/ 27 September 2019

The DBSA finances climate-friendly infrastructure

DBSA is a key funder in various projects under REIPP.
DBSA is a key funder in various projects under REIPP. (Photo: David Harrison)



The Development Bank of Southern Africa (DBSA) is a leading development finance institution working across the African continent. Established in 1983, it promotes economic and social development, growth and regional integration through infrastructure finance and development.

It is guided by the priorities and objectives of South Africa’s National Development Plan and the United Nations’ Sustainable Development Goals (SDGs) and supports the South African government in terms of their proposed Nationally Determined Contributions (NDC) emanating from the Paris agreement.

An integrated approach to infrastructure development

DBSA operates across the full spectrum of the infrastructure development value chain, offering clients products, services and solutions in the water, energy, transport and information and communication technologies (ICT) sectors.

DBSA’s suite of integrated infrastructure solutions

In the planning phase, the bank does municipal assessments and bulk infrastructure
 plans. It also plays an advisory role in 
infrastructure planning. In South Africa, its clients are intermediate and under-resourced municipalities. 

During project preparation, aspects include: project identification, feasibility assessments, technical assistance, financial structuring, project preparation funds 
and being the lead arranger. In South Africa, clients are municipalities, state-owned enterprises (SOEs), public-private partnerships (PPPs) and the private sector. 
In the rest of Africa, clients are SOEs, PPPs, sovereign
 and private companies. 

Services provided by DBSA include: providing vanilla and boutique financing opportunities, debt, mezzanine finance
 and limited non-recourse lending. In South Africa, clients are municipalities, SOEs, PPPs
 and the private sector. Clients in the rest of Africa are SOEs, PPPs, sovereign
 and private companies.

In the building sector, DBSA manages the design and construction of key projects in education, health and housing sectors, often providing project management support for national and provincial government departments and municipalities.

The bank supports the maintenance and improvement of social infrastructure projects for municipalities, provincial and national government departments.

Climate finance objectives

DBSA plays a significant role in dealing with the challenges of climate change by advancing sustainable and environmentally-friendly infrastructure solutions.

Its objectives are to provide dedicated advisory, investment and implementation support to access funds from climate funding mechanisms, and blend this with DBSA funding. 

DBSA’s portfolio is becoming progressively greener. It enhances the resilience of infrastructure investments, and supports government in meeting its Sustainable Development Goals targets and commitments to Nationally Determined Contributions.

Climate finance solutions

The DBSA’s climate finance initiatives involve managing facilities, funds and programmes that promote a greener economy, drive sustainability and development impact and support a just transition to a low carbon economy and adaptation to climate change.

It does so through the following:

The Green Fund is managed by DBSA on behalf of the department of environmental affairs. Its current portfolio is eight capacity development projects, 16 research and development projects 
and 31 investment projects.

DBSA’s accreditation to the Green Climate Fund provides access to funds for low-carbon and climate-resilient development. There are three projects in its current portfolio, and six are being prepared for consideration.

DBSA is accredited for the Global Environment Facility. Its current portfolio has six approved projects, and several projects are being prepared for Global Environment Facility 7.

The development bank is an active member of the International Development Finance Club, a network of 23 leading national, regional and international development banks that share a similar vision of promoting low-carbon and climate-resilient futures.

DBSA is a member of the Global Innovating Lab for Climate Change, which supports the identification and piloting of climate change financing instruments and products to catalyse private sector money into climate change mitigation projects in developing countries.

Climate Finance Facility

The DBSA’s Climate Finance Facility (CFF) is a lending facility intended to increase climate-related investment in Southern Africa by addressing market constraints and playing a catalytic role with a blended finance approach.

The CFF will use its capital to fill market gaps and crowd-in private investment, targeting projects that are potentially but cannot currently attract market-rate capital at scale without “credit enhancement”. It will focus on infrastructure projects that mitigate or adapt to climate change.

The CFF is a structured finance platform that will have initial committed debt funding of $2-billion. It will catalyse private sector funding by co-funding alongside developmental and private sector financial institutions to try and achieve a 1:5 leverage.

It is a rand denominated facility, targeted and available to co-fund private sector projects in South Africa, eSwatini, Lesotho and Namibia, countries in the common monetary union. It does so by offering credit enhancement products in the form of a first loss or subordinated funding and tenor extension (up to 15 years), by taking a blended finance approach with highly concessional funding that is being provided by the Green Climate Fund. The CFF can offer long-term competitively priced funding.

Embedded Generation Investment Programme

The embedded generation investment programme (EGIP) is a credit support mechanism that will develop a model for 
funding embedded generation renewable energy projects in South Africa. Independent power producers (IPPs), off-takers and local municipalities will implement these projects.

The $200-million programme will help South Africa achieve its climate targets; $84-million will be utilised to provide BBBEE funding to local communities’ SMMEs in renewable energy. 

EGIP will add 330MW of new generating capacity, thereby directly avoiding emissions of more than 700 000 tonnes of carbon emission per annum.

In partnership with the department of energy and the national treasury, DBSA has played a key role in developing the market for IPPs through the Renewable Energy Independent Power Producers Programme (REIPP), which has contributed to increasing energy supply and promoting the global climate change agenda. 

DBSA is a key funder in various projects under REIPP and has invested R12.4-billion into 14 projects, of which R2.5-billion was funding support for nine BBBEE entities and 15 local community trusts.