Despite challenging economic conditions, the DBSA produced a strong financial performance with a net profit of R2.8 billion and sustainable earnings of R3.6 billion. The DBSA delivered R48.2 billion in total infrastructure development support, with development assets now at R78.8 billion from R77.1 billion in 2015/2016.
Salient features of the financial year include:
Total infrastructure development impact of R48.2 billion of which;
• R31.9 billion in funds catalysed from third parties
• R12.4 billion in total disbursements
• R3.3 billion in total funds under management for infrastructure delivery
• R0.6 billion in project preparation funding
Key financial highlights:
• DBSA achieved a net profit of R2.8 billion (2016: R2.6 billion)
• Revenue growth of 31% to R4.7 billion (2016: R3.6 billion)
• Sustainable earnings rose to R3.6 billion (2016: R1.4 billion) on the back of an increase in net interest income to R3.7 billion (2016: R3.2 billion), an increase in equity gain realised of R655 million (2016: R44 million) and a decrease in impairments charges to R339 million (2016: R1.4 billion)
• Cost to income ratio improved to 18.8% from 28.7% in 2016, driven mainly by 31% revenue growth
• Cash generated from operations increased by 27% to R3.8 billion (2016: R3 billion)
• Non-performing loan ratio improved to 3.3% (2016: 3.7%)
• Return on average equity of 9.2% (2016: 9.7%)
Speaking at the launch of the results, Patrick Dlamini, Chief Executive of the DBSA said: “Despite a challenging operating environment, we have produced a strong set of results and delivered infrastructure development impact.”
South Africa and the continent’s needs for infrastructure development remain critical. As a result, in the financial year under review the DBSA further improved its strategy to ensure that its catalytic role is optimised by drawing private sector and other third party funding closer to the multitude of opportunities for developing Africa’s much-needed infrastructure.”
In the financial period under review, the DBSA’s Project Preparation experienced a challenging year. The value of projects approved for funding in 2016/2017 was R0.6 billion (2016:R76 billion), due to delays in the South African IPP programme and a large transport project. 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 DBSA delivered disbursements of R12.4 billion in the 2016/2017 financial year, compared to R17.1 billion in 2015/2016. The decline was mostly in the South African energy and transport sectors, due to delays in the IPP programme and transport infrastructure roll-out. The DBSA demonstrated its strong support to secondary and under-resourced municipalities, with an 83% growth in disbursements to R1.1Bn, with 17 infrastructure projects completed benefitting over 7 545 households.
The International Financing division met its targets, disbursing R3.7 billion to projects in the rest of the continent, up from R3.5 billion in 2015/2016.
Dlamini says, “Although challenging conditions are likely to remain, the DBSA will continue to play a role in supporting municipalities by providing not only infrastructure financing but planning and implementation support services.”
Impact of municipal funding includes:
• R839 million and R240 million disbursed to secondary and under-resourced municipalities respectively (2016: 430 million and 173 million)
• 17 projects completed in secondary and under-resourced municipalities in the electricity, water, sanitation, roads, storm water and fleet management sectors
• Through implementation support, the DBSA indirectly contributed to creating 1 178 temporary job opportunities
• Anticipated development impact based on signed commitments to the value of R13.3 billion during the 2016/17 financial year is as follows:
182 727 households to benefit from electrification projects and the upgrading of substations
22 814 households to be positively impacted from bulk water provision and reticulation projects
15 533 households to benefit from sanitation projects
The Infrastructure Delivery Division (IDD) delivered commendable results in a challenging year as a result of the slower than expected development of the contractor base and delays experienced by clients in their own organisations which in turn led to delays in the DBSA’s environment.
Total funds under management remained flat at R3.3 billion (2016: R3.3 billion), while the value of infrastructure delivered increased to R2.8 billion (2016: R2.6 billion).
Development impact highlights of the past financial year include:
• More than 266 000 people gained access to improved health facilities
• The completion of 12 schools, as part of the Accelerated School Infrastructure Delivery Initiative, benefitting 4 254 learners
• 342 affordable houses completed with 597 households to benefit from the houses completed
• 28 health facilities completed.
• 500 SMMEs benefitted from construction contracts to the value of R493 million, with 9 077 jobs created through projects completed by the Infrastructure Delivery Division.
The DBSA delivered strong financial results underpinned by the launch of new product and service offerings and continued focus on cost management. Sustainable earnings improved to R3.6 billion from R1.4 billion in 2015/16 and the Bank recorded a net profit of R2.8 billion against R2.6 billion in 2015/2016. Sustainable earnings represents profit earned before foreign exchange and certain financial instruments adjustments. The increase in sustainable earnings was mainly as a result of a R1 billion increase in income from our equity investments, a decline in impairments of R1.1 billion and an additional R480 million from net interest income.
The Bank’s total assets grew by 1% to R83.7 billion, with the total development asset book increasing by 2% to R78.8 billion. The debt/equity ratio of 158% remained well below the 250% statutory threshold, demonstrating the DBSA’s ability to continue to use its balance sheet to drive sustainable infrastructure investment. Demonstrating the DBSA’s focus on strong governance, non-performing loans, after specific provisions, improved to 0.7% from 1.1% in the previous financial year and against a target of 3.3%.
The DBSA achieved a cost-to-income ratio of 18.8%, compared with the previous year’s target of 28.7%. The improvement was driven by a combination of the 31% growth in revenues and prudent cost management.
“Although the economic outlook remains uncertain, we believe that our refined strategy will enable the DBSA to continue to deliver development impact across the full infrastructure development value chain,” says Dlamini. “As an example, in the coming financial year the DBSA seeks to expand and diversify its product offering in order to provide non-traditional balance sheet financing with greater support throughout the infrastructure value chain. We believe the DBSA is well-placed to continue its central role as the financial engine room of South African development, and to play a major role in the development of the continent,” concludes Dlamini.
Notes for Editors:
About Development Bank of Southern Africa
The Development Bank of Southern Africa (DBSA) is a leading Development Financial Institution (DFI) in Africa. The DBSA provides financing, project preparation and implementation support for economic and social infrastructure in South Africa, SADC and beyond. The institution’s mission is to improve people’s lives, boost economic growth and promote regional integration through infrastructure development.