DBSA Corporate Performance Results 2006/7 Jay Naidoo, Chairman,

DBSA Corporate Performance Results 2006/7 Jay Naidoo, Chairman,

DBSA Corporate Performance Results 2006/7 Jay Naidoo, Chairman, DBSA Board of Directors Paul Baloyi, Managing Director & Chief Executive DBSA Executive Team Members National Council of Provinces Cape Town 9 October 2007 Evolution of the DBSA Engagement Model ENTRY Point Range PREPROJECT Dev Planning, Mobilisation Partnerships Facilitation 1 2 EXIT Point Range 3

4 Identify Appraise Finance Procure Service Delivery 5 Monitor Building Commercial Bank Utility, SOE, Municipali Cooperative, Compan O U 6 T Operate Direct C Impact O M E Conventional Development Bank Vision 2014 DBSA Development Bank Model 2

Corporate Performance in 2006/7 was strong in both strategic and operational terms Strategically, the organisation re-focused & re-positioned: Hands-on re-positioning of the DF through Siyenza Manje; Reformed Strategic Performance Framework (BSC); Expansion of sustainable communities projects; Expanded and deeper focus on markets 2 & 3; More strategic approach to market 1 in line with NSDP; Expanded regional integration thrusts in line with NEPAD & new thrust of SADC Ministers of Finance; Revised research agenda; New partnerships and ventures; New risk management architecture; New human capital framework Re-positioned for deeper development impact & increased capacity for excellence & sustainability 3 Repositioning of the DBSA DF (1) Internally, the DBSA DF has been repositioned in line with the New Hands on Implementation Approach and Focus on Siyenza Manje: The DBSA DFs structures and systems were reviewed and largely re-designed in line with its new hands-on approach, to enable rigorous implementation of the Siyenza Manje programme. This has included the establishment of a project

management office and the development of new processes & reporting formats; The DBSA DF Board also reviewed the structure of the Development Fund Board and recommended discontinuation of the Board sub committee in order to expedite the approval of deployment processes and business plans. 4 Re-positioning of the DBSA DF (2) Externally, the DBSA DF has repositioned itself to address bottlenecks, synergies and reach over the longer term: The Development Fund is deploying resources to national departments (DWAF & DPLG) to address bottlenecks affecting the implementation of Siyenza Manje Programme and enable/accelerate overall project implementation; Introduction of a shared service approach to harness efficiencies in deployment and to accelerate support at municipal and district levels through; Discussions with National Treasury on options to upscale Siyenza Manje. 5 DBSA DF Operational Performance, 2006/7 The DF focused on key development output and impact deliverables Exceeded Targets (Substantially) - grants approvals to market 3 municipalities 20.3/14 - disbursements 67m/78m, post termination of 48 m. non-disbursing grants

- # of case studies 11/9 - # of municipalities supported (86/20) - # of projects completed 97/30 Key Development - % of operational expenditure 54m/101m Impact Indicators Achieved Targets Partial Achievement - revised policies & procedures - funds leveraged (42%/50) Mostly - aligned performance plans - # of experts deployed 87/90 Internal - statutory reporting (AR + IR) - marketing road shows House - partnerships strengthened - # of project completion reports 10/30 Keeping - publication of evaluation report- turn around time 14/6 - # of staff trained 12/15 - # of innovative ventures 0/1 6 On the Ground Development Impact of DBSA DF Operations 1.2 billion of Governments municipal infrastructure grants

unlocked; 471 infrastructure projects under implementation; 170,000 households connected to water; 120, 000 households upgraded with sanitation facilities; 7 Reformed Scorecards were completed in line with the enhanced V2014 Strategy & New Divisional Strategies 25 corporate measures of which 10 are new, 2 are improved and 13 existing: New KPIs introduced to drive execution of the sharpened strategy, of which the following are some highlights :

R value of MIGs implemented into projects, due to Banks interventions; # of new projects originated by the DBSA; # of new financial products/instruments developed (securitization, municipal bonds & growth fund) % of backlog commitments from the previous two years that were converted to disbursements in the current year; external client satisfaction with Banks delivery on its major capacity building initiatives; # of lessons learnt, case studies and models approved through KSC; # of project managers appointed, trained by DBSA DF & deployed; non performing book debt as a % of total book debt 8 The Bank had 12 targets in the KEY dimension, accounting for 80% of total performance All 12 targets were achieved (25%) or exceeded (75%) to varying degrees: Exceeded (Exceptional) Exceeded (Moderate) Target (9 @ 3.6 & above) Target (1 @ 3.1 3.5) Approvals - Disbursements. BEE investment financing. Approved projects Capacity building. Achieved Target (2 @ 3) External training. - Research agenda. Cost of new debt.

- Internal staff training. Cost to income. Turn around time. Innovative ventures. 9 Selected Development Impact of DBSA Operations (disbursements) 2005/6 2006/7 Jobs created 17,100 25 000 Low income households benefiting from Banks investments GDP contribution 400 million 2.0 billion 500 million 2.3 billion 10 16% increase on the total number of new projects approved in RSA, with focus on MKTS 2 & 3 # OF PROJECTS APPROVED BY MARKET SEGMENTS ,

EDUICATION & UTILITIES:RSA only 2003/04- 2006/07 Totals 150 Continuing trend in increase of number of new approved projects for markets 2 & 3 125 100 75 50 25 0 Market 1 Market 2 Market 3 Education Utilities Other PSI in RSA Total 2003/2004

1 37 19 16 2 3 0 78 2004/2005 8 41 14 20 7 7 0

97 2005/2006 6 38 18 25 16 7 19 129 2006/2007 5 41 32 25 8 17

20 148 11 Sustained the step-up in previous years jump in approvals Figure 2: Total Value of Loan & Equity Approvals : Six-Year Trend Analysis (Rmil) R 10,000 R 8,000 R 6,000 R 4,000 Total R value of approvals in 2006/7: Total: R8,3bil. But only 2.6% growth in 2006/7 RSA: R5,4bil (65.5%) Total Loan & Equity Approvals 8.05 SADC: R2,9bil (34.5%) R 2,000 R0 2001-2002 2002-2003

2003-2004 2004-2005 2005-2006 2006-2007 Table 2: Total Loan & Equity - Six-Year Trend Analysis (Rbn) 2001-2002 Total: Average: R 3,151 2002-2003 2003-2004 R 3,833 R 3,570 R 3,348 2004-2005 R 3,947 2005-2006 2006-2007 R 8,052

R 8,265 R 8,159 12 Large jump in share of inter-country/regional integration projects (0% in 2005/6) South Africa Botswana 34% 38% Namibia Malawi Mauritius 9% 1% 1% 1% 4% 12% Madagascar Zambia Multi-Region 13

Eastern Cape HotspotProvince Moves into Top 3 (from 5th last year) Kw a-Zulu-Natal 2% 2% 2% 2% 5% Gauteng Eastern Cape 6% 29% 9% Western Cape Free State North West 43% Mpumalanga Northern Cape Limpopo 14

Share of Empowerment Approvals Rises share of empowerment approvals rises to 38% of total loans and equity in RSA, up from 31% in 2005/6; 23% increase on previous years level. 15 Bank ramps up investment in project preparation, feasibility etc to unlock investment, growth & development Technical Assistance Grants - Six-Year Trend Analysis TA Grants in 2006/7 R42,1mil. 44% above target R 45,000,000 R 40,000,000 R 35,000,000 R 30,000,000 Technical Assistance Grants R 25,000,000 R 20,000,000 R 15,000,000

R 10,000,000 R 5,000,000 R0 20012002 20022003 20032004 20042005 20052006 20062007 16 Jump in growth in disbursements, raising public & private investment in infrastructure & economic development Total R value (Rmils) of Disbursements : Six-Year Trend Analysis R 4,000 R 3,500 Disbursements R 3,000 R 2,500 Total R value: Total: R3,7 billion RSA: R2,7billion (72.5%) SADC: R1,0 billion (27.5%)

R 2,000 R 1,500 R 1,000 R 500 R0 2001-2002 2001-2002 R 1,781 2002-2003 2002-2003 R 3,661 2003-2004 2003-2004 R 2,729 2004-2005 2005-2006 2004-2005 R 2,999 2006-2007 2005-2006 R 3,077

2006-2007 R 3,702 17 Meaningful country distribution of DBSA disbursements Country Rvalue South Africa (SA Ops + PSI) % R 2,683,197,251 72.5% R 129,697,958 3.5% R 40,537,060 1.1% R 56,318,728 1.5% Swaziland R 69,583,014

1.9% Tanzania R 210,572,439 5.7% R 57,066,060 1.5% R 305,928,053 8.3% Angola Mauritius Mozambique Uganda Zambia Multi-Region New, strategic market Investing in good performers R 149,897,881 Strategic focus

On integration, R 3,702,798,444 multi-country projects 4.0% Up from 4% Up from 0% 100.0% 18 Social infrastructure and water get lions share of DBSA disbursements in RSA Agriculture M anufacturing 1% 2% 1% 1% 0% 4% Tourism 6% 0% 3%

Education Energy 2% Communications Sanitation 39% 12% Roads & Drainage 0% Water Transportation Health Housing Community Facilities 29% Capacity Building(Research, Planning etc) Other( fund & entrepreneurial) 19 Non-DBSA Officials and Managers Trained

Official launch of Vulindlela 27 June 2006; Target to train 400 external delegates; Achieved 489 external delegates; 86% external delegate satisfaction level with Vulindlela courses; Partnerships with DPLG, SALGA and LGSETA for RSA and JIPSA for SADC. 20 Partnerships & Leverage Through Co-Financing 17% improvement on leverage (excluding Gautrain Project): 2006/2007 = 1 : 2.57 (1: 5. with Gautrain Project)

2005/2006 = 1 : 2.2 21 Banks achievements attained with cost-efficiency Operating costs to income ration (excluding TA & PRMB):6-Year Trend 40.00% 35.00% 30.00% 25.00% 20.00% Operating costs (excluding TA and PRMB) to income ratio: 15.00% 10.00% 5.00% 0.00% 2002 2003 2004 2005

2006 2007 22 Banks strong performance not achieved at the expense of financial sustainability interest on development loans operating income surplus growth faster than interest expense Operating expense growing relatively slowly & controlled 23 Assets grew steadily over the past year, by 5.5 % to 27.95 bn Balance sheet summary 24 Growth in Development Investments Return on Assets: 4.7% (up from 3.5)

Short term & liquid financial assets give way to development investments Return on Shareholders Funds: 8.7% (up from 7%) 25 The overall result is that performance in 2006/7 has been strong, exceeding that of the previous three years DBSA CORPORATE PERFORMANCE: FIVE YEAR TREND 4 3.8 3.6 3.4 3.2 3 2.8 2.6 2.4 2.2 2 Score 2002/2003

2003/2004 2004/2005 2005/2006 2006/2007 3.6 3.2 3.28 3.25 3.6 26 New Regional/Local Economic Development Fund Concept 27 Relevance of Development Fund interventions 1 Siyenza Manje Phase I - Adoption 2 1 SA Operations

Siyenza Manje Infrastructure Finance to SM Munis, incidental - subject to debt absorptive capacity freed up by capacity deployment/building Purely Capacity Deployment 1. 2. 3. Assumptions That munis debt absorption capacity will improve as human capacity constraints are addressed Placement of Specialists Systems Training/Capacity Building Assumptions That MIGs will be unlocked and processed 3 Reality Skills scarcity

Training/capacity building only incidental Capacity constraints/bottlenecks extend to government departments Munis debt absorption capacity limited by poor economic bases Gaps in economic infrastructure development curtailing real poverty reduction 28 Relevance of Development Fund interventions 2 Siyenza Manje Phase II - Enhancement SA Operations Financing complementary targeted concessionary funding (TIP) Vulindlela Academy Training/Capacity Building Knowledge Management Cluster Advisory services Research Risk Management Human Capital

Closer collaboration between DF & Bank Divisions Common/joint targets between SAOPS & SM eliminate funding gaps MIGS now specified targets Siyenza Manje Capacity building Targeted risk interventions Contracted institutionalised expertise to capture scarce skills (Project management expertise) DWAF, DPLG co-opted This framework is being institutionalised in current operations . 29 The Instrument Outlined

30 The Next Step Creating Sustainable Economic Development Funding mix Basic Infrastructure Co m te mer r m ci s al g/P gu ensi ara on nt e ba es cke d Primary Capital Governmen t Mi ni n t /sub -deb

Sen io r y ndar o c e Qu S A DBS nary asi-equ o mez ity/ su essi c b/ n - de o c s bt fund FIs nal D funds natio Inter ssionary ce Con

Social Infrastructure (Affordable housing) MIGS Economic infrastructure (e.g. roads, power, telecoms, industrial waste and water) Funding Gaps Business development (Commercial and Industrial) Private sector capital 31 32 Thank You 33

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