South Africa's State-owned Development Bank of Southern Africa (DBSA), which is a key financier of municipal infrastructure, reported a 11,3% fall in loan and equity disbursements to R8,26-billion for the year to March 31, 2010, from the R9,31-billion disbursed in the previous year. The value of DBSA's approvals also fell to R18,8-billion during the period under review, from the R20,5-billion approved in 2008/9.

However, CEO Paul Baloyi insisted that, in the context of difficult market conditions, which had placed strain on the bank's "sustainable" earnings and surpluses, it had "not compromised" on its developmental mandate.

The DBSA's "development impact" was calculated at R8,9-billion for the period, reflecting both the loan and equity approvals and a record R550-million having been spent on so-called "developmental initiatives", up from the R464-million reported in the previous year.

In fact, the developmental expenditure, much of which is nonrevenue generating, comprised 66,9% of DBSA's sustainable earnings for the year, representing a significant increase on the 48,9% reported in 2008/9. The DBSA had a target to sustain its expenditure on development at around 45% of sustainable earnings in future.

The R550-million helped subsidise lending rates to under resourced municipalities (R73-million); boost expenditure on research and advisory services (R69-million); and ensured the delivery of technical assistance to mostly municipal clients (R67,4-million). Further, some R340-million was disbursed through the DBSA Development Fund, which provided grants and technical expertise for under resourced municipalities under the Siyenza Manje programme.

During 2009/10, the Siyenza Manje programme employed 189 engineers and technicians, 80 finance experts, 26 planners, 156 young professionals and 164 artisans.

More than 120 of those deployees were seconded to 199 municipalities and 18 government departments, and facilitated 3 825 municipal infrastructure grants (MIGs) and capital expenditure projects to the value of R8,9-billion. These projects reportedly created 64 869 jobs and provided 107 195 households with access to sanitation services and 406 719 households with access to bulk sanitation. In addition, 203 125 households were connected to water reticulation networks and 410 093 households to bulk water.

Therefore, besides its direct contributions, Baloyi argued that the DBSA had also facilitated the unblocking of other sources of funding for municipal clients, particularly though the government's MIG.

The bank's governor, Finance Minister Pravin Gordhan also highlighted the growth of the DBSA's non-South Africa portfolio, which was now worth R9-billion, or one-third of the total portfolio.

He argued that it provided a mature platform for the establishment of a regionally competent development finance institution to complement the broader role of the African Development Bank in the region.

SCALABLE INFRASTRUCTURE

He also backed a capitalisation plan for the enterprise during the period, in terms of which the callable capital of the bank was increased from R4,8-billion to R20-billion.

The regulated leverage ratio was also amended to include the callable capital as equity, with the National Treasury having guaranteed R15,2-billion in support of all creditors, while the increase in callable capital was being amended by Parliament.

The recapitalisation increased the value of assets that can be supported by the DBSA's capital structure by R25-billion for 2009/10 and R37,5-billion for 2010/11.

In return, Gordhan insisted that the increase in DBSA's callable capital should underpin the bank's role in the development of "scalable infrastructure" programmes, particularly in the areas of healthcare, water and sanitation, education and energy, particularly green energy.

"Among government's conscious choices is the pursuit of globally acceptable targets on the reduction of carbon emissions. I have challenged the bank to develop scalable green energy programmes to help government meet these targets," Gordhan said.

The focus on healthcare, water and sanitation, education and energy was regarded as a "major strategic shift" for the institution, which indicated that it had made "good progress in soliciting market interest" for the new role.

Baloyi also insisted that, despite the pressure to increase its developmental impact and despite the difficult financial scenario that prevailed in 2009/10, the quality of DBSA's loan book remained "healthy".

Income-earning assets (loans and equity investments) grew by 13% to R36,2-billion, underpinning the 12% growth in total assets to R45,1-billion.