Though the Development Bank of Southern Africa (DBSA) was closely associated with the old regime, in 1994 the new government quickly identified it as a key instrument for financing social and infrastructural development, especially at local authority level. It saw the DBSA as filling a vital gap between the public and private sectors. Operating on strictly commercial, self-sustaining lines it was nevertheless able to consider projects that would be beyond the scope of traditional private-sector finance.
This unique character did not relieve the DBSA of the need to undergo its own transformation. Indeed, as chairman Jay Naidoo explains, the DBSA has gone through two transitional stages, and is now embarking on a third phase.
The first five years after 1994 were about stabilising the bank, and extending its mandate beyond SA's borders to the Southern African region. The broad philosophy was to apply about two-thirds of available resources in SA, the rest in neighbouring states.
Then came the second stage, Vision 2004, implemented through what Mandla Gantsho termed The Quantum Leap after his appointment as MD in 2001. He had been the DBSA's chief financial officer for the previous five years. This stage was about repositioning the institution to achieve equity transformation.
It became apparent that the DBSA could not concentrate solely on the provision of capital; because of capacity problems at local authority level, it had to adopt a triple role of financier, adviser and partner. The demands of these extra functions were such that the DBSA realised it could not function alone: it needed partnerships, with both the private sector and other governmental institutions, at various levels.
To an extent, it would have to play a catalytic role rather than be a sole motivator and driver, and in this way mobilise and leverage private-sector resources. This also required a new emphasis on knowledge-building; the importance of this and the public-private partnership concept are discussed later in this survey.
This strategic philosophy lies behind the third stage, Vision 2014, which is closely aligned with government's own vision of the future, as well as Nepad and the global Millennium Development Goals. Building on earlier successes, it envisages a more proactive role for the DBSA to expand the frontiers of delivery.
It must invest not only in traditional "hard" assets, but also in softer assets, such as human and institutional capital.
Based on this new approach - which, says Naidoo, is so exciting it is the only reason he was willing to serve another term - Vision 2014 seeks to raise overall investment levels in the wider Southern African region from the current 16% to 25% of GDP.
Naidoo says Vision 2014 will take the DBSA into riskier waters. But he identifies five major challenges:
- How can it stop repeating past mistakes and have a radical and dramatic impact on the systemic failure at local government level?
- How does it cut the cost of finance to the smaller, weaker and highest-risk municipalities? It needs tighter risk management and must invest enough to make them self-sustainable.
- How does it integrate development spending with the social environment and create stable communities?
- How does it "crowd in" the private sector, rather than risk the public sector absorbing an excessive share of available investment? It must create agencies within the private sector to invest in projects in needy areas with different rates of return. For example, a quality hotel in a rural area is a source of employment and income that must be linked to the development of the local community.
- Lastly, it must set criteria for development projects outside SA. The DBSA needs large regional projects with good returns to preserve its high credit rating.
The DBSA may seem like an institution undergoing constant change, but its continual questioning and redefining of its role has not distracted it from its vital underlying objective of financing infrastructural development.
In the 2005 financial year, total project approvals of R3,9bn were 30% above target. They covered 86 projects, up from 58 the year before. Disbursements rose from R2,8bn to an on-target R3bn - growth here was slower because of a lower level of approvals the previous year.
Indicative of its role as a partner and facilitator, the DBSA's R3,9bn was only half the total capital cost of the relevant projects. The contribution of other partners naturally varies, but in fact it was relatively low last year. At the other extreme, in 2001, the DBSA's commitment of R2,2bn helped to secure projects with total costs of R13,9bn.
At the DBSA Development Fund, record approvals of R170m were 86% above target, and disbursements of R74m were 42% above target.
Gantsho says the performance of the bank in 2005 is expected to create 36 000 jobs, contribute R6,9bn to GDP and add R400m to the income of low-income households. It's estimated that the number of households to benefit from project service delivery more than quadrupled during the year, to 1,9m.
With growth like this, it's no wonder bank officials refer to the past few years as having brought a quantum leap in its activities. In the past four years, it has grown its business, on a sustainable basis, by more than 50%.
In that period, says Gantsho, DBSA funding has helped generate more than 100 000 jobs and an estimated 2m infrastructure service connections. The impact on low-income households has been about R1bn, and R10bn on the economy in general.
All this has been achieved without losing sight of the need to be a financially strong and soundly based institution. All bar one of the financial sustainability targets were met or exceeded in 2005: the exception was the cost-to-income ratio because, though costs were held to 1% below budget, income was 11% below budget.
Moody's actually raised the DBSA's international rating from the target Baa2/BBB to Baa1/BBB. The local rating was unchanged at the target AAA. But, as Gantsho stresses, financial strength is a means to an end, not an end in itself.
The DBSA has also recast itself into a centre of excellence, and a hub for knowledge mobilisation and sharing. Here, a key initiative is the DBSA Vulindlela Academy, housed at the bank's Midrand head office.
The slogan on the cover of the DBSA's 2005 annual report sums up the bank's vision of its future: The Next Decade: Expanding the Frontiers of Delivery for Sustainable Development. That puts it squarely at the coalface of what many see as SA's biggest socioeconomic challenge: to reduce welfare disparities and provide basic services to those who were and are still disadvantaged.
If we can't accelerate our progress towards this, social stability will be threatened, perhaps even irrevocably damaged. The DBSA has a key role in averting this. N o negligible institution in itself, the DBSA's importance is magnified by its function as a catalyst and mobiliser of third-party resources.
