Attention: News Editors and Journalists

Date: 21 September 2011

DBSA DELIVERS ON DEVELOPMENT MANDATE DESPITE CHALLENGING ENVIRONMENT

The Development Bank of Southern Africa (DBSA) today released its Annual Financial Results for the year ended 31 March 2011.  The DBSA has exceeded most of its developmental and operational targets for the year, with record investment approvals of R37,1 billion in 2010/11, despite the fact that conditions in the Bank’s mandate space made meeting ambitious performance targets a challenge.  In South Africa, these challenges included a hesitant and uneven economic recovery, which affected the income of many public and private sector entities; structurally weak finances in many municipalities; the low level of interest rates, which affected the Bank’s interest income from investments; and institutional capacity challenges in government, which limited its ability to accelerate infrastructure project delivery and thus take up developmental loans.

The Bank made a significant internal investment in preparation for the coming phase of development, in line with the revised strategy. Of the R37,1 billion (2009/10: R18,8 billion) approvals, 83% were on projects in South Africa. Commitments were also high, at R13,9 billion.  Disbursements of R8,3 billion were on par with the previous financial year, but are considered satisfactory given the unfavourable economic conditions and the underspend on the public sector infrastructure budget.

The Bank allocated R518,9 million (2009/10: R550,2 million) to development expenditure, directly through the transfer to the Development Fund (to promote and facilitate capacity building within municipalities and local communities), and indirectly for research and development and the Targeted Infrastructure Program. This expenditure represented 60,8% (2009/10: 66,9%) of sustainable earnings for the year.

DBSA’s non-financial assistance to local government focused largely on maintaining its investment in building the institutional capacity of municipalities to deliver services to households and the business community. This entailed identifying and addressing the bottlenecks and constraints which hamper the ability of municipalities to scale up service delivery and to provide services more efficiently and effectively. The DBSA’s initiatives and programs in this regard are an integral component of its developmental business model. They include the Siyenza Manje program, training interventions by the DBSA Vulindlela Academy, the Rural Development program, and a new Operations and Maintenance support program.

Regarding the outcomes of the Bank’s core capacity building interventions, it is estimated that some 746 764 households benefited from improved access to water and some 585 204 households from improved access to sanitation.  Of the municipalities to which financial specialists were deployed, some 64% recorded improvements in audit outcomes. More than 11 381 external learners were trained through the Vulindlela Academy, significantly above the target of 10 000 for 2010/11.

While the financial position of the Bank remains strong, as evidenced by the modest levels of gearing and healthy earnings ratios, the current strategy will rely on continued support from its shareholder.  

Total assets grew marginally (by 5,2%) to R47,4 billion (2009/10: R45,1 billion), with the main contributors, development loans and equity investments, growing by 14,8% and 9,9% respectively.

The strength and quality of the loan book remain acceptable; the percentage of the non-performing loan book is 4,2% (2009/10: 4,9%).

During the year, the equity market showed great cyclical variability, with a general downturn in the last quarter. This is evident from the unrealised revaluations reflected in the financial position. The Bank’s equity investments are strategic, not speculative, supporting its development role and the risk management of the larger investments, where applicable. While equity movements do create volatility in the statement of comprehensive income owing to the classification, they do not create instability in the Bank’s financial position.

The debt-to-equity ratio (excluding callable capital) ended the year at 161,1% (2009/10: 148,5%). This ratio is influenced by the disbursement levels, which are funded mainly from the borrowings for the year.

The net interest income margin (net interest income over interest income) is maintained at 45,8% (2009/10: 45,3%).

A net impairment charge of R228,7 million (2009/10: R228,4 million) to the income statement is managed in line with the overall increase in the loan book.

 The cost-to-income ratio of 41,2% (2009/10: 40,5%) is below the prudential limit of 45%, owing to the active management of the income and expense components.

Sustainable earnings (earnings before the effect of foreign exchange, revaluations, grants and the transfer to the Development Fund) are R853,4 million (2009/10: R822,8 million).

Economic growth and job creation, as well as the eradication of backlogs in household service provision, lie at the heart of reducing poverty and inequality and improving the quality of life of the people of South Africa and the region.  Equally important, economic growth and stability requires continuous investment into new and expanded economic infrastructure. In this regard, the Bank has assisted various departments in finalising plans to unlock delivery in a number of key priority sectors. Full details hereof are contained in the Annual report.

Cabinet has confirmed the appointment of the DBSA to manage the R9 billion Jobs Fund announced by the Minister of Finance in the 2011 National Budget. The Bank’s response to this added challenge was admirable and we were able to operationalise the Fund within one month of the appointment.

The DBSA was also appointed as the reference bank to represent South Africa in the BRICS Banking Mechanism. Among other things, this entails interbank lending and other financial cooperation between DBSA and the reference banks of Brazil (Brazilian National Development Bank), Russia (Vnesheconombank), India (Export-Import Bank of India) and China (China Development Bank Corporation).

Much of the year was invested in financial planning and strategic initiatives that will accelerate the scaling up of the Bank’s infrastructure investments. The balance sheet is robust, and with the support of the shareholder, the Bank will maintain its strong financial sustainability into the future.

Issued by the Development Bank of Southern Africa

For More Information Contact

Name:  Anton Redelinghuis: Acting Group CFO

E-mail: Antonr@dbsa.org

Tel:      (011) 313 3377

Name:  Rosemary Mangope: Divisional Executive: Corporate Communications

E-mail: Rosemarym@dbsa.org

Tel:      (011) 313 3069

Notes for Editors

 "About Development Bank of Southern Africa”

The Development Bank is a leading Development Finance Institution (DFI) in Africa South of the Sahara, playing the roles of Financier, Advisor, Partner, Implementer and Integrator.  The Bank maximizes its contribution to sustainable development in the region by mobilising financial, knowledge and human resources to support Government and other development role-players in improving the quality of life of people in the region through funding infrastructure projects; accelerating the sustainable reduction of poverty and inequity; and promoting broad-based economic growth and regional economic integration.”