The government wants to work with the private sector to enable private participation in housing development in SA’s cities, as it moves to release well located state land for mixed income housing, deputy finance minister David Masondo says.
President Cyril Ramaphosa has made it a priority to address the dysfunctional spatial structure left by apartheid, adding this to the list of priority reforms to boost economic growth being tackled by Operation Vulindlela.
Fixing dysfunction in SA’s municipalities has also been added to the list in phase two of Operation Vulindlela, which was set up in 2020 to fast-track reforms in priority areas such as energy, logistics, visas, water and digital infrastructure.
Masondo, who has political responsibility for Operation Vulindlela, said the government would have to think seriously about housing and transport policy, and whether it continued with a supply-driven model which locates housing far from economic opportunity in cities and towns.
He was also frank about the need to intervene in municipalities to ensure they appointed competent and capable city managers and technical people. “The president has made it his pet project to look at these municipalities and make sure they are getting the right people, the right positions. That means we will have to tamper with their powers,” Masondo said.
He was speaking at the launch of the Development Bank of Southern Africa’s (DBSA’s) annual financial results. The bank reported a 7% increase in “sustainable earnings” for the year to end-March, on net interest income which was up 18%, though its net profit declined 1% to R4.7bn.
The institution disbursed R17bn of finance during the year, 65% of it in SA and 35% in the rest of Africa.
Cash collections were at record levels despite the challenges its municipal clients face and the debt distress and instability faced by some of its sovereign clients in the rest of Africa.
Municipalities are the bank’s largest clients, accounting for more than 30% of its loan book. The bank also assists under-resourced municipalities with infrastructure planning and project preparation. Masondo suggested the bank could play a role in bringing private finance into housing development in the cities.
The bank was key to SA’s successful renewable energy independent power producer project and is looking to replicate that success to support the rollout of investment in SA’s transmission grid. The country needs an estimated R290bn of investment in the grid, much of which will come from private sector financiers and institutions through blended finance models.
DBSA group executive for financing operations Michael Hillary said the bank had set up a project management office similar to that for the Renewable Energy Independent Power Producer Procurement Programme (REIPP) to manage the entire transmission financing programme.
It is providing project preparation to develop the underlying projects. And it is working with the World Bank to mobilise credit enhancement mechanisms to ensure the state does not have to come to the party to ensure bankable projects as it did in the REIPP. “We want to do it without guarantees this time about” Hillary said.
The bank has traditionally sourced a chunk of its funding via JSE listed bonds and money market instruments but this declined during the Covid-19 pandemic.
DBSA CFO Zodwa Mbele said it had been focusing on bilateral loans with commercial banks and development finance institutions but wanted to go back to the debt capital markets via auctions, rather than the private placements it has been doing.
The DBSA had total assets of R118bn at end-March, up from R108bn a year previously. SA makes up 71% of its loan book with the remainder in the rest of Africa.
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