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Development in SA need not mean loss making

Mar 22 2016 19:37
Carin Smith


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Cape Town - South Africa needs to move away from the idea that development and development funding mean loss making, according to Lefentse Radikeledi, director of development finance institutions at National Treasury.

"Stick to your mandate if you are a development agency. Then be sure you actually do development and that you charge according to the risk you are taking. It is also important to partner with the private sector," he said at a forum hosted by the Chartered Institute of Development Finance (Cidef) and the UCT Graduate School of Business (GSB).

The division between development banks and commercial banks is blurring, according to Dr Zwelakhe Tshandu, unit manager of the Knowledge Management and Innovation (KMI) unit strategy division of the Development Bank of Southern Africa (DBSA).

"Commercial banks are increasingly also becoming active in the area where development banks were exclusively active before," Tshandu said at the forum event.

He emphasised that, while development is an important component of the mandate of a development bank, the financial bottom line of making money is important as well.

"The trend is to move to a very integrated approach and the DBSA must make a profit where possible," he added. "Treasury is saying we must work more with the private sector. We also have competition from private banks in SA and the rest of Africa and we need to see what the 'marriage' will be with the new Brics Bank."

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The DBSA is now three years into its restructuring process with the aim to improve the cost to income ratio and to mandate realignment. Tshandu said the restructuring is about efficiency gains in order for the DBSA "to get back into the black". The bank is now smaller and the emphasis is on going back to its core. Its mandate has also been enlarged to now include Africa as a whole - with certain priority countries.

"It is about what we do and how well we do it," said Tshandu.

"Africa has infrastructure needs of about $100m (about R1.5bn) per year and the current funding gap is about $47bn. We must see where we can contribute effectively. Advancing regional integration is also very important. Yes, you can spend money, but is it being spent on the right projects?"

Furthermore, SA is good at building infrastructure, but not so good at maintenance, in his view. Therefore, there is also a focus on maintenance needed within the DBSA mandate.

"We must look at the large SA cities and address the spatial apartheid issues where people live far from where they work, for instance. We must try to create integrated spaces where working, living and playing are close to each other," said Tshandu.

The DBSA is trying to provide integrated solutions across the infrastructure value chain, he emphasised. It has expanded its footprint. In the 2015/2016 financial year the DBSA tried to enhance its focus area and it plans to aim for partnerships with the private sector.

"We also want to enhance our value proposition outside SA. The challenge is to see how we can translate our successes in the renewable energy sector, for instance, to other sectors too," he added.

"Going forward we want to focus on partnerships with financiers. It is very important to have knowledge partnerships, for instance with universities, to tap into resources and skills to lead to being able to do more."

ALSO READ: DBSA to revive infrastructure

uct gsb  |  dbsa  |  banking  |  sa economy  |  development


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