Midrand - The Development Bank of Southern Africa (DBSA), a South African Development Finance Institution (DFI) reported a solid set of results for the financial year ending 31 March 2021.
Despite the impact of the COVID-19 pandemic, the DBSA remained focused in line with its mandate, on pursuing its growth strategy designed to augment disbursements through emphasis on its catalytic role aimed at contributing to sustainable infrastructure development beyond the confines of its own balance sheet.
Statement of comprehensive income
Net profit for the year increased by 182% from approximately R504m in the prior year to R1.4bn in 2021. The net profit arose from the core lending activities of the Bank. Solid growth in net interest income amounted to 11% (compared to the prior year), which despite currency headwinds resulted in an 8% improvement in operating income to R5.1bn for 2021 (2020: R4.7bn). Impairment charges reduced by 68% compared to the prior year when the Bank made significant adjustments to accommodate the impact of COVID-19. Effective cost containment strategies enabled the Bank improved to its cost-to-income ratio from 28% in the prior period to 25% for 2021. “Managing profitability and efficiencies are the main drivers to the good set of results”, said Patrick Dlamini, CEO of the DBSA.
Statement of financial position
The Bank’s total asset base remained at the R100bn level as at 31 March 2021 when compared to March 2020 despite loan repayments amounting to a record level of R19bn (comprising principal loan repayments of R11bn and interest repayments of R8bn), offset by currency movements of R5bn and new disbursements amounting to R13.5bn for the year. Development loan disbursements decreased by 14% from R15.6bn in the prior year to R13.5bn in the current year as the impact of the pandemic disrupted new business. As at 31 March 2021, the equity investment portfolio decreased by 16%, from R5.9bn in the prior year to R5bn in the current year, as a result of currency movements of approximately R619m, capital repayments of R236m and fair value adjustments of R349m.The Bank experienced an increase in expected credit loss provisions amounting to R1.2bn on the back of marginal deterioration in the overall risk of the loan book and the average probability of default of the loan book increasing marginally when compared to the prior year. The Bank increased its impairment coverage levels on the loan book from approximately 11% in March 2020 to approximately 12% as at March 2021. This resulted in the balance sheet provision for expected credit losses (impairment provision) increasing by 12% to R11.4 billion (31 March 2020: R10.2 billion). However, when compared to prior year, the expected credit loss provision (impairment) charge in the income statement significantly decreased by 68% from R3.6bn in 2020 to R1.2bn in the 2021 financial year.
Capital adequacy and liquidity
The Bank’s capital ratio, expressed as a percentage of balance sheet shareholder capital to unweighted total assets, increased to 39% as at 31 March 2021 from approximately 37% as at 31 March 2020. Callable capital comprises shares authorized but not yet issued. The Bank’s balance sheet equity position increased by R1.6bn during the year from R37.6bn as at March 2020 to R39.2bn as at 31 March 2021.The debt-to-equity ratio, including the R20bn callable capital as at 31 March 2021, improved to 101% (31 March 2020: 108%), well below the Bank’s regulatory debt-to-equity ratio cap of 250%.
As noted, cash collections reached record levels during the period under review, contributing to the increase in cash generated from operations from R3.6bn in 2020 to R4.5bn for 2021. Cash and cash equivalents increased to R9bn in 2021 from R3.5bn in 2020.
“We have been successful in raising funding from international development finance institutions as well as international and local commercial banks. This gives us confidence in our ability to still attract investors in an increasingly challenging environment. Many countries were faced with finding a balance between containment of the virus while continuing to support economic growth”, Mr. Dlamini added.
From a development impact perspective, results achieved in the current period ending 31 March 2021 include:
- 6 909 learners receiving access to 11 newly built schools across the country.
- 33 125 learners enjoying the benefits of 51 refurbished schools.
- Interventions at municipal level resulted in the successful completion of 13 projects.
- Overall, R2.4bn of the Bank’s infrastructure spend benefitted broad-based black economic empowerment (B-BBEE) companies of which 39% have women ownership greater than 30%.
- In absolute numbers, 1 031 small medium and micro enterprises (SMMEs) benefited from the infrastructure that has been delivered to date of which 80 are women owned SMMEs.
DBSA successfully delivered infrastructure to the total value of R26.6bn, of which R8.2bn was infrastructure catalysed. In addition, the Bank achieved R0.9bn in projects prepared and committed and was able to unlock infrastructure within under resourced municipalities amounting to R1.4bn. Projects approved for B-BBEE entities for Project Preparation funding amounted to R2.1bn.
The Bank provided a comprehensive response to COVID-19 which included support to the National Disaster Management Centre as well as support to municipalities through the provision of isolation pods, testing kits, mobile toilets, water tankers, energized boreholes and much more.
Despite the challenging economic environment, the DBSA has a strong leadership and management team steering the Bank through the challenging pandemic, whilst following the principles of good corporate governance. The DBSA has a resilient balance sheet and continues to play a significant role in infrastructure development through lending and non-lending activities.
“Our continued success hinges on our ability to grow developmental impact using our own balance sheet and partnering with others. Both domestic and global economic factors are critical to the achievement of the DBSA’s objectives,” said Dlamini. “The Bank has a healthy pipeline of projects that form a solid springboard for success in the future and we will continue to focus on disbursing to infrastructure projects to grow developmental impact in line with our mandate.”
The 2020/21 Annual Reports can be accessed here