Bank blames delay in local government transformation for drop in the disbursement of its funds

THE delay in the restructuring of local governments was partly responsible for the Development Bank of Southern Africa (DBSA) reporting a decline in loan disbursements to R433m (R899m), the banks said, and approvals fell to R364m (R640m) for the six months to September.

Between 60% and 70% of the DBSA's loan portfolio is with local governments, which use the funding to provide services such as water, sanitation, electricity, roads, drainage, tourism and other multiple services and commercial ventures.

The beneficiaries of new approvals included foreign entities and nonfinancial institutions, which respectively accounted for 46% and 28%, and the balance was spread on local government (17%) and statutory bodies (9%). Of the new loans approved, 18% were used to foster private sector partnerships with a capital value of R656m (of which DBSA contributed R67,7m). Other loans worth R201m (55%) were for entrepreneurial development in the Southern African Development Community (SADC) and 45% was targeted at service, connector and bulk infrastructures in the region.

DBSA CE and MD Mandla Gantsho said yesterday that it was expected that the bank's annual project approval and disbursement targets may fall short of target.

He said the last leg of the local government transformation process had had an effect on DBSA business. Loan applications from local government had been limited because of the harmonisation of human resources and of information, financial and legal systems.

"Once the local government transformation process is over, loans for projects will significantly impact on the quality of life of the beneficiary communities in KwaZulu-Natal, Northern Province, Western Cape, Free State, Eastern Cape and Gauteng," he said.

Gantsho said that, in an effort by the bank to reach clients in SA who lacked the capacity to access the support of the bank and other financiers, DBSA had established a development fund, a nonprofit company with an initial capital of R80m.

"The fund, which will focus on mobilising resources for capacity building, is now fully operational under the bank's chief operating officer, Luther Mashaba," he said. The upward trend of commitments for the first six months bore proof of the bank's commitment to deliver on its mandate, he said.

The bank's financial executive manager, Gladman Nika, said the bank had posted a R620m surplus in the first six months, up from R418m for the corresponding period last year. He said the healthy surplus was an indication of the continued sound financial footing of the bank.