The State-owned Development Bank of Southern Africa (DBSA), which is in the midst of a far-reaching restructuring programme, indicated on Tuesday that it was finalising a new strategy and organisational structure that would lay the basis for a doubling of its loan book to R91-billion over the coming five years to 2017.

Consultations were still under way with the National Treasury, but the emerging strategy would involve a scaling up of lending to the eight metropolitan councils, as well the 112 Tier 2 municipalities in a bid to improve service delivery.

But the bank also planned to materially increase its debt exposure to State-owned companies (SoCs), as well as to African infrastructure projects and to public-private partnership (PPP) projects.

By contrast, the development financier would whittle down its equity investments, particularly to entities outside of its core infrastructure focus.

During 2011/12, the bank's assets grew by 10.5%, from R47.4-billion to R52.4-billion, but its financial performance was worse than expected, mainly as a result of impairments and unrealised revaluation losses on equity investments, particularly in the mining sector.

Newly appointed CEO Patrick Dlamini said the bank had “paid school fees” in the area of equity investments and that it would be far more circumspect in this area in future.

The current reorganisation, which Dlamini acknowledged was causing some uncertainty within the bank, was designed to realign the institution with its core mandate of supporting basic municipal infrastructure, as well as the development of economic infrastructure.

“It cannot be business as usual,” he averred.

The restructuring process could result in retrenchments should the current offer of voluntary-severance and early retirement packages fail to achieve the streamlining being sought. However, Dlamini said it was premature offer precise figures, or to comment on whether any group executives had taken up the offers.

In some cases, the DBSA would also be seeking to recruit new talent to bolster its capacity in the areas of corporate finance, project preparation, risk and credit management.

Over the coming five years, the DBSA expected to raise its lending to the municipal market to R26-billion, with a material ramp-up in lending to Tier 2 municipalities to R8.8-billion.

It was also planning a dramatic increase in lending to SoCs, from R4.8-billion currently to over R27-billion.

Particular emphasis would be given to the smaller SoC’s, owing to the fact that Eskom, Transnet, Telkom, PetroSA, the Passenger Rail Agency of South Africa and the Trans-Caledon Tunnel Authority had other funding options.

Dlamini said these “Tier 2 SoCs” would be a more natural match for DBSA’s corporate lending and project finance activities.

The third-largest area of focus would be infrastructure developments in the rest of Southern Africa, with the DBSA having set a target of raising its asset profile in the region to R20-billion by 2017. Dlamini said the group would target specific opportunities in the energy, water and sanitation, transport and information communication technology sectors.

The bank had also been given a specific mandate to support regional-integration-supporting infrastructure programmes, including the much-vaunted North-South Corridor.

In the PPP milieu, meanwhile, the DBSA had set a target of increasing its assets to R3.5-billion by 2017. To achieve that target, human and financial resources would be dedicated to increasing pre-financing activities to “unblock” deals.

The R9-billion Jobs Fund and the R800-million Green Fund would continue to fall under the aegis of the DBSA even under the new structure, with Dlamini indicating that yet further funds could be added in future, possibly in partnership with Chinese funders.

He acknowledged early teething problems with the Jobs Fund, but gave an assurance that the initiative was on track to stimulate the creation of 150 000 sustainable jobs over the coming five to seven years.

The application and adjudication processes had been significantly streamlined following earlier problems, which Dlamini said stemmed from the fact that the launch had taken place before “fundamentals” were in place.

The R91-billion vision would be supported by a funding plan comprising internal resources, bond issuances and the securing of favourable credit terms from “strategic partners”.

“We really want to make sure that the [reorganised] DBSA goes about its business in a completely difference, and more aggressive manner than has been the case in the past,” Dlamini concluded.