The Development Bank of Southern Africa (DBSA) has announced its highest ever profit of about R5.2-billion for the 2022/23 financial year.

The development finance institution (DFI) says its commitment to sustainable development across the region has yielded a strong fiscal performance, closing the year off in a good financial position.

On August 3, the DBSA revealed that, of the R5.2-billion net profit, sustainable earnings amounted to R4.2-billion, while net foreign exchange gains amounted to R860-million, owing to the significant depreciation of the rand. A critical contributor to this financial performance is a solid net interest generated from the bank’s loan book.

Further, the DFI continues to optimally manage its costs as evidenced by a cost-income ratio that remains low and unchanged at 24% when compared to the prior year.

The DBSA reported that its loan book, on average, remains largely moderate risk when compared to last year, and non-performing ratios improved when compared to prior year.

During the year under review, the gross development loans and development bonds reached a record of R108-billion on the back of increased disbursements, currency exchange movements and the prevailing high interest rate environment.

The single largest risk that the DBSA faces from its lending activities is credit risk. The bank has remained conservative in provisioning and proactive in loan management and monitoring given the evolving current economic environment and negative outlook skewed to the downside.

The bank successfully raised funding from a diverse pool of local and international commercial banks, international development finance institutions and the domestic fixed income market amounting to R11-billion.

The bank’s loan book remained resilient in a challenging economic environment, with high cash collections of about R17-billion, comprising interest of R8.5-billion and capital of R8.5-billion. It continues to have high liquidity levels which allows the bank to successfully meet maturing financial obligations and disbursement targets.

The DFI’s capital base expanded substantially by R5.2-billion when compared with last year’s R3.8-billion increase in the equity base. The bank’s capital ratio increased to 44% from about 43% last year. Overall, the bank remains well capitalised.

The DBSA also noted that its total asset base rose to a record R109-billion as of March 31. The previous financial year closed with R100-billion. The increase is owed to new disbursements and currency movements. 

“Striking a fine balance between meaningful development and financial sustainability, we have weathered what continues to be a tough operating environment both locally and internationally, with an increasingly complex global geopolitical landscape.

“Key to these encouraging financial results is our commitment to governance, particularly accountability, as a driving value that we hold dear across all our divisions. This means that beyond our balance sheet, we have ensured that all our projects have well-defined and astutely measured sustainable development impact, delivering tangible benefits to our stakeholders,” said DBSA CEO Boitumelo Mosako.

Over the past financial year, R14.2-billion in funds was catalysed to support various developmental initiatives. This is important for the DBSA in its role of crowd financing and accessing other sources of funding. This year, the bank had a record R13.7-billion in loans and bonds disbursements, accelerating the implementation of a multitude of essential projects across all sectors. 

The bank also reported that its project preparation arm unlocked a total value of R25.4-billion in approved projects. This capability helps to plug gaps in the market and ensure that the country has a strong pipeline of bankable projects. The division’s work to bring projects to bankability and, therefore, unlock funding and investment speaks to accelerated service delivery through an infrastructure development value chain that is fit for purpose.

The DBSA continued to finance municipal and local government infrastructure development efforts. In the reporting period, under-resourced municipalities addressed urgent disparities in service delivery with access to R2.1-billion of infrastructure funding and support. This support is bolstered by non-financial support to ensure adequate capacity to deliver to citizens.

The DBSA’s performance was made possible through effective partnerships in South Africa and across the region. In the reporting period, the DFI joined forces with various institutions to bolster the delivery of its mandate and foster regional integration.

The first of two key partnerships and programmes of note included regional integration, whereby the DBSA and the West African Development Bank entered into a partnership to lay the foundation for broader cooperation between the West African Economic and Monetary Union and Southern Africa at COP27 in November 2022. 

The second of these partnerships and programmes involved renewable energy – in the period of reporting, the European Investment Bank and the DBSA reached a formal agreement to finance a targeted renewable energy programme in South Africa.

The programme is aimed at unlocking funding for private sector investment in renewable energy projects across the country. The total initiative, equivalent to R7.7-billion, will facilitate the funding of various new renewable energy ventures in South Africa.

The bank continues to focus on increasing the participation of small to medium-sized enterprises, in particular black-owned entities, and black women-owned entities, by providing access to finance, project preparation and procurement opportunities. In pursuit of this goal, the projects funded by the bank created 9 951 job opportunities; 1 524 small, medium-sized and microenterprises (SMMEs) benefitted and the value of spend allocated to SMMEs and subcontractors was R785-million.

In terms of social infrastructure, 2 208 learners across the education sector benefitted from the various projects the bank did across the country. The bank refurbished 85 schools, benefitting 64 400 learners.

In collaboration with the Department of Basic Education, the DBSA launched Sanitation Appropriate for Education, which delivered 162 ablution facilities in schools. The collaboration created 10 362 temporary and permanent jobs, delivering a catalytic effect to local economies.

“Our social infrastructure interventions are a key part of our work in South Africa, and education has been of particular interest because we truly believe in its power to transform lives. Ensuring access to quality education at an early age opens opportunities for young people and alleviates families and communities in significant ways.

“Our focus, therefore, has been on building and refurbishing schools in underserved areas and building student accommodation at tertiary level. We are driven to play our part in bridging the education gap for more empowered communities with tools required to shape their own destinies,” Mosako said.

The DFI invested in party funds as a means of amplifying development impact in the short to medium term. These engagements impacted about 3.84-million people in food and food-related services and supported 144 519 smallholder farmers and micro-entrepreneurs, creating 14 006 permanent jobs in the agricultural sector.

The bank’s profits were disbursed in 'moonshot projects' that aim to deliver high impact in previously disadvantaged communities and with young people, particularly.

An example of this engagement is the Development Laboratories (DLABs), a solution for the growth of township economies. Through DLABs, the bank partners with various role players to build ecosystems of innovation and empowerment, and these mobilise investment inflows and yield developmental returns. In the last financial year, the bank disbursed to five DLABs in the Gauteng, Western Cape, Mpumalanga and North West provinces.

"Our focus continues to be investing in sustainable projects that promote economic growth, environmental preservation, and social upliftment. Our success comes from strong governance processes and, very importantly, a strong team . . . Key to that are the various partners who are part of the infrastructure development value chain across all spheres of government.

“Working together with them, we are driven to find solutions to system blockages and improve ecosystem efficiencies. That, coupled with innovative financing, will change infrastructure delivery from being seen as a long-term engagement to one that is fit for purpose,” Mosako said.