The Development Bank of South Africa (DBSA) has published its annual report for the year ended March 31, 2020, and received a clean audit report from the Auditor-General (AG).
The DBSA was established in 1983 to perform an economic development function.
The scope was widened in 1997 to “promote, facilitate and by funding to mobilise the socioeconomic development” in southern Africa.
Unfortunately, through no fault of its own, funding given to certain state-owned entities (SOEs) has not achieved the intended objective, and billions have been wasted.
Moody’s credit opinion at April 2
Moody’s has downgraded DBSA to Ba1, with a negative outlook, on the assumption of a “high probability of support” from the government.
Moody’s does however acknowledge the “weakening in the government’s capacity to extend support in the case of need”.
Factors that could lead to a downgrade include:
The DBSA stands apart from most other SOEs:
The AG issued a clean audit report.
Key audit issues:
Development loans – sectoral analysis
The entities that have received development loans are not disclosed. However, 80.6% of the development loans are invested in sectors that are fairly risky.
The amount invested in Eskom, which has been severely impacted by state capture and corruption, is not disclosed.
With the mounting cost of Covid-19, the paralysis of the South African Revenue Service (Sars), rampant corruption, failing and flailing municipalities, South Africa’s soaring debt-to-GDP rate, cash-eating zombie SOEs, and the unknown quantity of government guarantees issued on an ad hoc basis to those entities, the DBSA in my view is being pushed towards the precipice.
Is DBSA in a position to assist in South Africa’s intended infrastructure-led recovery without taking on more debt?
Without the DBSA disclosing its investees, we will have to wait and see.
In this struggle to escape the tentacles of state capture and corruption, and the mounting government debt, are we, the citizens including taxpayers, not entitled to know where the DBSA has ‘invested’ its (our) money?
This article first appeared on Moneyweb and was republished with permission.
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