The Development Bank of Southern Africa (DBSA) disbursed a record R17.1-billion during its 2016 financial year, up from R13-billion in 2015, with disbursements to the country’s eight metropolitan councils (metros) surging to R7.5-billion from R3.7-billion.

CEO Patrick Dlamini said a total of R8.1-billion was disbursed to local government, including a further R440-million to secondary cities and R173-million to under-resourced municipalities.

DBSA governor, Finance Minister Pravin Gordhan, praised the support given to the metros, where expanding infrastructure was “crucial” in light of rising urbanisation. Some 60% of all South Africans now reside in urban areas and nearly 40% in the eight metros of Buffalo City, Cape Town, Ekurhuleni, eThekwini, Johannesburg, Mangaung, Nelson Mandela Bay and Tshwane.

However, Gordhan said the focus should “shift” to smaller cities as well as under-resourced municipalities, which, unlike many of the metros, were not in a position currently to raise borrowings in their own right.

Dlamini said the DBSA had every intention of increasing its support for smaller municipalities, including through the creation of new funding products that could “catalyse” private sector support for secondary city (Market 2) and under-resourced municipalities (Market 3).

R100BN YEARLY TARGET

While refraining from providing comprehensive details, he indicated that the intention was to increase the DBSA’s overall yearly support for infrastructure development to R100-billion within the coming five years by deploying innovative “structured products” for Market 2 and 3 municipalities.

In 2016, the DBSA calculated its infrastructure support at R28-billion – a figure that included not only the disbursements of R17.1-billion, but also R7.6-billion for project preparation activities and the R3.3-billion for the building of schools, houses and clinics.

Chief risk officer Paul Currie told Engineering News Online that it would not be possible to increase its yearly support to R100-billion off the DBSA’s balance sheet alone. However, it was canvassing support for various solutions, whereby the DBSA created “credit enhancements” that lowered the risk profile to the point where the private sector could take on municipal debt.

Currie revealed that the DBSA was working with a commercial bank to create a bond structure to give smaller municipalities “a form of access to the bond market”.

As it worked on these new funding innovations Currie said it would be critical to sustain and enhance its funding base, which was also why the bank was taking active steps to respond to the governance concerns raised by Futuregrowth Asset Management, which recently froze additional support for six South African State-owned entities, including DBSA.

DBSA chairperson Jabu Moleketi went to lengths to highlight the governance credentials of the bank, highlighting the competence and experience of the board, as well as the independence of its decision-making. “I have been chairman of the DBSA for just about six years and we have never once [as the board] receive an instruction on how to take a decision on any matter.”

The DBSA reported that it has had “extensive engagements” with Futuregrowth, which has a R5-billion exposure to the bank, since Futuregrowth’s suspension announcement and that it was optimistic that there could be lifting of the suspension in the coming weeks.