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