The Development Bank of Southern Africa (DBSA) — one of the shining lights in the failing state-owned enterprise landscape — plans to migrate more of its portfolio towards the just energy transition.
DBSA CEO Patrick Dlamini said during a briefing to parliament’s finance committee on Wednesday that the DBSA would have to migrate its portfolio to achieving the just transition and the aim of net-zero emissions by 2050. Over the past six years, the DBSA has raised $1.6bn in green funding from international financial institutions and had a total exposure to renewable energy in SA of R13.8bn by the end of January. Its total loan book at end-September was R100bn.
The global aim of the transition away from fossil fuels is to achieve net-zero greenhouse gas emissions by 2050, with government’s current cost estimate of this for SA near R1-trillion before 2030 and R3-trillion to 4-trillion by 2050, according to a recent report by Reuters.
In November, a number of developed nations offered SA a $8.5bn (about R130bn) package to assist with the switch to a low-carbon economy. The government is still working on the form this funding should take.
DBSA chair Mark Swilling, a Stellenbosch university professor in sustainable development, said the bank wanted to significantly extend its book by diversifying its base with the just transition offering a big opportunity both in SA and Africa.
The DBSA defines a just energy transition not only as decarbonisation and ensuring that workers in the coal industry migrate to the renewable energy sector as is commonly understood, which Swilling believed was a limited understanding. For the DBSA the just transition also means upstream renewable industrialisation as the driving force “for the biggest job creation programme since 1994”.
He said this conception of the just transition would depend on the pricing of renewables on being appropriate. A price that was too low would mean importing equipment from foreign companies with access to climate finance or from China.
“What we want is SA companies who open up manufacturing plants to create jobs upstream that is financially viable. If the price is too low it is not financially viable. At the moment the prices are almost too low for SA companies to be able to do this because of the competitive dynamics and that is something that needs to be addressed.”
Swilling said the DBSA would be interested not only funding the renewables and the transmission grid but also to make sure that this was linked to upstream industrialisation and its huge job creation potential. This would be transformative for the SA economy.
Dlamini noted that the bank’s other strategic goals included scaling up and fast-tracking infrastructure development and accelerating BEE funding.
He assured MPs that the bank was performing strongly financially and was “still on top of our game” in terms of its sustainability. It is globally accredited, has a Ba3 rating by Moody’s credit ratings agency and continues to achieve clean audits.
The bank is very active in providing support to municipalities and in developing infrastructure in the water and sanitation, transport, ICT, energy, education, health and human settlement sectors. It has also provided R128m to KwaZulu-Natal and the Eastern Cape to assist with dealing with the aftermath of the floods.
By the end of September, the bank had made a net profit of R2.2bn in the 2020/2021 financial year compared with R1.2bn the previous year. Nonperforming loans at 5% of the gross loan book remained within acceptable limits, Dlamini said.
In the 10 months to end-January, loan approvals totalled R7.8bn, commitments R11.2bn and disbursements R9.6bn.
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