Development Bank of Southern Africa: A positive approach to financing change

African nations continue to strive for a level playing field with other parts of the world, when it comes to socio-economic development. The role of institutions like the Development Bank of Southern Africa play an integral part in providing economic impetus for change.

The Development Bank of Southern Africa (DBSA) was established in 1983 to perform a broad economic development function within the homeland constitutional dispensation that prevailed at the time.

Headquartered in Midrand, South Africa, the DBSA seeks to play a pivotal role in delivering developmental infrastructure in South Africa and the rest of the African Continent.

Its vision is to help propagate a prosperous and integrated resource efficient region, progressively free of poverty and dependency.

To achieve these aims, the DBSA works closely with the South African government and focuses on a number of areas.

DBSA provides planning, financing and implementation support to municipalities in areas such as water and sanitation; electricity; roads and houses. Successful projects include the Tshwane Rapid Transport system and financing the Durban University of Technology student village. (174 words)

DBSA also provides funding for economic infrastructure projects covering: bulk water; transportation/logistics; power/energy; telecommunications and liquid fuels (oil/gas). One of the notable projects DBSA has been involved in is the !Ka XU Solar One, one of the 28 renewable energy projects announced by the Department of Energy (DoE) in 2011. The total cost of the project was budgeted at R8.8 billion of which the DBSA provided funding of R2.0 billion.

The project entails the development, financing, procurement, construction, testing, commissioning, operation and maintenance by !Ka XU CSP South Africa (Pty) Limited of a green field solar power station installation with a 100 MW net power generating capacity, together with associated infrastructure and facilities. The project is located 40 kilometres from the town of Pofadder on the farm Scuit Klip 92 and will provide power into the Eskom Paulputs transmission substation distribution located approximately one kilometre from the project site.

DBSA invests in social infrastructure projects aimed at addressing backlogs and expediting the delivery of essential social services in support of sustainable living conditions and improved quality of life within communities.

Funding supports planning, financing, and implementation support to non-municipal infrastructure projects including: bulk water (financing); higher education (financing); student accommodation; and project implementation support for the construction and maintenance of houses, schools and health facilities.DBSA’s remit has a wider geographical reach however, branching across Africa with the aim of enhancing regional integration. Its services include: providing vanilla and boutique financing services with encompass debt; Mezzanine financing and limited non-recourse lending.

DBSA’s remit has a wider geographical reach however, branching across Africa with the aim of enhancing regional integration. Its services include: providing vanilla and boutique financing services with encompass debt; Mezzanine financing and limited non-recourse lending.

The organisation supports project planning and development, advocacy and partnership building for resource mobilisation and helps to promote inter-regional integration and cooperation between SADC and the adjoining regional economic communities in Africa.

Additionally, DBSA deals with climate finance projects and has partnered other organisations in a number of programmes.

Each individual project takes painstaking preparation and the DBSA has made funding available for project preparation on issues such as transport: including road, bridges, air, shipping, rail, ports, and border posts. Energy is another area provided with assistance on projects dealing with generation, transmission and distribution. DBSA also funds project preparation for Information and Communication Technologies and water and sanitation ventures.

DBSA’s Project Preparation and Development Facility (PPDF) programme is financed by the European Union and KFW. The aim of the PPDF is to assist SADC to address the implementation of the SADC Regional Infrastructure Development Master Plan.

DBSA is involved in the Infrastructure Investment Programme for South Africa (IIPSA); the main purpose of the IIPSA funding is to enhance sustainable economic growth and the delivery of key services affecting development in South Africa and in the SADC Region.

Meanwhile, the Pan African Capacity Building Programme (PACBP) is a partnership initiative of the Development Bank of Southern Africa (DBSA), and the Industrial Development Corporation (IDC). The partnership initiative was initiated in 2008, and operations commenced in 2009. The DBSA is the implementing agent of the partnership initiative.

The main objective of the PACBP is to build African capacity for infrastructure and general economic development. The programme builds capacity through regional DFIs, government departments, state-owned enterprises (SOEs) or other semi-government institutions (parastatals), and through any other locally based development stakeholders across sub-Sahara Africa.

DBSA is involved with the Green Fund, a new national fund supporting green initiatives to help South Africa’s transition to a low carbon, resource efficient and climate resilient development path, delivering high-impact economic, environmental and social benefits.

The DBSA was accredited as a National Project Agency (NPA) for the Global Environment Facility (GEF) in 2014.  Following the accreditation, the Bank signed a Memorandum of Understanding with the GEF Secretariat. The MOU commits the DBSA as an agency to follow all GEF Policies and establish the conditions in which the Bank can seek resources from the GEF Council for the preparation and implementation of projects.

“Accreditation of the DBSA as a GEF agency has placed the DBSA at the global arena in terms of providing financial assistance to environment and climate change projects. This fits into the DBSA’s strategy and focus area of Energy/Environment. As a GEF agency, the Bank is further posed at an opportune position to assess funding and leverage funds from other global sources. The GEF Accreditation process has also provided an opportunity for DBSA to identify and close gaps in its fiduciary, social and environmental safeguards, a process that has enhanced its image and built confidence with stakeholders, including other international partners,” describes the company website.

The post-Trump election America is of particular interest to DBSA as the new president addresses foreign relations and trade agreements. An existing cooperation agreement between the DBSA and US Trade and Development Agency (USTDA) allows for the acceleration of large scale infrastructure projects in the power, transport and ICT sectors across Sub Saharan Africa through project preparation grant/capital funding and other funding mechanisms.

Recent project investment includes a 15-year loan (co-financed with Agence Française de Développement (AFD)) to provide eThekwini municipality with R700 million.

A grant of R93-million was also provided to the municipality by the Infrastructure Investment Programme for South Africa which is funded by the European Union.

The funds will be used to advance the city’s Western and Northern Aqueduct projects that will improve water access to citizens.

In early October 2016, DBSA announced that it had provided financing for 21 renewable energy projects since the launch of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Ms. Lucy Chege, General Manager for Energy Financing at the DBSA, said “The DBSA’s achievements in the renewable energy space confirms our role as an instrumental partner in developing integrated solutions for and on behalf of the Department of Energy’s IPP office and National Treasury.”

This announcement came a fortnight after the release of the DBSA’s financial results which revealed that the bank had delivered a net profit of R2.6 billion and sustainable earnings of R1.4 billion in the 2015/2016 financial year. In this 12 month period ending March 2016, the DBSA delivered R28 billion across the total infrastructure value chain, with development assets now standing at R77 billion and total assets at R82 billion.

To date, the DBSA has contributed to 2,512 megawatts of power being installed on the national grid through the funding of 21 projects across South Africa. This has significantly addressed the energy crisis challenges across South Africa and the region.

The 21 projects funded by the DBSA with a total capacity of 2512MW are part of SA’s REIPP Programme and the Department of Energy’s s Peakers IPP Programme. All projects are currently operational and delivery power to the national grid. These projects include 5 Commercial Solar Panels, 9 Solar PV’s and 5 wind projects. Approximately R2, 167 billion has been provided to enable the participation by BBBEEE players and local community trusts in various energy projects. Funding has been provided in the form of senior debt, mezzanine debt and BEE funding.

The bank has also financed numerous gas fired plants and infrastructure throughout the continent as part of regional integration efforts to address the power crisis. Regional projects include Cenpower, Ghana powership and funded the Bulk Oil Storage Terminal of Ghana.

“The energy portfolio accounts for the banks largest exposure and this signals our commitment to working with all partners and promoting the DBSA’s regional integration and infrastructure programme,” said Ms. Chege.