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Transforming DBSA cuts back, ups its lending 87%
DEVELOPMENT CAPITAL
THE Development Bank of Southern Africa almost doubled its lending in the past year, outstripping even the most upbeat estimates and growing infrastructural spending exponentially. The DBSA, which is coming out of a period of major transformation from its apartheid roots as a homeland bank, approved lending of R4.3-billion in 1997/8, up 87% from R2.3-billion a year earlier. Chief executive Ian Goldin said the bank was surprised by the extent of the growth, especially in view of the transformation process which has seen employee numbers substantially reduced with a focus on efficiency and affirmative action. He said it was unlikely that the current financial year would show such strong growth. The bank has doubled productivity on almost every measure. It has cut management positions to 27 from 57 since October 1996 and the number of management positions filled by blacks and women has risen 83% to make up three- quarters of management. Goldin says the bank's success should be measured by the impact it has on the communities it serves. "In the past year, 987 000 households in 72 SA urban areas benefited from DBSA projects which included upgrading water supply and sanitation, roads, electrical reticulation and institutional and social services." The most striking turnaround at the bank has been the sharp increase in co-funding of projects. For every R1-billion approved by the bank in 1997/8, another R2-billion has been contributed by other parties - private, government and donor - to create a total project value of some R13.5-billion. This compares to a ratio of under one just a year before. Much of this improvement comes from the DBSA's move outside SA to other SADC countries. While loan approvals of R2.3-billion within SA contribute the bulk of total project value of R4.1-billion, approvals of R1.96-billion in other SADC countries represent only 21% of project value of R9.4-billion. Goldin says R2.2-billion was disbursed in 1997/8 against R1.4-billion a year earlier. The combined job creation effect of the 1997/8 disbursements and approvals is 54 000 direct jobs. The bank is budgeting for disbursements to grow on average by 10% a year and in 1998/9 provision has been made for disbursements of R2.5-billion. The bank has already accepted new loan commitments in the pipeline of some R4.67-billion. The DBSA lends over 40% of its funds to local authorities and Goldin says that despite the widespread attention given to potential bad debts, the argument carries little weight at the bank. He says none have had debts written off and expects potential write-offs to be minimal in the current year. Overall bad debt write-offs in 1997/8 was a negligible 0.04% against 0.4% in 1996/7. The bank makes provisions of 7% of its development loans for bad debts. The bank reported a 317% higher surplus for the year of R427-million, R250-million of which is considered exceptional. About 95% of DBSA funding is raised at commercial rates on the capital markets, and about half of this is from offshore lending. The bank has delivered well ahead of expectations in the last year and Goldin says the only possible constraint to further strong growth in lending is linked to internal capacity.
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