Cape Town: The Development Bank of Southern Africa (DBSA) is considering forming a new subsidiary to house its international division, DBSA International. The bank would hold the majority stake in DBSA International with other shareholders including local, regional and international entities. These could include entities from SA's partners in Brics (Brazil, Russia, India and China) who have agreed to seek ways to facilitate greater trade and investment in Africa.
The proposed subsidiary could act as a conduit for development finance from the Brics countries into the rest of Africa.
The bank's initiative to beef up its global division hit the headlines recently when it was reported that former spy chief Mo Shaik was in line to be appointed to head it, allegedly without going through normal procedures. The bank strongly denied this and said headhunters had been appointed to fill the position.
DBSA chairman Jabu Moleketi and acting CEO Tshokolo Nchocho briefed Parliament's standing committee on finance last week on the bank's 2012-13 corporate plan, including the tentative proposal to set up a new subsidiary.
"The intention is to create an organisation that is able to ring-fence its operations from that of the DBSA, allowing for improved risk management and a more focused execution of a regional mandate.
"Furthermore, it will embed existing strategic partnerships with international funders and secure lines of funding to allow for the envisaged growth in the short to medium term," the bank noted in its presentation.
The rationale for setting up the international division as a separate subsidiary had to do with "managing and reducing the risk of the growing regional portfolio to the DBSA as well as harnessing additional funding, especially concessional funding and risk capital from like-minded development and financial institutions and partnerships".
Another key reason was to position the bank's international business in Southern Africa and Africa as a whole as "a strong champion of regional projects with more strategic and financial clout".
The DBSA finances social and economic infrastructure projects in all 15 countries in the Southern African Development Community, but it is now considering markets beyond the region "to capitalise on emerging market opportunities".
Potential future projects under negotiation or consideration include the $227m Kilwa energy project in Tanzania and other energy projects elsewhere to the value of $280m; $150m in the financial services operation Banco Bai in Angola; and a $80m potential project pipeline in various housing projects.
It has traditionally been involved in providing financial and technical assistance to municipalities but since 2010 has been repositioning itself as a "centre for excellence" and a bank for infrastructure development throughout the country.
It is looking towards a recapitalisation and other initiatives to alleviate what it told MPs was its "overdependence on the capital and financial markets".