ANNUAL REPORTS

Chief Executive Officer’s report
I am pleased to report that the DBSA has once again
exceeded most of its developmental and operational targets
for the year, with record investment approvals of R37,1 billion
in 2010/11. This is even more impressive considering that
conditions in the Bank’s mandate space made meeting
ambitious performance targets a challenge. In South Africa,
these challenges included a hesitant and uneven economic
recovery, which affected the income of many public and
private sector entities; structurally weak finances in many
municipalities; the low level of interest rates, which affected
the Bank’s interest income from investments; and institutional
capacity challenges in government, which limited its ability
to accelerate infrastructure project delivery and thus take
up developmental loans. As a result, a proportion of capital
requirements remains unfunded.
Real economic growth
% change
Municipal infrastructure funding gap, 2009 to 2011
R billion
8
7
6
5
4
3
2
1
0
-1
-2
300
250
200
150
100
50
2004 2005 2006 2007 2008 2009 2010
South Africa GDP % change Sub-Saharan Africa GDP % change
Source: South African Reserve Bank and IMF, June 2011
0
2009/10 2010/11 2011/12
Conditional grants Own revenue Planned borrowing Unfunded gap
Sources: Division of Revenue Act, 2011; National Budget Review, National Treasury,
2011; Municipal Infrastructure Investment Framework 7, 2011
The Bank makes a considerable non-funding effort in the
areas of research, capacity building and assistance with
programme development and project management. Much of
this is directly or indirectly geared to building the institutional
capacity of government to plan and deliver infrastructure
projects and improve the delivery of services to communities.
On a regional level, improved economic performance by
many SADC countries in the year under review and the
re-emergence of positive regional fundamentals after a
difficult 2009/10 improved the climate for the Bank’s regional
investment activities. Improved liquidity in global financial
markets also made for better access to capital markets,
although there were more competitive issuance dynamics in
the primary capital markets.
However, the Bank’s favourable performance over the past
year must be seen in context. The developmental needs
in South Africa and the region are massive. The outbreak
of violence in some parts of the continent, including labour
agitation in South Africa, is an expression of the pent-up
demand for services. Economic growth and job creation,
as well as the eradication of backlogs in household
service provision, lie at the heart of reducing poverty and
inequality and improving the quality of life of the people
of South Africa and the region. Meeting these challenges
has become imperative and urgent, and government is
conscious of the risk posed by poor delivery and lethargic
bureaucracy and their impact on continued political stability.
The government’s plan to spend R800 billion on infrastructure
over the next five years has been on the table for some time.
This has now increased to well over a trillion rand, owing
to escalations and the formulation of additional plans for
transport, roads and so forth. However, during the year
much of government’s focus, and by extension that of the
DBSA, has remained on the difficult task of translating
agreements on National Priorities into key initiatives within
sector departments, with a view to increased, visible delivery
on commitments across the country. Mandates from the
Governor and the Board directed the Bank to support various
national and provincial departments in these initiatives as
an advisor, implementer and financier. Key focus sectors
included health, education, water and sanitation, and energy.
While great work has been done in this regard, we are painfully
aware that at year-end there is very little to show by way of
visible, demonstrable results on the major infrastructure
developments. There are valid reasons for this: the plans that
have been concluded entail a dramatically different approach
to infrastructure delivery, requiring significant changes in
both policy and the constitutional mandates of government
departments. Aligning the bureaucracy and institutional
capacity has been a tedious but necessary process, and
if government stays the course and follows through on the
adopted resolutions, the results should be evident over the
ensuing year.
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DBSA DBSA | ANNUAL | ANNUAL REPORT REPORT 2010/11 2010/11