Development Bank of Southern Africa

Select Committee on Trade and International Relations: DBSA’s role in

facilitating SMME Development

30 May 2012

Agenda

Background and mandate of DBSA

Development Fund

Jobs Fund

Accelerated Schools Infrastructure Development

Initiative (ASIDI)

Rural Economic Development Initiative (REDI)

Background and mandate of DBSA

The DBSA is one of the Development Finance Institutions (DFIs)

in South Africa;

Wholly owned by the Government of South Africa;

Shareholder representative is the Minister of Finance

DFI’s: Development Finance Framework in SA

Wholesale development finance institution:

The DBSA: Part of the family of 5 DFI’s,

DBSA - Act of 1997 :

To promote economic development and growth, human resources development,&

institutional capacity building in the region;

To support sustainable development projects and programmes in the region.

KHULASmall bus.

Development

Land BankAgricultur

e: onsite

IDCIndustrial

Development

DBSAInfrastructure

Development

NAT. HOUSING FINANCE

CORP.Housing Finance

Background and mandate of DBSA contd

Background and mandate DBSA

Infrastructure Development Finance in South Africa and the rest of the Southern African Development Community (SADC)

Co-deliver social and economic infrastructure

Build human and institutional capacity Promote broad-based economic

growth, job creation, cooperation, integration and prosperity

Serve as a centre of excellence for development financing, effectiveness and good governance.

Engender sustainability, external and internal

Historical The Development Bank of Southern Africa (DBSA) (www.dbsa.org) is wholly owned by the SA government, and was established in

1983 to perform a broad economic development function within the homeland dispensation that prevailed

Since the new democratic order in 1994, the role of the Bank has evolved to accelerate both economic and social infrastructure development for the benefit of all citizens in both South Africa and SADC region

Current Today, the DBSA is uniquely positioned to support the development challenges in South Africa. Its client facing operations is

structured to unlock value across three broad prevailing challenges: social transformation; economic stimulation and institutional capacity building

Social Transformation

Early stage development and investment in large-scale

infrastructure projects to address backlogs and expedite service

delivery

Economic stimulation

Early stage development and investment in large-scale infrastructure

projects to stimulate economic activities and economic growth, reduce

bottlenecks and drive long-term sustainability

Institutional Capacity Building

Actions aimed at enhancing

institutional ability to plan, implement and manage large-scale

infrastructure projects

PrevailingChallenges in

Africa

Aligning core bank operations to address these

challenges

South Africa Operations

Financing Municipalities in South

Africa

International Division

Financing outside South Africa

Investment Banking

Financing public sector national

programs that deliver bulk infrastructure

Development Fund

Programs to address institutional weaknesses

Background and mandate DBSA

Priority sectors The Investment Banking Division’s focus is on originating infrastructure development projects within priority sectors largely prioritised

to expedite infrastructure delivery, as well as to support economic growth required to stimulate employment and alleviate poverty

Channel New business is originated by a team of seasoned investment professionals through leads obtained from private sector, but also

through upfront engagement with public sector in order to assist with early stage project development and financing during bankability stages

Renewable Energy

Independent Power Producers (IPP)

Generation

Health

Public hospitals Clinics Pharmaceuticals Professional

Training

Water

Bulk raw water infrastructure

Bulk water services

Energy Transportation

Rail Roads Ports Pipeline Passenger

transport

Telecoms

• Fixed line • Wireless• Fibre-optic

Human Settlements TourismMining/ResourcesEducation Other

• Affordable housing (metros, 2nd tier cities)

• Retail/commercial (townships)

• Game parks/lodges

• Hotels

Resource beneficiation

New mine exploration

• Tertiary education

• Basic education

• Financials• Construction

Background and mandate DBSA

• Although SMME not direct mandate of DBSA, the Bank facilitates SMME development through, amongst others:– Development Fund– Jobs Fund– Accelerated School Infrastructure Development Initiative

(ASIDI)– Rural Economic Development Initiative (REDI)

DBSA SMME development initiatives

SMME Capacity Building Support on Operations and Maintenance

Contract Work Opportunities in O&M work at municipalities

Linkages with Financiers and equipment providers DBSA secured MOUs with: - Bell Equipment- National Employment Fund

Training and Mentorship provided: - Labour-intensive construction - Business management - Project management skills Training to 62 SMMEs provided during 2010/11 and 2011/12 FYs

Development Fund – Operations & Maintenance (O&M) Programme

Development Fund (O&M)

Number of municipalities implementing the programme

Number of SMME’s benefitting from the programme

O&M plans developed and implemented

• Target: 10 • Target: 30 • Target: 24• Actual: 10 • Actual: 55 • Actual: 25• The O&M programme was

implemented in the following municipalities:

• Eden district,• Hessequa, • Kannaland, • Dipaleseng, • Bushbuckridge, • City of Tshwane, • Thabazimbi, • Ga-Sekonyane, • Mogalakwena,• Gamagara.

• The DBSA provided grant funding of R960 000 to train 50 SMMEs on labour intensive construction, business management and project management skills. This intervention resulted in the allocation of O&M projects to SMME’s in the Eden district municipality.

• 24 O&M plans were developed and will result in prioritised maintenance projects included in the Integrated Development Plans (IDPs) and annual budgets of municipalities.

ENTITY ASSISTANCE

Malamanana Bricks – BaPhalaborwa

• Assistance with registration as cooperative• Access to training• Assistance with project management – site preparation, water supply

and contracting through the DF Deployee

Namakgale Hawkers facility, BaPhalaborwa

• Facilitated access to facilities funding (Neighbourhood Development Partnership Grant) and funding of security fence

• Training of hawkers

Namakgale Taxi rank, BaPhalaborwa

• Facilitated access to facilities funding (Neighbourhood Development Partnership Grant)

Transido Business Centre Mthatha

• Negotiations with Eastern Cape Development Corporation for upgrade of centre

• Facilitated funding of R33 million from Neighbourhood Development Partnership Grant for re-development

• Project Management support

Coastal Cashews • Production Inputs grant of R900 000• Technical capacity building through the deployment of Agricultural

Specialist • Board training on Governance• Turn-around strategy for operations

Development Fund – Other SMME Assistance

ENTITY ASSISTANCE

Elliotdale Housing • Identification of local contractors• Contractor training • Designed and incorporated the Housing support centre to provide

plans, procurement of material and quality assurance to local contractors

Wassup – Diepsloot for water and sanitation maintenance

• Facilitated contract with the City of Johannesburg for Wassup• Seed funding of R800 000 for Co-operative

Midrand Construction skills Training Centre

• In partnership with Group 5, financed and operationalised the fully accredited Midrand Training Centre

Keiskammahoek • Linking paprika farmers with Unilever• Technical capacity building

o deployment of Agricultural Specialist o Training by Small Enterprise Development Agency (SEDA) and

National Department of Agriculture• Grant funding for production inputs and labour

Grabouw: Elgin Training College

• Funding of upgrade and assistance with accreditation of the Elgin Training College

• Training linked to Rooidakke Housing development

Development Fund – Other SMME Assistance

Projects approved to the value of R1.8 billion

121592515

Applications received

Eligible applications

9642,651

• Key operational aspects of the Jobs Fund scoped and completed, including the Application Capturing System, Eligibility Assessment Tools and Policies & Procedures documents.

• 2,651 applications were received from the first call for proposals.• The Enterprise Development window attracted the most applications, at 51%,

and followed by Work Seekers, Infrastructure and Institutional Capacity Building and 23%, 17% and 9% respectively.

• It is estimated that 186 238 jobs will be created by the first round of approved projects.

• Approval progress to date is summarized follows:

Jobs Fund

Preliminary targets for three years

Expenditure(R mil)

Co-Funding(R mil)

Number of Projects

Sustainable jobs created

Net income added

(R m a year)

Enterprise Development

3 500 7 000 700 100 000 1 500

Infrastructure Investment

4 000 2 000 250 20 000 400

Work-Seeker Support

1 000 500 200 20 000 400

Institutional Development

500 500 200 10 000 200

Total R9 000m R10 000m 1 350 150 000 R2 500m

Operational overview (as at 31 March 2012)

Applications received 2 651

Grant funding approved R1,835 million

Matched funding R1,739 million

Total project value R3,574 million

Projected jobs 186 238

Jobs Fund

Accelerated Schools Infrastructure Delivery Initiative (ASIDI)

The ASIDI program comprises of the following primary aims: • Eliminate the backlogs in schools infrastructure. • Upgrade the standard of schools to meet the optimum functionality levels

prescribed by Norms and Standards for Schools Infrastructure.• Eradicate inadequate, unsafe and poor physical infrastructure (395 unsafe

schools in the Eastern Cape) by properly utilising allocated funds. • Benefit over 12 300 learners from the first 49 schools under construction.

Progress made• Detailed planning and preparation of the initial 49 schools was completed. • 16 construction companies were appointed in January 2012 for the

building of the 49 schools in Umtata, Libode and Lusikisiki districts. • The construction of 49 schools sites is in progress. • The construction programme is expected to be completed by 31 August

2012. • At the end of the financial period, 27 SMMEs had benefited from the

construction activities.• Over 796 temporal jobs were created for the local communities.

One of the schools that will be replace

Progress at Dakhile school

ASIDI

Rural Economic Development Initiative (REDI)

• Key element of REDI– Strategic Choice– Strong Multi-stakeholder Partnership– Fast Track Delivery– Technical Support

Strategic Choice Measurable, practical link btw

economic growth, service delivery & financial

sustainability

Fast-Track Delivery Unblocking grants & EIAs,

rezoning, land transfer processes & institutional

constraints

Technical Support Leading technical experts

plus effective process facilitators makes ED

work

Strong Multi-Stakeholder Partnerships

Strategic private & public partnerships forged focused

on real opportunity

REDI unlocks finance for catalytic economic infrastructure projects as well as the development and implementation of economic turn-around

strategies within areas of economic potential with the aim of stimulating a reconfiguration in national and local space economies in order to foster

shared growth and financial sustainability

REDI Approach

Achievements of REDI

• Cacadu District Municipality– 50 Catalytic development Projects identified– 35 provided with assistance– 15 referred to various financial institution for

finance– Potential for R400 million to be invested in Cacadu– DBSA financial commitment of R7.8 million– R14 million crowded in to co-fund identified project

Achievements of REDI

• Cacadu District Municipality– Eastern Cape Pineapple Industry in Bathurst

• Beneficiation of pineapple• High dietary fibre by-product of pineapple

commercialised• Team currently converting Pineapple Leaf Fibre to

Micor-Crystalline Cellulose (MCC)• Team converting Pineapple Stump Juice to Bromelain

– 15 referred to various financial institutions for finance

– Successful commercialisation of MMC and Bromelain essential for long term viability of Eastern Cape Pineapple industry

– Project has potential to create 1000 low and semi-skilled jobs (unemployment rate is 76%)

Achievements of REDI

• Theewaterskloof REDI– 40 catalytic development projects identified– 15 provided with packaging assistance– R110 million referred to various financial

institutions for finance– R90 million crowded in to co-fund identified

projects– 20 new tourism business opportunities created– 10 new enterprise opportunities indentified

• Theewaterskloof REDI– 1133 jobs created– Unlocked partnerships with

• Stellenbosch University• The Department of Education (Basic or Higher?)• PUM mentorship and support programme• South African Breweries

– Partnership between biking enthusiasts, Municipality and Cape Country Meander

• Increased biking track from 200 kilometres (kms) to 500 kms

• Leveraged around R500 million in direct investment in MRB infrastructure

• Could gain a further R20 million indirect investment

• Created 8 enterprise opportunities for trail builders, crafters, guides, transport companies and service teams

• Created 73 jobs in the tourism value chain

Achievements of REDI

Achievements of REDI

• Ugu District REDI– Umzimkulu Sugar Mill reopened– Partnership between the Department of Rural

Development and Land Reform and Illovo Sugar • Entered into a partnership to revitalise small grower

programmes• Ugu District Municipality facilitating the revitalisation

of North Pondoland Sugar Scheme in Alfred Nzo District Municipality

Achievements of REDI

• Ugu District REDI– 40 catalytic development projects identified– 21 of these provided with packaging assistance– 21 referred to various financial institutions for

funding– DBSA financial commitment of R7.5 million– R328 million crowded in to co-fund identified

projects– Potential for R2 billion to be invested within Ugu

Achievements of REDI

• Building strong public-public and public-private partnerships– At a strategic level– At a sectoral level– At a project level

Achievements of REDI

• Lessons learnt– Importance of long term view– Focus on planning through doing– Work with a large and diverse portfolio– Drive process through multi-stakeholder

partnership approach– Balance between retaining and growing

businesses– Committed and dedicated champion– External process facilitation

Thank you