[South Africa] DBSA delivers pleasing performance despite impact of subdued economy
The DBSA delivered an encouraging set of results for the year ended 31 March 2019, despite the adverse impact of the subdued economy on the demand for infrastructure funding.
DBSA CEO Patrick Dlamini commented:
“The Bank’s performance this year was encouraging, considering the difficult economic environment compounded by the governance challenges experienced in the public and private sector alike. Although economic conditions affected the level of disbursements, the trends we see emerging indicate we have the capacity to deliver far greater high-impact investment. We achieved unprecedented levels of project approvals as well as commitments and we expect to see many of these come to fruition, as disbursements, in the next financial year and beyond.”
Audited results for the year ended 31 March 2019
1. Total infrastructure development impact of R37 billion
(a) R16.8 billion in funds catalysed
(b) R9 billion in total disbursements
(c) R3.5 billion in infrastructure implementation support
(d) R6.8 billion projects reached commitment stage
(e) R0.9 billion infrastructure unlocked for under-resourced municipalities
2. R39.7 billion value of project approvals
3. R17 billion in commitments
Key financial highlights
(a) Profitability of R3.10 billion (31 March 2018: R2.28 billion)
(b) Sustainable earnings of R2.32 billion (31 March 2018: R2.77 billion);
(c) Net interest income increased by 17% to R4.49 billion (31 March 2018: R3.85 billion);
(d) Expected credit losses on financial assets at amortised cost of R1.44 billion (31 March 2018: impairment of R623 million);
(e) Operating income increased by 47% to R5.64 billion (31 March 2018: R3.84 billion);
(f) Cost to income ratio increased to 23% (31 March 2018: 22%);
(g) Cash flow generated from operations decreased to R3.8 billion (31 March 2018 from R4.0 billion);
(h) Total assets increased by 0.3% to R89.5 billion (31 March 2018: R89.2 billion);
(i) Return on equity based on sustainable earnings of 6.5% (31 March 2018: 8.3%);
(j) Capital Adequacy (including R20.0 billion callable capital) 89.8% (31 March 2018: 98.7%). Limit is 250%; and
(k) Capital adequacy (excluding R20.0 billion callable capital) 138.1% (31 March 2018:156.2%)
Development Impact Highlights
(a) 433 297 households to benefit from funds committed to municipalities;
(b) 6 728 learners benefitted from eight newly built schools;
(c) 40 307 learners benefitted from 63 refurbishments of storm-damaged schools;
(d) 1 087 local SMMEs and subcontractors employed in the construction projects;
(e) 61 500 people gained access to improved health facilities;
(f) R3.2 billion value of projects from black-owned entities approved for project preparation funding;
(g) R1.9 billion value of projects from black-owned entities were approved for funding.
The Bank achieved a net profit of R3.10 billion and sustainable earnings (net profit excluding foreign exchange gains or losses and revaluation adjustments on financial instruments) of R2.32 billion. It delivered R37 billion in total infrastructure development support, with development loan and bond assets now standing R77.11 billion.
The impairment charge increased to R1.44 billion compared to R623 million in the prior year. This is in line with IFRS 9 provisioning requirements and in particular, the additional expected credit loss impairment provisions in our SADC portfolio due to changes in the economic conditions. IFRS 9 requires entities to be proactive and recognise expected credit losses due to current and forecast economic conditions.
In his mid-term budget speech, the Minister of Finance allocated R625 million to strengthen project preparation in South Africa. The DBSA is earmarked to manage a facility of R400 million which will be used toward the development of infrastructure projects to feed into the National Treasury’s Budget Facility for Infrastructure and the envisaged Infrastructure Fund.
Total approvals amounted to R39.7 billion (2018: R14.5 billion) and commitments to R17 billion (2018: R8.7 billion). In line with its mandate, the DBSA has continued to pursue the implementation of its growth strategy, through which it aims to increase the crowding-in of third-party funding, de-risking projects through early stage project preparation and improved innovation.
Both domestic and global economic factors are critical to the achievement of the Bank’s objectives. Government’s commitment to revive and grow the economy is expected to improve business confidence and boost economic activity and we believe this will positively impact the demand for infrastructure funding.
“The DBSA has a healthy pipeline of projects that form a solid springboard for success in the future. Our solid foundation of financial sustainability is key to realising our potential for development impact. This position of strength sets a strong platform for the DBSA to start addressing some of the enormous challenges that we face in South Africa and Africa at large,” said Dlamini.