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DBSA shares progress on infrastructure development support in priority sectors

18th October 2023

By: Marleny Arnoldi

Deputy Editor Online

     

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As the Development Bank of Southern Africa (DBSA) works to create a multibillion-rand water infrastructure fund and R18-billion green hydrogen investment fund, the development finance institution (DFI) has reiterated its commitment to realising projects in what are deemed as critical sectors in the region.

The DFI has been prioritising its investments in energy, information and communication technology, transport, health, education, and water and sanitation to realise tangible positive outcomes for society.

During a media roundtable hosted on October 18, the DBSA unpacked the progress it had made through its infrastructure delivery division, which was created in 2015, including having realised just under R30-billion worth of infrastructure projects, of which R15-billion comprised the improvement or building of schools.

The DBSA in 2015 committed to playing a bigger role in realising infrastructure projects on behalf of the State and returning money back to the fiscus. “We augment the capacity of the State to deliver,” DBSA infrastructure delivery group executive Chuene Ramphele said.

The DFI has been involved in the planning, design, procurement, construction and maintenance of many projects, with the aim of making positive and sustainable impacts in society.

In particular, the DBSA is involved in the planning stage of many projects, particularly at local government level, to assist with capacity building, which, in turn, helps to unlock funding from the fiscus.

Ramphele assured during the media engagement that, although the bank had a regulatory limit to borrow, in order to on-lend, it still had much capacity to borrow money from other institutions owing to its strong leverage ratio.

He said the DBSA was among the most profitable and capable organs of State, having reported a R52-billion profit in the 2022/23 financial year. He added that the DFI struck a balance between financial sustainability and profitability, and by lending on the basis of the cash it generated, it ensured it did not lend beyond its viable means.

DBSA local government support head Chuckeka Mhlongo said the entity only funded projects that were in line with the strategic objectives of the bank, which included to support infrastructure to stimulate economic development, create jobs and advance equality.

What makes DBSA unique and effective is its ability to source funding from various international capital markets and identify the level of readiness of projects, and where lacking, help to advance planning and feasibility for more funding to be unlocked.

In the current South African context, there was a situation where infrastructure was deteriorating rapidly, which required rapid intervention. Ramphele said infrastructure needs had surpassed the capacity that was available, with the country having serious budget constraints.

Hence the DBSA’s sectoral approach to prioritise projects in a complementary fashion with the investment programmes that African countries already have in place.

“In South Africa, we have specific programmes that are dealing with asset care, especially those that deliver critical services,” Ramphele stated. He added that, despite every country in the region having different regulatory systems, the DBSA strove to realise projects as rapidly as possible.

There were, however, sometimes issues around unresolved land claims, for example, even if projects themselves were bankable. To this end, the DBSA strove to plan effectively and have partners tackle these issues first. There were also often social issues in how society was included along the way – Ramphele admitted there were often issues of mafias and community disruptions on infrastructure projects, which naturally delayed the timelines of the bank to realise projects.

Another challenge that the DFI often navigates is that of local government having multiyear budget allocations for projects, meaning that projects often stand still until more funding becomes available. In turn, this sometimes leads to social instabilities when projects get delayed.

In this regard, the DBSA often provides upfront funding for government to follow up with and settle later.

To help realise infrastructure plans for municipalities, DBSA programme development execution head Lebogang Seperepere explained that the bank often partnered with other municipalities through a district model to help realise mutually beneficial projects quicker. The DBSA also ensured that adequate skills were in place to support the plans over a longer term.

“The DBSA showcases that projects can realise based on a programme and that developmental impact can be measured, with partnerships yielding better results than public and private sector parties acting alone,” Seperepere noted.

Ramphele warned that with Africa’s population poised to reach 1.6-billion by 2030, this left the continent far behind on meeting Sustainable Development Goals, particularly related to water. The DFI calculated that $30-billion of investment a year was needed to ensure water security and sustainability in Africa.

The bank believed that Africa had a prime opportunity to share water infrastructure, leveraging the large river basins on the continent. “If water insecurity is not addressed, other development cannot follow,” he said.

The DBSA in July announced its Water Reuse Programme was approved for R4.5-billion in funding from the Green Climate Fund, which will be used to support climate-resilient interventions for water services infrastructure in South Africa.

The bank also unveiled in June its plans for a SA-H2 Fund dedicated to green hydrogen development.

The fund is supported by climate fund managers and other international investment institutions based in the Netherlands, among others.

The fund aims to secure $1-billion in funding, to be raised directly in South Africa or indirectly through other channels.

“This fund is a significant addition to national efforts to leverage our existing renewable energy infrastructure. With a national target of $250-billion investment in green hydrogen by 2050, this sector is projected to amplify the development impact of the renewable energy industry. It is an exciting development that, in accelerating the development of critical green hydrogen infrastructure, will stimulate the economy, train new skills, create jobs, generate export revenues, and facilitate the decarbonisation of our economy and industry,” DBSA project preparation group executive Catherine Koffman stated.

Ramphele added that the DBSA had various energy initiatives underway, including minigrid development programmes to enhance the availability of electricity to communities. The bank is also looking at minigrid programmes in other African countries.

The DBSA is also working with Eskom to deepen its large infrastructure programme, as well as with Transnet to strengthen the logistics network. Seperepere confirmed that the DFI was also looking into electric vehicle infrastructure development, but this work was still in the early stages.

“Our strategy is to educate, inspire and inform,” the speakers agreed, saying that the DBSA was sharing more about how it was helping South Africa develop into a transformative and impactful economy.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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