Tebello Radebe
The meandering road leading to the Development Bank of Southern Africa (DBSA) Midrand headquarters has changed little from the late 1980s. It is possibly the only thing that has remained the same about the bank as it faces the millennium with a new direction and mandate.
This year has been characterised by instability, in part caused by the resignation of Andre le Grange as chief executive in February. Div Botha and Nick Christodoulou held the fort until June before the appointment of the present incumbent, Dr Ian Goldin.
On the operational side, the bank has had to concentrate on two main issues: to take the transformation process forward and maintain existing disbursements and project activities.
Goldin said the latter was influenced by the knowledge that infrastructure would be the main thrust of the bank’s future activities, while projects in other sectors were being gradually phased out.
The extent and timing of this phasing out have been guided by the knowledge that the bank would probably have to perform a significant warehousing function for projects in rural, small business and human resource development previously approved and funded. This would continue until new institutions were in place to take over these functions, he said.
Chairman Professor Wiseman Nkuhlu and Goldin are confident the bank will continue its near-perfect cost recovery record even though the bulk of its future clients will now be local authorities. This despite reports that local authorities in six provinces are owed a staggering R3-billion for services by their residents. Gauteng local authorities alone are owed R2,415-billion, according to Constitutional Affairs minister Valli Moosa.
“The availability of grant funding from the government and other donors for capacity-building of local authorities will contribute to developing the financial sustainability of the new borrowers,” said Nkuhlu.
Established in 1983 by the government as a funding conduit to develop “the constellation of Southern African states” (including the “independent” homelands) and funded by the government to the hilt (a total of R3,7-billion has been pumped into the DBSA to date), the bank grew into a top-heavy structure with layer-upon-layer of senior management.
It was headed by a 15-member council of governors drawn from the ranks of homeland and senior government functionaries. A 10-member board of directors, complemented by eight alternate directors as well as an executive management team, took charge of the bank, which six years after its inception had a staff of 682.
Now, having shed over 150 staff since 1989, a few senior managers are currently negotiating severance pay deals. According to Goldin, “considerable unhappiness existed as a consequence of the perception that decision-making was concentrated in the hands of a few people”.
Says Goldin: “It was soon realised that the internal transformation of the organisation would require an approach in which the bank had not been greatly successful in the past —that is, offering staff a meaningful opportunity for participation in the process.”
These and several other cutting-edge changes follow the report by a finance ministry transformation team, appointed last May, which tabled a range of recommendations to alter the fabric of the bank and to bring its structure and purpose in line with the overall democratic changes in the country.
Nkuhlu says there is now broad agreement on the bank’s new mandate, which is infrastructure development. Another main change has been the reduction of state funding, which means the bank has had to both increase borrowings and cut its capital funds.
As a result, disbursements in development loans and grants have risen by 15,7 % to a record R1,328- billion; there is an additional R2,621-billion in approved, but undisbursed loans.
A sharp contrast can be drawn against total disbursements of R473-million five years ago, with R60-million paid out for infrastructure development, and average total disbursements of R1-billion a year for 1988, 1989 and 1990.
Mandla Gantsho, finance general manager, describes the role of the bank then as “trying to be all things to all people” by financing projects for a wide array of needs from education to small business, roads and health.
“All this came about to ensure that the apartheid policy and ideology could be advanced through this funding processes,” he said.
Another major departure is the bank’s new role in mobilising private sector investment in infrastructure. So far this year, R770,5-million has been raised from the private sector, bringing about a new form of private and public sector partnership, with the bank serving as a catalyst for linking the finance sources and the projects.
Nkuhlu notes that political change has opened up international funding opportunities. He argues that the country’s internal resources alone cannot cope with the funding needs of the Reconstruction and Development Programme, the new macro-economic growth plan, job creation, a national crime prevention plan, and a system of welfare security nets.
“It is therefore encouraging that other countries and overseas institutions have offered an initial package of concessional and grant funding, technical assistance and export credits to a total value of R12,5-billion,” said Nkuhlu. He, however, stressed that these will be accepted with extreme caution, taking into account risks associated with foreign borrowing.
It is indeed a meandering road to travel, but at least the road ahead seems much clearer.