The fit of The fit of NDBs/DFIs with NDBs/DFIs with

public policypublic policyThe Africa Development The Africa Development

Finance WeekFinance Week

Kabelo J SeitshiroKabelo J Seitshiro

PUBLIC POLICYPUBLIC POLICY A choice made by govt to undertake some A choice made by govt to undertake some

course of actioncourse of action Developing, translating and implementing of Developing, translating and implementing of

public policy into a successful practice is an public policy into a successful practice is an art and a craftart and a craft InsightInsight CreativityCreativity ImaginationImagination

To accurately identify societal problemsTo accurately identify societal problems The clear articulation of these problems and The clear articulation of these problems and

proposed strategies to solve themproposed strategies to solve them Effective implementation strategies at a Effective implementation strategies at a

policy levelpolicy level

CENTRAL ROLE OF CENTRAL ROLE OF GOVERNMENTGOVERNMENT

Aimed at addressing:Aimed at addressing: Private sector oversight in areas of public policy – Private sector oversight in areas of public policy –

Mkt failure, path dependencies, etc. andMkt failure, path dependencies, etc. and Policies governing the private sector playing fieldPolicies governing the private sector playing field

This requires a mix of state and market This requires a mix of state and market interactions that foregrounds a development interactions that foregrounds a development agendaagenda InvestmentInvestment FinanceFinance Human capital developmentHuman capital development Technology acquisitionTechnology acquisition Promotion of policy and institutional reformsPromotion of policy and institutional reforms

NDBs/DFIs can act as an effective bridgeNDBs/DFIs can act as an effective bridge

ROLE OF PUBLIC ROLE OF PUBLIC MANGERSMANGERS

““On occasion, public managers have an obligation On occasion, public managers have an obligation to instigate public deliberation rather than to instigate public deliberation rather than simply make policy decisions, in directing simply make policy decisions, in directing public attention towards these ideas, public public attention towards these ideas, public managers broaden the range of possibilities for managers broaden the range of possibilities for public action and deepen society’s self public action and deepen society’s self understanding” Robert Reichunderstanding” Robert Reich

““Policy analysts as well as office holders have a Policy analysts as well as office holders have a responsibility of improving the quality of responsibility of improving the quality of discourse by probing assumptions, raising discourse by probing assumptions, raising issues, and thereby helping the public consider issues, and thereby helping the public consider different formulations of problems and a wider different formulations of problems and a wider set of possible solutions.” G Majoneset of possible solutions.” G Majone

ROLE OF NDBs/DFIsROLE OF NDBs/DFIs

Market failure correction widely Market failure correction widely accepted as justification for accepted as justification for intervention – (state/market/DFIs)intervention – (state/market/DFIs)

NDBs/DFIs generally used to NDBs/DFIs generally used to address market failure in credit address market failure in credit risky socio-economic strategic risky socio-economic strategic sectorssectors Agressively filling gaps in the supply of Agressively filling gaps in the supply of

financial servicesfinancial services Crowding in the private sectorCrowding in the private sector

ROLE OF POLICY BASED ROLE OF POLICY BASED DFIs/NDBsDFIs/NDBs

““Policy based DFIs have their Policy based DFIs have their raison d’ etreraison d’ etre in in the recognition that risk and profitability the recognition that risk and profitability criteria often mean that, private institutions criteria often mean that, private institutions are not willing to provide finance in certain are not willing to provide finance in certain government priority areas and on the government priority areas and on the conditions which are necessary for conditions which are necessary for development. As a consequence, policy based development. As a consequence, policy based DFIs were created to provide government DFIs were created to provide government with a mechanism through which funds could with a mechanism through which funds could be directed to these priority areas, in an effort be directed to these priority areas, in an effort to support economic growth and development. to support economic growth and development. In so doing, the problem of supplying long In so doing, the problem of supplying long term funds for capital investment in priority term funds for capital investment in priority fields is addressed” Mateyisi 2001fields is addressed” Mateyisi 2001

ROLE OF A DEV FIN ROLE OF A DEV FIN SYSTEMSYSTEM

A mechanism of identifying societal A mechanism of identifying societal problemsproblems

Processes that assist in clearly Processes that assist in clearly articulating govt policy objectivesarticulating govt policy objectives

Aid in meeting challenges faced by Aid in meeting challenges faced by different sectors of the economydifferent sectors of the economy

Mobilising private and public resourcesMobilising private and public resources Close the gap between first and second Close the gap between first and second

economieseconomies

INTERNATIONAL INTERNATIONAL EXPERINCEEXPERINCE

Appropriate & efficiently managed DFIs can Appropriate & efficiently managed DFIs can contribute to economic growth and contribute to economic growth and developmentdevelopment Indonesian DFI landscape – a structured financial Indonesian DFI landscape – a structured financial

sector which effectively contributes to developmentsector which effectively contributes to development Developing countries Developing countries

Policy based DFIs have given rise to severe market Policy based DFIs have given rise to severe market distortions – Zambia’s Agriculture Sectordistortions – Zambia’s Agriculture Sector

Failed to promote growth and developmentFailed to promote growth and development Many international experiences from which Many international experiences from which

lessons can be drawnlessons can be drawn

LESSONS LEARNEDLESSONS LEARNED Promoting pvt sector activitiesPromoting pvt sector activities Avoiding competition for the same investment Avoiding competition for the same investment

opportunitiesopportunities DFI functions could includeDFI functions could include

Generation and provision of informationGeneration and provision of information Filling financial gaps where pvt sector is unwilling to Filling financial gaps where pvt sector is unwilling to

participateparticipate Leveraging pvt sector involvementLeveraging pvt sector involvement Undertaking certain govt functionsUndertaking certain govt functions Augmenting capacity in communitiesAugmenting capacity in communities Linking SME projects to macro projectsLinking SME projects to macro projects

Assisting in Policy articulationAssisting in Policy articulation Continuous monitoring of the development processContinuous monitoring of the development process Identifying market constraints to pvt sector participationIdentifying market constraints to pvt sector participation

ENSURING THE FIT WITH ENSURING THE FIT WITH PUBLIC POLICYPUBLIC POLICY

Clearly articulated policy objectivesClearly articulated policy objectives Prioritisation of the policy objectivesPrioritisation of the policy objectives Co-operation and co-ordination between Co-operation and co-ordination between

govt ministries themselves and the finance govt ministries themselves and the finance ministryministry

Identification of market gaps in addressing Identification of market gaps in addressing these policy objectivesthese policy objectives

Outlining the role of DFIsOutlining the role of DFIs Periodic reviews and alignment of DFI mandatesPeriodic reviews and alignment of DFI mandates

Aligning DFI strategies to policy objectivesAligning DFI strategies to policy objectives Determining pre-agreed KPIsDetermining pre-agreed KPIs

THE SOUTH AFRICAN THE SOUTH AFRICAN EXPERIENCEEXPERIENCE

Public policy not well articulatedPublic policy not well articulated Evolving policy vs. static mandatesEvolving policy vs. static mandates DFI ownership structures vs. policy objectivesDFI ownership structures vs. policy objectives A mismatch between policy objectives and DFI A mismatch between policy objectives and DFI

activitiesactivities Incentive structures promote competition with pvt Incentive structures promote competition with pvt

sectorsector Financial sustainability risks promote a profit focusFinancial sustainability risks promote a profit focus Focus on financial vs. development performance Focus on financial vs. development performance

measuresmeasures Limited DFI collaboration and coordinationLimited DFI collaboration and coordination Access to DFIs by target communities remains difficultAccess to DFIs by target communities remains difficult A general urban biasA general urban bias

EVOLVING DFI EVOLVING DFI LANDSCAPELANDSCAPE

ASGI-SAASGI-SA Unspent cash – from approx R10bn to Unspent cash – from approx R10bn to

R4bnR4bn Prioritisation of government projectsPrioritisation of government projects

DFI ReviewDFI Review Continuing self assessmentContinuing self assessment

SA DFI networkSA DFI network Improving collaboration and Improving collaboration and

coordinationcoordination

HARNESSING THE HARNESSING THE PRIVATE SECTORPRIVATE SECTOR

““The starting point in thinking about the public The starting point in thinking about the public role in financing development is that private role in financing development is that private markets exist within institutional frameworks markets exist within institutional frameworks that are created and maintained by governments that are created and maintained by governments and the international organisations they and the international organisations they establish. Those markets are generally guided by establish. Those markets are generally guided by policies that the official bodies determine….policies that the official bodies determine….Thus Thus both directly and indirectly, governments both directly and indirectly, governments and international institutions help to shape and international institutions help to shape the financing for development, even in a the financing for development, even in a world of largely private economic activityworld of largely private economic activity.” .” B B Herman, F Pietracci, K SharmaHerman, F Pietracci, K Sharma

FINANCIAL SECTOR FINANCIAL SECTOR CHARTERCHARTER

CLEARLY ARTICULATED POLICY - BEECLEARLY ARTICULATED POLICY - BEE

++

VISIONARY PVT SECTOR LEADERSHIPVISIONARY PVT SECTOR LEADERSHIP

PVT SECTOR RESOURCES FOR PVT SECTOR RESOURCES FOR DEVELOPMENTDEVELOPMENT

FINANCIAL SECTOR FINANCIAL SECTOR CHARTERCHARTER

Human capital Human capital developmentdevelopment

Procurement policiesProcurement policies Enterprise Enterprise

developmentdevelopment Shareholder activismShareholder activism

Access to financial servicesAccess to financial services Empowerment financingEmpowerment financing Financial sector ownershipFinancial sector ownership Control in the financial sectorControl in the financial sector Corporate Social InvestmentCorporate Social Investment

Voluntarily developed by the financial sectorVoluntarily developed by the financial sector Establishes principles upon which BEE will be Establishes principles upon which BEE will be

implemented in financial sectorimplemented in financial sector Partnership with govt on BEEPartnership with govt on BEE Establishes measurable targetsEstablishes measurable targets

A REMARKABLE A REMARKABLE ACHIEVEMENTACHIEVEMENT

A first of its kind world wideA first of its kind world wide Beyond complianceBeyond compliance How the financial sector makes How the financial sector makes

business sense of a more sustainable, business sense of a more sustainable, inclusive and equitable futureinclusive and equitable future

Collective partnership and stakeholder Collective partnership and stakeholder capitalismcapitalism

Co-operation and collective effort to Co-operation and collective effort to overcome information asymmetry and overcome information asymmetry and economies of scaleeconomies of scale

CORPORATE CORPORATE GOVERNANCEGOVERNANCE

TRANSPARENCY – adherence to TRANSPARENCY – adherence to established accounting norms, and established accounting norms, and annual auditsannual audits

EQUITY – equitable treatment of EQUITY – equitable treatment of shareholdersshareholders

ACCOUNTABILITY – enforceable ACCOUNTABILITY – enforceable fiduciary duties, conflict resolution fiduciary duties, conflict resolution processesprocesses

NDB/DFI OWNERSHIP NDB/DFI OWNERSHIP STRUCTURESSTRUCTURES

Diffused ownership structuresDiffused ownership structures Used for political motivesUsed for political motives Complex agency relationshipComplex agency relationship Competing policy objectivesCompeting policy objectives Protecting the public goodProtecting the public good

TREASURY TREASURY MANAGEMENTMANAGEMENT

DFI treasury issues includeDFI treasury issues include FundingFunding Debt managementDebt management Cash managementCash management Foreign exchangeForeign exchange Liquidity riskLiquidity risk Interest rate risk managementInterest rate risk management

TREASURY TREASURY GOVERNANCEGOVERNANCE

Development of treasury policies and Development of treasury policies and strategiesstrategies

Independent treasury risk reporting to the Independent treasury risk reporting to the BoardBoard

Treasury management to align with Treasury management to align with business and financial objectivesbusiness and financial objectives

Appropriate identification of treasury risksAppropriate identification of treasury risks Annual internal audit of the treasury Annual internal audit of the treasury

functionfunction

ENTERPRISE-WIDE RISK ENTERPRISE-WIDE RISK MANAGEMENTMANAGEMENT

Development of a Risk Management Development of a Risk Management Framework/Strategy;Framework/Strategy;

Completion of operational risk Completion of operational risk assessments;assessments;

Awareness sessions regarding Risk Awareness sessions regarding Risk Management;Management;

Development of risk reporting dashboards Development of risk reporting dashboards for key identified risks;for key identified risks;

Preparation of fraud prevention plans; andPreparation of fraud prevention plans; and Development of a Compliance register Development of a Compliance register

CONCLUSIONCONCLUSION

Clearly articulate and prioritise govt Clearly articulate and prioritise govt policy objectivespolicy objectives

Align DFI strategies to policy Align DFI strategies to policy objectivesobjectives

Harness pvt sector participationHarness pvt sector participation De-politicise DFI operationsDe-politicise DFI operations Appropriate risk management and Appropriate risk management and

corporate governancecorporate governance

THANK YOUTHANK YOU

Kabelo J SeitshiroKabelo J Seitshiro