Lean, mean DBSA back in the black

2014-09-21 15:00

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Bank swings into profit and spreads its wings to cover the entire continent as it shrugs off looming threats from new and established finance institutions

The Development Bank of Southern Africa (DBSA) is leaner, more cost-effective and ready to execute its mandate, which was recently expanded by Parliament, to cover the entire continent. But the looming launch of the Brics-led New Development Bank might pose a threat for this development finance institution.

The extension of the bank’s mandate will need creative thinking, according to CEO Patrick Dlamini.

“This requires us to be very smart and innovative. We need to find projects with the highest sociodevelopmental impact,” he says.

DBSA competes with the African Development Bank and will soon have a new rival in the upcoming New Development Bank, which will be led by the Brazil-India-China-South Africa economic trade bloc, with a regional centre planned in Joburg. But Dlamini says the three will complement each other.

Dlamini says Africa spent about $40?billion (R440?billion) a year on infrastructure projects. The Africa Infrastructure Country Diagnostic project showed that the infrastructure needs of sub-Saharan Africa will exceed $93?billion annually over the next decade.

“The gap is huge, so it is important to partner with other development finance institutions. We can fulfil the role of partner and facilitate interregional trade,” he says.

Continent-based development finance institutions are making institutions such as the International Monetary Fund and the World Bank think about their relevance, he adds.

“Over time, as African development finance institutions get more support from their governments, there will be less need for them to rely on these institutions.

“But it is really important for us that African development finance institutions work together. There are many initiatives that are delivering in that direction.”

The bank released its results on Monday and showed a return to the black with R787?million in net profits for the year to March, compared with a R826?million loss last year.

This was despite accelerated disbursements of R12.7?billion, its highest in five years, and an increase in impairment provisions to R2.4?billion from R2.3?billion.

Dlamini says more than half of the profits were due to organic growth, with 49% due to the bank’s recent organisational restructuring, where the head count was almost halved to 496 staff members.

According to the bank’s annual report, it wound down the DBSA development fund?–?a significant contributor to the bank’s cost base?–?and established an infrastructure delivery division operating on a “full cost-recovery” basis.

Locally, the bank is involved in government’s strategic integrated projects programme?–?18 projects which are part of an ambitious R3.2?trillion-R4?trillion, 15-year infrastructure drive. It is the coordinator of SIP 6, a municipal infrastructure project to address maintenance backlogs and upgrades needed in the 23 least-resourced district municipalities that cater for 17?million people.

“We need to be able to play our role,” says Dlamini. “The SIPs need project people. Development finance institutions will have to do [such things as] feasibility assessments.”

The DBSA is also the implementing agent for SIP?13, a project to upgrade and refurbish schools and build new ones. Dlamini says the DBSA is in talks about the needs of the Trans-Caledon Tunnel Authority, Transnet, and the Passenger Rail Agency of SA.

“In the near future, we’ll be putting our money in. There are some projects where government doesn’t even have to put money in, like Transnet,” he says, pointing to the logistics company’s recent R6?billion funding deal with the US Export-Import Bank to buy locomotives from General Electric.

“Our role there is in the form of project development,” says Dlamini.

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