) provided R15.4 billion towards social and economic infrastructure projects in its past financial year, and it grew the value of its assets by 12 percent to more than R100bn, chief executive Patrick Dlamini said on Friday.
He said in an interview the near doubling of non-performing loans in the year had started to improve, with notably some fragile sub-Saharan African countries again beginning to service their loans, but he said “we are not yet out of the woods”, and risks associated with potential second waves of Covid-19 infections remained.
The expected credit losses on financial assets rose sharply to R3.63bn in the year to March 31, compared with R1.44bn at the end of the previous financial year. Net profit of R504m had fallen from R3.1bn at the end of the 2019 financial year.
The DBSA received an unqualified audit report.
During the last quarter of the financial year, the global spread of Covid-19 had created a health and economic crisis that saw most countries closing borders and implementing lockdown measures.
The fallout from the pandemic necessitated unconventional monetary and fiscal policy measures across the world, while economic activity was disrupted. In South Africa, infrastructure investment was identified as a way to re-stimulate the economy.
Dlamini said the DBSA was in the process of “populating” a dedicated division for the Infrastructure Fund, so that the fund could do its work in planning and facilitating viable infrastructure projects through blended financing arrangements, while at the same time allow the DBSA to continue with its other normal development finance activities.
President Cyril Ramaphosa has made infrastructure development the “flywheel” of the Economic Reconstruction and Recovery Plan for the post-Covid-19 economy, and the government hopes to unlock some R1 trillion in infrastructure investment over four years.
Project preparation was the most critical component to attract private capital to infrastructure investments, he said.
The DBSA has so far identified a pipeline of R340bn of infrastructure projects in student accommodation, social housing, water infrastructure, rail freight branch line development, electrical generation, bulk infrastructure to municipalities and broadband.
Dlamini said the two “promising” projects looked like they might be launched early next year. One would begin to make inroads into the estimated shortfall in student accommodation of more than 300 000 student beds, while the other related to SA Connect, which entails the laying of fibre between government agencies and organisations.
He said the key to the success of these projects would be the DBSA’s role in helping to “crowd-in” private sector participation in these projects.
He said thus far there had been good buy-in from potential private sector funders such as pension funds, asset managers and a host of regional and multilateral development finance institutions. “They are fully on board,” said Dlamini.
In the past year, some 33 percent of the DBSA’s loan disbursements went towards the larger municipalities, but, said Dlamini, more than 90 percent of the municipalities were reliant on central government fiscal allocations, and the DBSA was in talks with the National Treasury about “how best to add value” to the funding of the municipalities.
Also, about a third of the DBSA’s disbursements last year went towards the financing of infrastructure projects in other African countries.
Dlamini said the Africa Continental Free Trade Agreement meant that the DBSA had a “catalyst” role to play in facilitating infrastructure development to enable South African goods to be able to get more easily into other African countries.