Development Bank of Southern Africa Amendment Bill [B 2-2014] Briefing of Standing Committee on Finance National Assembly 8 July 2014 Presenters: Mr Lefentse Radikeledi Director: Asset and Liability Management Adv Empie van Schoor Chief Director: Legislation
Outline of presentation Background DBSA post-restructuring Mandate Operating Model Financing and non financing support Main objects Process up to introduction Proposed amendments 2
Background (1) Development Bank of Southern Africa (DBSA) established in 1983 Following new 1994 constitutional dispensation, DBSA reconstituted by DBSA Act, 1997 to promote socioeconomic development in Southern African region DBSA Act regulates range of matters regarding DBSA including object, powers, management of affairs, board, CEO, share capital, expenditure, dividends, accounts & audit and Minister s regulation-making powers Comprehensive set of ministerial regulations made in November 1997 3
Background (2) DBSA is listed as major public entity in Schedule 2 to Public Finance Management Act, 1999 (PFMA) Characteristics of a Schedule 2 public entity generates profits and declare dividends operates in competitive market place (general business principles) may borrow money (section 66(3)(a) of PFMA) 4
DBSA Post-Restructuring (1) Organisational Review was undertaken because of two key issues Deteriorating financial position of DBSA; and Expanded mandate given to DBSA Therefore, for DBSA to deliver on its expanded mandate Significant changes to its business model were required Capital injection was required to rebuild its capital base DBSA in much stronger position now than it was a year ago Newly restructured DBSA is slowly gaining traction and ready to contribute to national & regional infrastructure plans 5
DBSA Post-Restructuring (2) - Mandate Primary mandate of DBSA is infrastructure development finance in South Africa (SA) and rest of continent South Africa (67% risk capital) DBSA is mandated to develop key infrastructure sectors: water & sanitation, energy, transport, ICT, education and health Municipalities, State Owned Companies (SOCs), Independent Power Producers (IPPs) and Public- Private-Partnerships (PPPs) remain key areas of focus Africa (33% of risk capital) Outside South Africa, DBSA still focus on Southern Africa Development Community (SADC) However, with expansion of the DBSA s mandate to other national territories on African continent, DBSA has begun to assess investment opportunities beyond SADC Support for key and leading economic growth sectors: energy, transport, ICT and water Focus on public and private sector projects that enhance regional integration Bringing regional focus and local expertise into development process Formation of strategic partnership & mobilisation of resources 6
DBSA Post-Restructuring (3) - Mandate Statement Aim of Mandate Statement sets out Shareholder s expectations of Board for each financial year serves as framework against which shareholder compact and DBSA corporate plan are to be drafted & agreed to by parties Policy direction Promotion of regional integration through infrastructure development is a key pillar in Africa s growth and development agenda DBSA must service both domestic and regional requirements Performance measurement Balanced scorecard (BSC) & shareholder compact serve as key guidelines for DBSA s key performance indicators (KPIs) and measurement To that effect, DBSA will provide quarterly reports to Shareholder, demonstrating achievements on following Loan and equity disbursements to different sectors and market segments Actual projects financed Post-disbursement performance monitoring on funded projects 7
DBSA Post-Restructuring (4) - Operating model Old organisation New organisation. SA Operations. SA Financing Investment Division International Division Balanced portfolio of lending activities on commercial & subsidised terms International Financing Balanced portfolio of lending activities on commercial & subsidised terms Development Fund Development Planning Division Grant funding on balance sheet Institutional capacity building support development planning and research Financing Operations Infrastructure Delivery Cost recovery model Project preparation Fund Management Project planning support (pre-financing support) Project implementation support (post-financing support) Promoting institutional sustainability 8
DBSA Post-Restructuring (5) - Financing support Client segment Disbursement, 2015-2017 Composition R million South Africa 38500 70% Social infrastructure 21000 38% Municipal 16800 30% Metropolitan 11000 20% Secondary 4300 8% Under resourced 1500 3% Other 4200 8% Economic infrastructure 17500 32% SOCs 9500 17% Independent power producers 6800 12% Private sector 1200 2% Outside South Africa 16700 30% Total 55200 100% 9
DBSA Post-Restructuring (6)- Non-financing support Infrastructure Delivery Project planning support (pre-financing support) Project implementation support (post-financing support) Client segment Government Departments s (e.g. education, health) Funding model Project Preparation Municipalities Full cost recovery basis Financing Operations Fund Management Public and private entities 10
Main objects of Bill Main objects of proposed changes to DBSA Act are to specifically enable and regulate in DBSA Act extension of DBSA s operations to African countries outside SADC to increase authorised share capital of DBSA & to enable further increases to address growing demand for infrastructure funding enhance DBSA capital base to amend Minister s regulation-making powers 11
Process up to introduction NT consulted DBSA before submitting Bill to Cabinet for approval Cabinet approved that Bill be published for public comment and be tabled in Parliament should there be no material changes Published 13 December 2013 with 17 January 2014 as closing date Only one comment - not related to proposed amendments Bill tabled before 2014 elections but not dealt with by previous Parliament On 18 June 2014 National Assembly agreed to resume proceedings on Bill 12
Proposed amendments (1) Definitions & Companies Act & obsolete provision Inclusion of definitions in section 1 of authorised share capital, callable capital and issued share capital because of their use in sections 13 & 17 of DBSA Act (clauses 1(a), (b) & (c), 5 & 6 of Bill) Inclusion of definition of Companies Act because of its use elsewhere DBSA Act & alignment with provisions of 2008 Companies Act applied for certain purposes (clauses 1(b), 4 & 7 of Bill) Amendment of definition of region to refer to new provision on determining scope of operation of DBSA (new section 2A in clauses 1(d) & 3) 13
Proposed amendments (2) DBSA s scope of operation DBSA proposed to be enabled by ministerial regulation to operate in countries on African continent outside SADC region Though regulations already extended scope of DBSA s operation outside SADC, propose that DBSA Act itself- specifies countries in which DBSA may operate South Africa & other SADC countries enables Minister of Finance to approve by regulation other African countries that DBSA operate subject to approved annual plan of activities (clauses 3, 6 & 8) Aim is to enable DBSA to participate in infrastructure & other strategic projects in any African country 14
Proposed amendments (3) DBSA s share capital Section 13 of DBSA Act deals with DBSA s share capital Proposed definitions authorised share capital means maximum amount of capital which DBSA is authorised to raise ito section 13(1) of DBSA Act issued share capital means portion of authorised capital that DBSA has issued callable capital means authorised share capital less issued share capital (clause 1 of Bill) Government of South Africa is currently only share holder of DBSA 15
Proposed amendments (4) DBSA s share capital Propose to amend DBSA s share capital in section 13 of DBSA Act by increasing DBSA s authorised share capital from R5 000 million to R20 billion and R200 million changing number of ordinary shares from 500 000 to 2 020 000 instead of stipulating details in DBSA Act, providing that share certificates for Government as consideration for paid-up share capital must be issued as determined in ministerial regulations enabling Minister of Finance to increase authorised share capital & number of ordinary shares by Gazette notice requiring shareholder s approval for subscription by shareholders to portion of balance of authorised share capital on request of DBSA s board (clause 5(a) & (b) of Bill) 16
Proposed amendments (5) Regulationmaking provision Propose to amend regulation-making power of Minister of Finance in section 17 of DBSA Act by distinguishing between regulations that must be made and those that may be made enabling Minister to initiate regulations and not only when requested by shareholders or Board enabling Minister to regulate use of callable capital to calculate leverage ratio of DBSA limiting general regulation-making power to ensure constitutionality (Clause 6) 17
Proposed amendments (6) Application of other legislation DBSA Act (section 17) currently provides that DBSA is exempt from 1973 Companies Act and that Minister of Finance may apply provisions of Companies Act, Banks Act and other law Bill (clause 7) proposes to remove exemption from Companies Act, since new 2008 Companies Act does not apply to DBSA; and rephrase provision enabling Minister to apply provisions of other legislation to DBSA 18
Ri a livhuwa/enkosi/siyabonga/ Re a leboga/dankie/thank you