DBSA / Finance Focus Q2 2022

DBSA

IGNITING SUSTAINABLE DEVELOPMENT AND TRANSFORMATIVE CHANGE

For the Development Bank of South Africa (DBSA) sustainability is at the forefront, as it promotes economic growth in South Africa and across sub-Saharan Africa. In the current push for net zero its commitment is borne out in multiple ways, with massive investments in key programmes and tireless support of a low-carbon economy fulfilling its central role in driving a just transition.

PRODUCTION: Timothy Reeder

INDUSTRY FOCUS: SUSTAINABILITY

Our purpose,” explains the DBSA, “is to build Africa’s prosperity by driving inclusive growth and securing innovative solutions that drive socio-economic development in emerging economies in sub-Saharan Africa.” The company fulfils this ambitious mandate by first mobilising funding resources, and subsequently channelling these into projects aimed at building sustainable infrastructure planning and development across the continent.

Among the leading African Development Finance Institutions (DFIs), the DBSA was established in 1983 with primary focus areas of energy, water, transport and telecommunications, as well as interests in health and education. “We aim to deliver impactful development finance solutions that ignite transformative change in South Africa and on the rest of the continent. Improving the quality of life of people in Africa is the fundamental focus of our development impact,” the DBSA details.

“We aim to bend the arc of history towards shared prosperity through multifaceted investments in sustainable infrastructure and human capacity development.”

INVESTMENTS PAY OFF

Having amassed more than three decades of experience in driving transformational change for different types of infrastructure development, the DBSA is now partner of choice for some of the continent’s most impactful development projects. In June last year came the conclusion of two loan facility agreements between Trans-Caledon Tunnel Authority (TCTA) and the DBSA, totalling R5.5 billion and spanning 20 years, to spark the implementation of Phase II of the Lesotho Highlands Water Project (LHWP).

The investment was negotiated with the five major banks in South Africa for a total of over R15 billion, with the DBSA’s funding to be used for new infrastructure development

integral in ensuring water security across South Africa.

With significance beyond the benefit to the overall Vaal River System, the transaction strengthens the ongoing cooperation between these two influential parties, furthering their mutual water infrastructure mandates, while with water and sanitation representing one of the DBSA’s key focus sectors, the deal serves to significantly bolster its loan book. It in turn allows TCTA to

“OUR FUTUREFOCUSED STRATEGY IS REINFORCING THE RESILIENCE AND RELEVANCE OF THE DBSA IN A WORLD OF DISRUPTION AND CHANGE”

fulfil its flagship role as a bulk water infrastructure implementing and national funding agency of the South African government.

“This is a significant transaction and as the DBSA, we are proud to be instrumental in the continued implementation of this historical

and highly developmental project for both South Africa and Lesotho,” acknowledged Zodwa Mbele, DBSA Group Executive. “The anticipated economic shift speaks to significant combined GDP impact of about R245 billion in the two countries, additional water supply to support about 60% of the South African economy and incremental royalties to the Kingdom of Lesotho, which are key to its fiscus and national economy.”

Now in its ninth month of construction, the 100MW Redstone monolith is a concentrated solar thermal power (CSP) plant forming a fundamental part of the South African Renewable Energy Independent Power Producer (REIPP) Procurement Program. Its backing, to a total of R11.6 billion, also makes it the largest renewable energy investment in

South Africa to date, with the DBSA’s commitments totalling R1.91billion - R1.5 billion in senior debt and R410 million in equity-linked funding.

Redstone CSP will power 200,000 households with clean and reliable electricity upon completion and offset an estimated 440 metric tons of CO2 emissions per year; it has now notched up a crucial milestone in the form of its first debt drawdown, securing in the region of $152 million and further solidifying the commercial viability of CSP technology in enhancing clean energy generation.

“The African Development Bank is privileged and proud to play the MLA and Coordinating Bank’s role for this largest renewable project in South Africa alongside our partners ABSA, CDC, DBSA, DEG, FMO, Investec, Nedbank, and Sanlam,” resumed

TAKING YOUR PROJECTS TO NEW HEIGHTS

With over 38 years’ experience in civil, structural, municipal and township engineering services, Infraconsult aims to be the preferred civil engineering consulting firm for public and private sector clients across southern Africa.

As your Proudly South African infrastructure design and support link, the company strives to do the right thing, the first time.

Infraconsult Engineering is honoured and proud to be associated with the Development Bank of South Africa as a preferred Professional Service Provider. We truly appreciate the high level of professionalism and efficiency with which the DBSA as a Client Body executes and implements its projects.

Highly qualified, highly skilled and highly competent

“AS A LEADING DFI IN THE REGION, THE DBSA IS WELL PLACED TO ENSURE THAT A TRANSITION TO A NET ZERO TARGET IS A JUST TRANSITION”

INDUSTRY FOCUS: SUSTAINABILITY

Director General of the Southern African Region Leila Mokaddem.

“It reflects our shared objectives of supporting the energy transition to address the threat of climate change across Africa.”

JUST TRANSITION COMMITMENT

In all that it does, the DBSA evinces its commitment, through activities and initiatives that contribute towards the global greenhouse emissions target, to playing an active role in the transition to net zero by 2050. “We are developing an integrated sustainability approach,” the DBSA outlines. “As a leading DFI in the region, the DBSA is well placed to ensure that a transition to a net zero target is a Just Transition.”

Providing transition finance, while eschewing new fossil fuel investments not part of a clear and unambiguous plan to a decarbonised future, is key here. Exemplifying this is the DBSA’s

Green Fund, instituted to contribute towards a wide range of goals in transitioning to a greener economy. These include the financing of projects and programmes that reduce the impact on climate change and favouring high-impact, innovative, low-carbon, inclusive programmes.

“The DBSA has made a concerted effort to address climate change and contribute to the broader lowcarbon aspirations of South Africa and the rest of Africa by supporting and investing in initiatives aimed at climate change mitigation and adaptation. The DBSA was instrumental

in the development of the Renewable Energy Independent Power Producers Programme (REIPPP) by funding the establishment and administration of the Independent Power Producer Office resulting in investments of over R200 billion and the creation of 50,000 jobs in the REIPPP.”

A solid set of results for the financial year ending 31 March 2021,

in the face of the havoc wreaked by the COVID-19 pandemic, kept the DBSA firmly on course to pursue its growth strategy designed to augment disbursements through emphasis on its catalytic role. “This is aimed at contributing to sustainable infrastructure development beyond the confines of its own balance sheet,” the bank stressed.

“Our continued success hinges on our ability to grow developmental impact using our own balance sheet and partnering with others,” assessed Patrick Dlamini, DBSA CEO. “The bank has a healthy pipeline of projects that form a solid springboard for success in the future and we will continue to focus on disbursing to infrastructure projects to grow developmental impact in line with our mandate.”

The DBSA saw net profit for the year increase by 182% from approximately R504m in the prior year

to R1.4 billion in 2021, attributed to the core lending activities of the bank. Solid growth in net interest income amounted to 11% compared to the prior year and an 8% improvement in operating income to R5.1 billion for 2021. Significant adjustments to accommodate the impact of COVID-19 also allowed impairment charges to reduce by 68% compared to 2020.

“We are operating in a rapidly transitioning world,” Dlamini sums up, “and the DBSA is mindful of how this impacts the sustainability of our business. Consequently, our futurefocused strategy is reinforcing the resilience and relevance of the bank in a world of disruption and change.”

“WE WILL CONTINUE TO FOCUS ON DISBURSING TO INFRASTRUCTURE PROJECTS TO GROW DEVELOPMENTAL IMPACT IN LINE WITH OUR MANDATE”