HOW COVID OVER­HAULED FUND­ING

De­vel­op­ment fi­nance in­sti­tu­tions are meant to in­vest more to ease the pain when times get tough — like right now

Financial Mail - - ON MY MIND - By TP Ncho­cho

Barely seven months into Covid-19, its im­pact on economies across the globe has been swift but dev­as­tat­ing. In some coun­tries, years of grad­ual eco­nomic re­cov­ery and progress in curb­ing un­em­ploy­ment and poverty, in­flicted at the height of the global fi­nan­cial melt­down in 2009, have been un­done.

SA’S econ­omy was strug­gling even be­fore the Covid-en­forced lock­down. Re­cent fore­casts make for grim read­ing: way, in­clud­ing the con­struc­tion of bulk wa­ter in­fra­struc­ture, the con­struc­tion of roads and im­ple­men­ta­tion of the In­te­grated Re­source Plan. It’s an opportunit­y for DFIS such as the De­vel­op­ment Bank of South­ern Africa to spear­head a re­cov­ery premised on in­fra­struc­ture in­vest­ment.

In a post-covid world, we ex­pect that a num­ber of in­dus­tries will re­bound as lo­cal­i­sa­tion of prod­ucts be­comes a dom­i­nant theme and sup­ply chains are re­aligned glob­ally. The IDC will push for a trans­formed econ­omy, which pro­vides equal op­por­tu­ni­ties across the racial and gen­der spec­trum while sup­port­ing the cre­ation and de­vel­op­ment of black in­dus­tri­al­ists.

The ques­tion is, what is hold­ing back DFIS from play­ing a more ac­tive role in re­viv­ing our econ­omy?

Un­like the 2008 eco­nomic crash, Covid-19 has af­fected the abil­ity of DFIS to re­spond as they would like to. Their port­fo­lios have been ham­mered by the de­clin­ing for­tunes of their busi­ness part­ners — value has been erased and in­come cur­tailed.

It means new and dy­namic re­sponses are needed. That’s why the CEOS of SA’S largest DFIS have set them­selves the chal­lenge of re­spond­ing to the cur­rent cri­sis in a col­lec­tive man­ner, so that the sum of our in­ter­ven­tions, as a DFI sys­tem, is greater than our in­di­vid­ual ef­forts.

We re­alise that for DFIS to play a mean­ing­ful and ef­fec­tive role we need to part­ner not only with each other, but with the gov­ern­ment, our share­holder, and with busi­nesses and clients. We need to look at ac­cess­ing extra fund­ing to help the econ­omy bounce back. We need to think cre­atively about how to strengthen DFIS’ bal­ance sheets to pro­vide the mus­cle for them to play their coun­ter­cycli­cal role.

It’s a sig­nif­i­cant change from the way we’ve op­er­ated be­fore. It means that as much as Covid-19 has re­set SA’S econ­omy, the coun­try’s DFI sys­tem is also wit­ness­ing a new and more pro­duc­tive dawn.

Ncho­cho is CEO of the IDC

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