THE BIG FOUR-OH OF DBSA DEVELOPMENT PROGRESS

The Development Bank of Southern Africa (DBSA) turns 40 in 2023 – a year that also marks a major CEO leadership change following the appointment in April of Boitumelo Mosako, dubbed ‘the lioness’ by poet Jessica Mbangeni. She takes over the reins from Patrick Dlamini –one of the most courageous leaders of our time.

By Zeph Nhleko

This is a time for reflection and celebration, as we wind back the clock over the past four decades and revisit the milestone events that have shaped our past and future. The DBSA storyline began in earnest in 1979 and can be divided into the apartheid and postapartheid periods.

Apartheid Period

In his toespraak at the Carlton Centre Conference on 22 November 1979, Prime Minister PW Botha advised delegates, which included mostly leading white business personalities, that there was a Marxist danger to the order and stability of Southern African independent nations, his so-called ‘constellation of nations’. He claimed that the Marxist system implied neither freedom nor welfare for Southern African states.

As expected, this so-called freedom and welfare was to be attained without causing a large-scale transfer of productive assets to black citizens. In fact, he assured the conference that it was to be attained by ensuring that assets remain in the possession of private interests, and specifically those who possess expertise.

Delegates were informed that the constellation of nations must work together to respond to this imaginary Marxist danger by, among others, supplementing existing multilateral structures. One of the key interventions proposed was the establishment of a development bank for Southern Africa to provide technical expertise and finance infrastructure.

Foundation and landmark developments

The DBSA was established in 1983 by its shareholders – the government of South Africa and the bantustans of Transkei, Bophuthatswana, Venda and Ciskei. It commenced operations in February 1984 and went on to provide loan and grant financial development interventions worth R40.5 billion between 1983 and 1993.

The Author

Zeph Nhleko is currently chief economist at the DBSA. Before this, he served as a deputy directorgeneral at the national Economic Development Department overseeing economic policy development and coordination, as well as social dialogue. This followed his role as a deputy director-general at the KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs. Here, he was responsible for economic planning, sector development and business governance. He earlier spent many years as a senior economist analysing economic data and interpreting macroeconomic policy outcomes at the South African Reserve Bank.

Some of the notable projects facilitated during its first decade of existence include building the Fika Patso Dam in QwaQwa (now part of the Free State) for R21.5 million; rehabilitation of 62 km of the N2 road in Transkei (now part of the Eastern Cape) for R37 million; development of the R66 road linking Ulundi, Nongoma and Pongola in KwaZulu (now part of KwaZulu-Natal) for R39 million; building the DBSA headquarters in Midrand for

R26 million; building the Isithebe, Madadeni and Ezakheni industrial parks in KwaZulu for R64 million; building Umtata College of Education for R35 million in Transkei and the Ndebele College of Education in KwaNdebele (now part of Mpumalanga) for R28 million; facilitating the Alexandra Township urban renewal programme for R54 million; and initiating the Lesotho Highlands Water Project for R72 million.

The DBSA also played a significant role in reshaping policy prior to the democratic dispensation in the areas of poverty, regional development, land reform, education, urban-rural interface, urban development and housing.

POST-APARTHEID PERIOD

Not shutting down the DBSA at the dawn of democracy was one of the good decisions made by the government of national unity. A transformation committee was established in December 1994 to advise the Minister of Finance on the focus, structure and functions of a transformed DBSA.

The committee reviewed the development finance system in South Africa and recommended that the DBSA (or the Infrastructure Development Bank, as they suggested at the time) should narrow its focus of operations to infrastructure development. More specifically, it was recommended that the bank should be reconstituted as a South African government subsidiary and its primary

INFRASTRUCTURE FUNDING & IMPLEMENTATION

purpose should be to promote economic growth, development, human resource development and institutional capacity building through sustainable development projects and programmes centred around the provision of infrastructure.

Since then, the DBSA has grown its annual level of loan disbursements from R717 million in 1994 to R12.9 billion in 2022. During the same period, interest income increased from R547 million to R8.9 billion; the loan book from R4.8 billion to R90 billion; shareholder equity from R4.5 billion to R42.9 billion; net earnings from R255 million to R3.6 billion; and total assets from R6 billion to R100 billion. Today, the DBSA is working on an infrastructure project pipeline worth more than R155 billion across its various divisions.

A-category rating and unqualified audits

While the bank’s credit rating is capped at that of the sovereign, the Association of African Development Finance Institutions Peer Review mechanism – which performs ratings among African DFIs – has rated the DBSA at the prestigious A-category for the past five years. Similarly, auditors have granted the DBSA unqualified annual audit opinions since its inception.

This performance has allowed the bank to increase its non-lending development contributions and increase its development impact. Annual grant support increased from R6.8 million in 1994 to R72 million in 2002. And during the past decade alone, the bank – through its infrastructure build process – has built and refurbished 726 schools, completed 404 health facilities, and 456 social houses. The bank has also contributed to this remarkable development impact by facilitating the creation of more than 37 000 jobs in 2022 – compared with only

300 jobs in 1994 – and supported small blackowned businesses to the tune of R3.2 billion, compared with R10.5 million in 1994.

Peaks and troughs

It is acknowledged that the overall national economic performance from 1994 to 2022 falls short of citizens’ expectations, with national GDP averaging 2.4%, unemployment 25%, poverty 51% and inequality 68%. However, many South African public and private corporates have made contributions to ensure that we stay afloat over these past 29 years. The DBSA is one of them. It is therefore an unfounded myth to say all stateowned enterprises (SOEs) are dysfunctional. The DBSA is among those SOEs that remain resilient and operate in accordance with all relevant prescripts.

Staying true to the mandate

The mainstay that has kept the DBSA resilient and ensured impressive performance since 1994 is guided by four critical factors:

1. The bank constantly strives to adhere to its corporate values of high performance, integrity, innovation, service orientation and shared vision.

2. The bank adheres to strong governance that involves staff, the board and the shareholder.

3. The bank continuously and carefully plans leadership changes to ensure leadership stability at executive and board levels. (The DBSA has, for example, had only seven permanent CEOs in 40 years; the three acting CEOs only spent 19 months during this time.)

4. The bank always shows appreciation to its staff and offers a sound employee value proposition in return.

Looking back, the DBSA can certainly be proud of its achievements, and going forward there’s a challenging and exciting road ahead. In fact, the DBSA intends to multiply its current performance manyfold over the next 40 years!