Monday, 7 October 2013

Development Bank of Southern Africa: new CEO, same promises

CEO of the Development Bank of Southern Africa,
blames a lack of capacity for ills at the bank.
NOBODY can accuse Patrick Dlamini, CEO of the Development Bank of Southern Africa (DBSA), of denialism.
About the funding institution’s underwhelming achievements, he says: “We have huge room for improvement.”
He was appointed just more than a year ago, which may explain his honesty about its shortcomings. He cannot be held responsible for them.
“Our job is to fund infrastructure development at municipal level, but if you look at this space you see a serious collapse of infrastructure.”
It is a capacity problem, he says. “South Africa is not a country that is short of funding. It is more about capacity.”
Sadly, billions of rand have been “lent” to municipalities that are more talented at wasting and stealing it than using it to maintain infrastructure.
“We are not good at maintaining our infrastructure and it is effectively costing the country much more than it should be, because we are not ensuring that we extend the useful life of our infrastructure.”
The DBSA has decided that “the municipality space is a very key space for us to look at in terms of providing funding”.
I remember being told this by the bank 10 years ago.

“Yes, but we also got involved in a whole host of other things to the neglect of the municipality space. We will now be seriously focusing on this space.”
The bank needs to provide more than just funding to the municipalities, he says. It needs to deliver pre- and post-funding support to ensure that funded projects actually get done.
“We did not focus that much on this before.”
The last time I spoke to the bank, it sounded enthusiastic about a new programme called Siyenza Manje (we are doing it now) put together by it and the Treasury. The idea was to deploy skilled professionals to struggling municipalities to help them build and maintain infrastructure. “It was a very successful programme,” says Mr Dlamini. “It was really beginning to make an impact.”
Then it was transferred to that bastion of efficiency, the Department of Co-operative Government and Traditional Affairs to play with. “That was a mistake,” says Mr Dlamini. It “seriously weakened” the campaign.
But there is hope. The DBSA is now co-ordinating a new programme to train young professionals, many of them engineers, in infrastructure development at the University of Pretoria.
“Give us two to three years and you should see a vast improvement in terms of infrastructure at municipal level.”
I remember being told that 10 years ago too. It is an old favourite.
Mr Dlamini, 44, has a bachelor of commerce degree in accounting and economics from the University of KwaZulu-Natal.
He was head-hunted for this job from the Air Traffic and Navigation Services company, which, as the name suggests, is responsible for air traffic control. Quite why this job made him a dead ringer to run a regional development funding institution in deep trouble is not clear — even less so when one learns that he had no experience of developmental financing.
“I can’t claim a background in developmental financing, but I can claim a background in business leadership,” he says.
He attained this while working for Transnet and South African Airways.
Since his arrival at the DBSA he has spearheaded a radical restructuring programme that has involved the exodus of almost half its staff. Observers say the restructuring has led to the departure of staff members with valuable information technology, project management and other skills, which no institution faced with its massive infrastructure development responsibilities can afford to lose.
Indeed, many of them have been snapped up by the big commercial banks, which will be competing with the DBSA to provide infrastructure funding.
Mr Dlamini denies that the bank has been weakened by the exodus. Why was such drastic restructuring necessary?
“As an organisation we were seeing very disturbing trends,” he says. These trends told them they needed to “reposition” the bank to make it “much more effective”.
What trends?
“Costs were rocketing in the organisation.”
“We were getting involved in a whole host of other things that we did not have the requisite skills to be involved in.”
It got involved in the tourism sector, for example. Hard-earned taxpayers’ money was invested in Sol Kerzner’s One&Only hotel, among other curious projects. To his credit, Mr Dlamini (who was not involved in this) does not even try to explain how giving money to Mr Kerzner furthered the DBSA’s mandate.
The bank also invested in mining, about which sector, he concedes, it knew little.
“We didn’t have a decent level of skills sets in those areas” is the bureaucratic euphemism he employs.
“This resulted in some of those sectors not performing and hence impairments in our financial statements.”
This meant that it lost a fortune on five-star luxury hotels, platinum jewellery and other such projects instead of investing it in boring things like water-treatment plants, roads, schools and hospitals.
How much, exactly?
Well, there were impairments of “about” 7.1%, he says. That is 7.1% of the R45bn it lent, gave away, invested, whatever.
Much of this R45bn went to municipalities, but Mr Dlamini concedes that there is little to show for it.
“That is why we are putting measures in place to increase the quality of our deals.”
The DBSA is dependent on “capital injections” from the government, although Mr Dlamini denies that the R7.9bn it got from the Treasury earlier this year was a “bail-out”. “It was to increase our capacity to fund more projects.”
He talks, as did his predecessors, of the bank no longer needing government funding. But it does not take deposits and the board has halted further equity investments. So where will the money come from?
He has high hopes for the Brics development bank, which he thinks will happen within three years. Meanwhile, overseas development financing institutions are “contributing”, he says.
Their contributions are unconditional, but “they look at our financial performance”.
And still they give you money?
“They understand that global economic conditions have been a factor.”
The International Monetary Fund said this week that this excuse was wearing a bit thin.
Mr Dlamini agrees that “we need to be bold enough to accept that we can address some of the issues ourselves. We have seen serious strife in the labour sector, which has got to be addressed.”
He thinks the Congress of South African Trade Unions has become too strong for South Africa’s good and says this needs to be balanced by a more assertive business community.
“We need a much more robust engagement between the private sector and government. It is very, very important that we see much stronger, more assertive demands being made by the private sector for the greater good of our country.”
He says unemployment and “the breakdown of infrastructure” are the greatest threats to South Africa’s future.
“We need to drive our developmental agenda more than we have ever done before, because the problems on the table are actually getting bigger and bigger,” he says.
• This article was first published in Sunday Times: Business Times

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