Development Bank of South Africa: Shaping the future with investment

The South African Government has made a pledge to improve infrastructure and to stimulate socio-economic development through investment. Such a venture is fraught with challenges and controversy but the formation of the Development Bank of Southern Africa has delivered structure and priority to numerous major projects.

Headquartered in Johannesburg, the Development Bank of Southern Africa (DBSA) is a Development Finance Institution wholly owned by the government of South Africa and focuses on large infrastructure projects within the public and private sector.

It is one of several development finance institutions in southern Africa and its main objectives are the promotion of economic development and growth, human resource development, institutional capacity building, and the support of development projects in the region. DBSA plays a multi-role as Financier, Advisor, Partner, Implementer and Integrator to mobilize finance and expertise for development projects.

shutterstock_137332325DBSA was established back in 1983 and is wholly owned by the South African Government. The Bank’s development agenda is premised on its VISON: “A prosperous and integrated region progressively free of poverty and dependency.”

Within South Africa, the Bank has been invited by the Government to play an important role, serving as a catalyst for the Government’s delivery on priority national mandates, with the special emphasis on green energy, hospital and school infrastructure as well as water and sanitation.

The corporate website describes DBSA’s role as thus: “The Development Bank of Southern Africa (DBSA) is a state owned entity with the purpose of accelerating sustainable socio-economic development and improve the quality of life of the people of the Southern African Development Community (SADC) by driving financial and non-financial investments in the social and economic infrastructure sectors.

“Social infrastructure: Infrastructure aimed at addressing backlogs and expediting the delivery of essential social services to support sustainable living conditions and a better quality of life within communities; economic infrastructure: Infrastructure aimed at addressing capacity constraints and bottlenecks in order to optimise economic growth potential. The DBSA has prioritised water, energy, transport and ICT as its key focus areas.

“The Government, through Act. 13 of 1997 mandated the DBSA to: promote economic development and growth, human resources development and institutional capacity in the region; support sustainable development projects and programmes in the region and focus on infrastructure and leverage the private sector.”

However DBSA also operates on a broader scale and is also involved in projects elsewhere in Africa, working closely with Governments and regional institutions to help them achieve development priorities.

The DBSA co-finances, lead arranges, underwrites and advises on the funding of infrastructure and socio-economic projects in the region and has played its part in the development of many pioneering and transformative development projects worth over $10 billion.

Among the many projects that the DBSA has been involved with are the first and award-winning public private partnership public hospital in Lesotho, Namibia’s first and environmentally-friendly Ohorongo Center Plant, Lesotho’s landmark Highland Water Project, Zambia’s Lusemfwa IPP, one of the region’s first independent power producers and Mozambique’s Mozal Aluminum Smelter.

DBSA has also become involved as a partner in the early stage pre-investment project preparation and has helped to develop risk strategies with sponsors and other partners to establish the feasibility of major projects such as the Kariba North bank Hydro Power Extension Project Zambia, the Beitbridge-Harare-Chirundu Arterial Road in Zimbabwe and the Ndjil Nation Airport in Kinshasa, in the Democratic Republic of Congo (DRC).

Within South Africa, evidence of DBSA’s work is not hard to find. In October 2013, news came through that DBSA had formed a partnership with Anglo American’s enterprise development arm, Zimele, resulting in the launch of the R500 million Sebenza Fund.

The fund is designed to create meaningful and sustainable employment in poverty nodes and areas with high unemployment throughout South Africa.

The Sebenza Fund, which is the fifth fund in the globally recognised Zimele stable, will channel its financial war chest into helping underprivileged and poor communities, with Anglo American and DBSA each contributing R250 million.

At the time of Sebenza’s launch, it was reported that the initiative was expected to create in the region of 8,000 new jobs over 3 years.

The Sebenza Fund is set to operate along similar lines to the highly successful Community Fund and will create 30 new business hubs across South Africa. (707 words)

More recent, in March of this year, DBSA, in partnership with the European Union (EU), launched a multi-billion fund for infrastructure development.

The Infrastructure Investment Programme for South Africa (IIPSA), is set to provide grant funding in support of loans for essential infrastructure projects in South Africa and the region.​

The fund was established following a joint initiative between the Government of South Africa and the European Union, and forms part of the EU’s broader intervention under its country strategy for South Africa.

shutterstock_137970122Speaking at a media briefing, DBSA’s CEO Mr. Patrick Dlamini said: “We are pleased that the Bank has been appointed as a fund manager to implement the IIPSA programme. We therefore, view this programme as a strategic intervention to fund South Africa’s national and regional infrastructure projects, especially at the critical initial stages to prepare projects to bankability”.

EU Ambassador, Mr. Roeland van de Geer underlined that “IIPSA will provide innovative financing that will see the blending of European Union grants with long-term financing from participating South African and European development finance institutions. It also aims to attract private financing into projects with a high socio-economic return by enhancing the financial feasibility and project quality and/or by reducing the risk associated with such projects.”

Projects to be supported will be selected from an updated list of priority infrastructure projects established by the IIPSA Project Steering Committee, and will be directly linked to the priorities of SA government, EU-SA priorities for cooperation and the SADC regional infrastructure strategy.

“The establishment of this fund could not have come at a better time because lack of adequate infrastructure funding has been identified as a key constraint to faster economic growth and social inclusion both in South Africa and in the SADC region”, Mr. Dlamini added.

In order to be eligible to receive financial assistance from the IIPSA fund, projects must comply with the following criteria: the project must either be a South African project; or, a regional project which must be a trans-border initiative involving two or more countries in the SADC region with a demonstrable regional impact on one or more countries.

Key priority sectors will include: energy, transport, water and environment, ICT and social infrastructure.

South Africa and the whole of southern Africa might have a long way to go, but thanks to the assistance of the Development Bank of South Africa, millions of lives are changing for the better.