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

2

Evolution of the DBSA Engagement Model

Appraise

Finance Procure Identify

Operate DirectImpact

OUTCOME

ENTRY Point

Range

EXIT Point

Range

Service Delivery

Monitor Building

1 2 5 63 4

CommercialBank

Conventional DevelopmentBank

Vision 2014 DBSA Development Bank Model

Utility, SOE, MunicipalityCooperative, Company

Dev Planning,

Mobilisation Partnerships Facilitation

PRE-PROJECT

3

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

Corporate Performance in 2006/7 was strong in both strategic and operational terms

Re-positioned for deeper development impact

& increased capacity for excellence & sustainability

4

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 DF’s 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.

5

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.

6

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- % of operational expenditure 54m/101m

Achieved Targets Partial Achievement- - revised policies & procedures - funds leveraged (42%/50)- - aligned performance plans - # of experts deployed 87/90- - statutory reporting (AR + IR) - marketing road shows- - partnerships strengthened - # of project completion reports 10/30- - publication of evaluation report - turn around time 14/6

- # of staff trained 12/15- # of innovative ventures 0/1

Key DevelopmentImpact Indicators

MostlyInternal House

Keeping

7

1.2 billion of Government’s municipal infrastructure grants unlocked;

471 infrastructure projects under implementation;

170,000 households connected to water;

120, 000 households upgraded with sanitation facilities;

On the Ground Development Impact of DBSA DF Operations

8

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 Bank’s 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 Bank’s 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

9

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.

10

2005/6 2006/7

Jobs created 17,100 25 000

Low income households 400 million 500 million

benefiting from Bank’s

investments

GDP contribution 2.0 billion 2.3 billion

Selected Development Impact of DBSA Operations (disbursements)

11

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

0

25

50

75

100

125

150

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

Market 1 Market 2 Market 3 Education Utilities Other PSI in RSA Total

Continuing trend in increase of number of new approved projects for markets 2 & 3

Totals

12

Sustained the step-up in previous year’s jump in approvals

Figure 2: Total Value of Loan & Equity Approvals : Six-Year Trend Analysis (Rmil)

R 0

R 2,000

R 4,000

R 6,000

R 8,000

R 10,000

2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Total Loan &Equity Approvals

2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Total: R 3,151 R 3,833 R 3,348 R 3,947 R 8,052 R 8,265

Average:

Table 2: Total Loan & Equity - Six-Year Trend Analysis (Rbn)

R 3,570 R 8,159

Total R value of approvals in 2006/7:Total: R8,3bil.

RSA: R5,4bil (65.5%)

SADC: R2,9bil (34.5%)

But only 2.6% growth in 2006/7

8.05

13

Large jump in share of inter-country/regional integration projects (0% in 2005/6)

38%

12%4%

1%

1%

1%

9%

34%

South Africa

Botswana

Namibia

Malawi

Mauritius

Madagascar

Zambia

Multi-Region

14

Eastern Cape “Hotspot”Province Moves into Top 3 (from 5th last year)

29%

43%

9%

5%

2%

2%

6%

2%

2%

Kw a-Zulu-Natal

Gauteng

Eastern Cape

Western Cape

Free State

North West

Mpumalanga

Northern Cape

Limpopo

15

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 year’s level.

16

Bank ramps up investment in project preparation, feasibility etc to unlock investment, growth & development

Technical Assistance Grants - Six-Year Trend Analysis

R 0

R 5,000,000

R 10,000,000

R 15,000,000

R 20,000,000

R 25,000,000

R 30,000,000

R 35,000,000

R 40,000,000

R 45,000,000

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

TechnicalAssistanceGrants

TA Grants in 2006/7R42,1mil.44% above target

17

Jump in growth in disbursements, raising public & private investment in infrastructure & economic development

Total R value (Rmils) of Disbursements : Six-Year Trend Analysis

R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

R 3,000

R 3,500

R 4,000

2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

Disbursements

2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

R 1,781 R 3,661 R 2,729 R 2,999 R 3,077 R 3,702

Total R value:Total: R3,7 billionRSA: R2,7billion (72.5%)SADC: R1,0 billion (27.5%)

18

Meaningful country distribution of DBSA disbursements

Country Rvalue %

South Africa (SA Ops + PSI) R 2,683,197,251 72.5%

Angola R 129,697,958 3.5%

Mauritius R 40,537,060 1.1%

Mozambique R 56,318,728 1.5%

Swaziland R 69,583,014 1.9%

Tanzania R 210,572,439 5.7%

Uganda R 57,066,060 1.5%

Zambia R 305,928,053 8.3%

Multi-Region R 149,897,881 4.0%

  R 3,702,798,444 100.0%

New, strategicmarket

Investing in good performers

Strategic focus On integration, multi-country projects

Up from 4%

Up from 0%

19

Social infrastructure and water get lion’s share of DBSA disbursements in RSA

1% 4%

6%

0%3%

2%

12%

29%

39%

1%1% 2% 0%

0%

Agriculture

Manufacturing

Tourism

Education

Energy

Communications

Sanitation

Roads & Drainage

Water

Transportation

Health

Housing

Community Facilities

Capacity Building(Research, Planningetc)

Other( fund & entrepreneurial)

20

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.

Non-DBSA Officials and Managers Trained

21

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

22

Operating costs to income ration (excluding TA & PRMB):6-Year Trend

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

2002 2003 2004 2005 2006 2007

Operating costs(excluding TA andPRMB) to incomeratio:

Bank’s achievements attained with cost-efficiency

23

Bank’s strong performance not achieved at the expense of financial sustainability

interest on development loans

operating income

surplus growthfaster than

interest expense

Operating expense growing relatively slowly & controlled

24

Assets grew steadily over the past year, by 5.5 % to 27.95 bn

Balance sheet summary

25

Growth in Development Investments

Short term & liquid financial assets give way to development

investments

Return on Assets: 4.7% (up from 3.5)

Return on ShareholdersFunds: 8.7% (up from 7%)

26

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

22.22.42.62.8

33.23.43.63.8

4

Score 3.6 3.2 3.28 3.25 3.6

2002/2003 2003/2004 2004/2005 2005/2006 2006/2007

27

New Regional/Local Economic Development Fund Concept

28

SA Operations

Infrastructure Finance to SM Munis, incidental - subject to debt absorptive capacity freed up by capacity deployment/building

SA Operations

Infrastructure Finance to SM Munis, incidental - subject to debt absorptive capacity freed up by capacity deployment/building

Relevance of Development Fund interventions … 1Siyenza Manje – Phase I - Adoption

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

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

Assumptions

That munis’ debt absorption capacity will improve as human capacity constraints are addressed

Assumptions

That munis’ debt absorption capacity will improve as human capacity constraints are addressed

Siyenza Manje

Purely Capacity Deployment

1. Placement of Specialists

2. Systems3. Training/Capacity

Building

1. Placement of Specialists

2. Systems3. Training/Capacity

Building

Assumptions

That MIGs will be unlocked and processed

Assumptions

That MIGs will be unlocked and processed

12 3

29

SA OperationsFinancing complementary –

targeted concessionary funding (TIP)

SA OperationsFinancing complementary –

targeted concessionary funding (TIP)

•Vulindlela Academy•Training/Capacity Building

•Knowledge Management Cluster

•Advisory services•Research

•Risk Management•Human Capital

•Vulindlela Academy•Training/Capacity Building

•Knowledge Management Cluster

•Advisory services•Research

•Risk Management•Human Capital

Siyenza Manje

•Capacity building•Targeted risk interventions•Contracted

institutionalised expertise to

capture scarce skills

(Project management

expertise)

Siyenza Manje

•Capacity building•Targeted risk interventions•Contracted

institutionalised expertise to

capture scarce skills

(Project management

expertise)

•Closer collaboration

between DF & Bank Divisions

•Common/joint targets between SAOPS & SM –

eliminate funding gaps

•Closer collaboration

between DF & Bank Divisions

•Common/joint targets between SAOPS & SM –

eliminate funding gaps

MIGS now specified targetsMIGS now specified targets

DWAF, DPLG co-optedDWAF, DPLG co-opted

Relevance of Development Fund interventions … 2Siyenza Manje – Phase II - Enhancement

……This framework is being institutionalised in current operations ….

30

The Instrument Outlined

31

The Next Step – Creating Sustainable Economic Development

Basic Infrastructure

Basic Infrastructure

Social Infrastructure

(Affordable housing)

Social Infrastructure

(Affordable housing)

Economic infrastructure

(e.g. roads, power, telecoms,

industrial waste and water)

Economic infrastructure

(e.g. roads, power, telecoms,

industrial waste and water)

Business development

(Commercial and Industrial)

Business development

(Commercial and Industrial)M

IGS

Fu

nd

ing

Ga

ps

Primary Capital –

Government

Secondary –

DBSA

concessionary

funds

Min

ing/

Pen

sion

bac

ked

guar

ante

es

Intern

ation

al DF

I’s –

Co

ncessio

nary fu

nd

s

Quasi-equity/ sub/mez- debt

Private sector capital

Sen

ior/

sub

-deb

t

Com

mer

cial

term

s

Funding mix

32

33

Thank You