DBSA spends a fraction of money earmarked for social infrastructure

The Development Bank of Southern Africa,  tasked with delivering developmental infrastructure on the continent, invested only a fraction of the money earmarked for social infrastructure projects such as schools and hospitals in the past financial year, its latest annual report shows.

While it paid out R12.2bn to facilitate infrastructure projects in the year to the end of  March 2018, the annual report showed that only R222m was paid to social infrastructure projects, compared with a target of R1.8bn. 

Development finance institutions (DFIs) are critical in driving investment towards social infrastructure, as returns cannot be easily quantified in monetary terms, making it difficult to attract private-sector investors.  

Social infrastructure can be hard infrastructure like schools and hospitals or soft infrastructure, such as the provision of services, community and cultural development.

“If we think of investments in social infrastructure as a mixture of these and a conduit through which inclusive communities and growth can be achieved, then it seems to me that the amount quoted is inadequate. Studies show that social infrastructure is an important source of growth under the right conditions,” said Michael Graham, head of development finance programmes at the University of Stellenbosch Business School.

Graham said if a country’s infrastructure development is biased towards economic infrastructure, it runs the risk of non-inclusive growth, which leaves the society deeply divided and prevents social cohesion, especially in rural communities.

In terms of education infrastructure, the report shows that through DBSA funding, eight new schools were completed and 21 more were under construction at the end of March. For health, 25 facilities were refurbished.  

The bank disbursed just over half of the R20bn it was supposed to allocate to infrastructure in the 2018 financial year, with a further R9.2bn of funding commitments made but not paid. More than half — R6.9bn — went to energy infrastructure, which included the upgrading of substations and electrification of households. The DBSA’s exposure to the energy sector, excluding municipalities, has increased to 48% of the bank’s total portfolio.

The report also showed that actual disbursements continue to be skewed towards the top five metros. The top five recipients received R3bn in infrastructure finance, while smaller metros and intermediate cities got R238m. On the other hand, the DBSA spent R42m to support under-resourced municipalities. Support included helping to develop infrastructure master plans for these municipalities and plans to reduce non-revenue water losses. Thirteen municipalities were supported in this regard and 12 projects were completed.

As far as its financial results are concerned, the annual report showed a 26% decline in sustainable earnings to R2.7bn. Sustainable earnings are profits from operations before net foreign exchange gains or losses. Its gross development loan book increased 6% to R79.9bn, while R7.3bn in interest was capitalised, compared with R7bn in 2017. The bank posted a net profit of R2.28bn, slightly less than the R2.8bn reported in 2017 but almost triple the R787m net profit five years ago.

buthelezil@businesslive.co.za