Bank to focus on early stage investing
• Development Bank of Southern Africa targets early stage investment
The Development Bank of Southern Africa, which disbursed R12.4bn in infrastructure finance for the year to March, would direct more funds to early stage investing to crowd in greater private sector investment, said client coverage head Mohan Vivekanandan.
The Development Bank of Southern Africa, which disbursed R12.4bn in infrastructure finance for the year to March, will direct more funds to early stage investing to crowd in greater private sector investment, says client coverage head Mohan Vivekanandan.
Early stage investing could help a project become bankable, attracting commercial banks and other private investors, Vivekanandan said on Tuesday.
For the year to March, the bank catalysed R31.9bn in investment from third parties. This contributed the lion’s share to its total infrastructure development impact of R48.2bn and compared with R12.4bn in disbursements from its own balance sheet.
It is now widely accepted that traditional development finance institutions (DFIs) should work together with private sector investors to maximise impact. In 2015, a cohort of DFIs coined the phrase, in a paper by the same title, “from billions to trillions”. One of the ideas behind it is that to achieve the UN sustainable development goals, private sector investment will need to come in alongside official development assistance.
One of the major reasons for the infrastructure backlog in SA and on the continent was not the funds available but the number of bankable projects, said Vivekanandan. By 2020, the bank wanted to unlock R100bn annually in infrastructure investment, with only about 25% of this delivered from its own balance sheet, he said.
In this vein, the bank had established a “project preparation capability” that would prowell vide funding to make more projects bankable.
The value of projects approved for funding during 2017 amounted to R600m, down from R7.6bn in 2016. This was due to delays in the independent power producer (IPP) programme and the expansion of the Gautrain. “Looking ahead, the project preparation division will focus on a programmatic approach in the water and energy sectors as well as in under-capacitated municipalities,” the bank said.
The bank, which has assets of R86.5bn, disbursed R12.4bn in the year to March, down from R17.1bn in the previous period, on the IPP programme and Gautrain delays.
It extended R4.5bn to metropolitan cities in SA, narrowly missing its R4.8bn target.
The bank had faced competition from commercial banks as as the International Finance Corporation in this space, Vivekanandan said.
Investments of R433m and R2.7bn in social and economic infrastructure, respectively, were well below the targets of R1.2bn and R5.6bn.
Positively, the bank’s impairment charge fell to R339m from R1.4bn in 2016 on an improvement in the quality of its book. This helped to support a doubling of its earnings to R3.6bn.
Its nonperforming loan ratio has improved from 7.3% in 2013 to 3.3%, while the cost-toincome ratio fell from 28.7% in 2016 to 18.8% on a 31% increase in revenue to R4.7bn.
The bank’s ability to borrow remained robust, said Vivekanandan. “I’m hoping these financial results will continue to allow us to borrow at reasonable rates.”
INVESTMENTS OF R433M AND R2.7BN INTO SOCIAL AND ECONOMIC INFRASTRUCTURE WERE NOT ENOUGH
THE BANK NOW HAD A PROJECT PREPARATION CAPABILITY, TO MAKE MORE PROJECTS BANKABLE