DBSA’s 2020 Strategy – “Unlock R100Bn in infrastructure per annum, in partnership with key stakeholders” BEPP Workshop 05 September 2017
The Role of DFIs is to address Market and Coordination Failures to achieve Sustainable Development Market and Coordination Failure Role of DFIs Market Failure - DFIs occupy an 1 5 intermediary space between public and 4 private investment to facilitate capital Augmented DFI Augmented DFI flows role – advisory, role – catalytic, implementation origination, facilitation and underwriting capacity building and advisory Effect of Effect of Risk - DFIs have a higher risk 2 “institutional” “organisation” tolerance than private sector actors failure failure Return - DFIs have a longer 3 investment horizon (10-15 yrs) while 3 2 private sector has a short term pay- back (5- 7yrs) Institutional failure – DFIs create an 4 enabling environment and overcome information asymmetry between the role players in development 1 Org. failure - DFIs’ can serve to 5 mitigate risk where the private sector is unwilling to operate alone, as well as create viable opportunities to expand the investor base | 2
DBSA’s Mandate & Mission “The DBSA was mandated in terms of the DBSA Act, 1983 and continues to exist in terms of the DBSA Act 1997 as amended [No 13. of 1997] “… as a development finance institution (DFI) with a primary purpose to promote economic development and growth , human resource development and institutional capacity building by mobilising financial and other resources from the national and international private and public sectors for sustainable development projects and programmes in South Africa and the wider African continent”. Mission To advance the development impact in the region by expanding access to development finance and effectively integrating and implementing sustainable development solutions to: � Improve the quality of life of people through the development of social infrastructure ; � Support economic growth through investment in economic infrastructure; � Support regional integration ; and � Promote sustainable use of scarce resources. | 3
The DBSA is a leading South African Infrastructure Finance Institution VISION A prosperous and integrated resource- efficient region, progressively free of poverty and dependencies KEY POINTS DBSA 100% owned by the SA Government, • reporting into the National Treasury • Mandate – Covers entire African continent; focus on Southern Africa • Financially sound – R84bn Assets, R32bn Equity, R3Bn+ sustainable profits • DBSA foreign currency rating is Baa3 (Moody’s) • Well governed – Achieved unqualified audits; A+ rating from AADFI PSGRS Globally accredited – Global Environmental • Facility, Green Climate Fund, EU 6-pillar | 4
Overview of the Bank’s Products, Services and Sectors GEOGRAPHIC FOOTPRINT PRODUCTS & SERVICES The DBSA mostly lends to its clients directly, but also provides DBSA’s primary market financing to financial institutions (particularly outside of SA) DBSA’s main focus outside of SA DBSA’s secondary (and recent) focus outside of SADC SECTORS Primary: Energy, Transport, ICT, Water & Sanitation Secondary: Education, Health | 5
The DBSA strives to be financially sustainable and while delivering high levels of development impact FY 2015/16 Results | 6
The DBSA applies sound corporate governance structures and processes to deliver sustainable growth in the interest of all stakeholders SHAREHOLDER SHAREHOLDER Board meets 6 times a year DBSA BOARD DBSA BOARD Subcommittees Board & Board Sub-Committees meet quarterly ARC BCIC HRNSEC IDKC BCIC meets monthly Corporate Secretariat is responsible for CORPORATE SECRETARIAT CORPORATE SECRETARIAT Board and EXCO meetings EXCO & Subcommittees CEO CEO GROUP EXCO GROUP EXCO EXCO meets monthly SCM EXCO Sub-Committees meet weekly or INVESTMENT ALCO IDKC COMMITTEE monthly- depending on committee COMMITTEE PRICING i. All projects for financing are COMMITTEE reviewed at early and appraisal stages at the bank- wide IC INFRASTRUCTURE SOUTH AFRICA OFFICE OF THE INTERNATIOAL OPERATIONS CORPORATE meetings FINANCING Divisions FINANCING FINANCING GROUP RISK DELIVERY SERVICES STRATEGY ii. Project Preparation and CFO Infrastructure Delivery have there own committees and protocols for assessing projects 7 |
Our Strategic Context � The DBSA has delivered strong developmental and financial performance, by focusing on our core infrastructure market ▪ Disbursement growth of 100%+ over past three years; asset base nearly doubled ▪ Sustainable profits approaching R2Bn for 2016/17; ROE well within 3-6% band and NPLs below 4%; core banking cost-to-income ratio well below 35% benchmark ▪ New businesses launched in project preparation and infrastructure delivery � However the DBSA’s competitive position is weakening, due to entrance of new development financiers and our increasing cost of capita � The scale of the infrastructure gap in both South Africa and the continent is much greater than addressable directly by our lending capacity ▪ South Africa alone should invest an additional 2-3% of GDP – ~R100Bn annually* � Therefore the DBSA needs to reduce reliance on lending and develop/reinforce new products and services to continue to drive greater development impact Note: *Per Prof. Adrian Saville and DBSA analysis | 8
Our Strategic Response � The DBSA needs to fully leverage our competitive advantages to generate increasing development impact ▪ Use our privileged role as a trusted partner to RSA and African state-owned entities, African DFIs and multilateral and bilateral agencies to source projects and concessional capital ▪ Take advantage of our ability to take greater risk-return profiles (e.g. subordinated positions) and longer tenor ▪ Deliver integrated infrastructure solutions, especially in taking early-stage risk in the project lifecycle � The DBSA will deliver an annual R100Bn in infrastructure impact* by 2019-20, while ensuring financial sustainability (ROE of 4.5%+) via:** ▪ Grow disbursements in line with inflation (~R20Bn annually by 2020) ▪ Catalyse third party financing in our lending projects (~R10-20Bn annually by 2020) ▪ Ramp-up the programme and project preparation business (R25Bn+ by 2020) ▪ Build a significant structured financing capability (R50Bn+ by 2020) ▪ Grow maintenance and project management office set-up mandates by IDD for under resourced clients (R15-20Bn in infrastructure unlocked by 2020) Note: *’Infrastructure impact’ defined as DBSA lending, projects/programmes unlocked (pre-financing) and infrastructure delivered or maintained (post-financing). | 9 **Individual opportunities sum up to greater than R100Bn
DBSA’s Strategy Deliver R100Bn annually in infrastructure unlocked by 2019-20, while maintaining Strategic financial sustainability Ambition: Develop structured Establish project Greater investment Continue core De-risk project products and management Paths in early-stage long-term finance structures funding structures offices and focus programme and to infrastructure to crowd-in third to unlock on maintenance of project Victory: infrastructure and public lending activities party funding development crowd-in 3 rd parties infrastructure Integrated Sources of infrastructure Access to Greater risk-return Competitive concessionary Strategic partnerships solutions, including trade-off andTenor Advantage: early-stage risk and financing delivery capability | 10
The DBSA has been reorganized to ensure we are best positioned to meet our clients’ needs DBSA has a dedicated frontline team that Metros can engage with 11 | 11
Summary of DBSA’s Targets – We will focus on “catalysation” to maximize development impact DBSA Targets 120 In order to meet the Strategic Aspiration of Increasing 100 leveraging of unlocking R100 billion of infrastructure per 80 third party 73.1 annum by 2020, the DBSA will use its own funds 60 54.8 Balance Sheet and play a Catalysing role by 40 39.5 36.2 crowding in/ leveraging third party funds. 20 31 23.5 20 12.4 0 FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 Disbursement Catalysing FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 48.6bn 59.5bn 78.3bn 104.1bn 80 70 73.1 17.9 54.8 60 50 10.4 39.5 25 36.2 40 31.0 6.9 3.3 22 0.6 23.5 30 20.0 10 20 4 20 20 24.7 2 12.4 6 10 5.5 5 3.7 10 5 15 14 13 12.4 10.2 8.7 7.2 7.6 0 Disbursement Catalysing Disbursement Catalysing Disbursement Catalysing Disbursement Catalysing | 12 South Africa Rest of Africa Project Financing / Subordinated Loans Structured Products Pre Financing Implementation & Maintenance
Innovation – A three-prong approach • Develop strategic partnerships 1 o South Africa – Municipalities (e.g. BEPP), Provinces, Sector stakeholders o Rest of Africa – SDIP Africa Hub (WEF/OECD partnership); SADC DFIs 2 • Embed innovation culture o Program with Local Business School Faculty o Innovation System & Hub 3 • Structured product solutions o Additional initial allocation of capital o Create leverage impact o Executive “cover” o Conform to Governance | 13
Thank You |
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