PROJECTS:  Patrick Dlamini is confident Moody’s and Futuregrowth’s decisions will not affect the bank’s investment plans. Picture: FINANCIAL MAIL
PROJECTS: Patrick Dlamini is confident Moody’s and Futuregrowth’s decisions will not affect the bank’s investment plans. Picture: FINANCIAL MAIL

THE Development Bank of Southern Africa (DBSA), which is heavily reliant on third-party investors to fund its projects, is confident Moody’s and Futuregrowth Asset Management’s decisions will not affect its plans to invest R120bn over three years to infrastructure projects.

After the release of the development finance institution’s 2016 annual results on Thursday, DBSA CEO Patrick Dlamini indicated Futuregrowth’s decision to suspend R1.8bn to six state-owned entities (SOEs) including the DBSA, and Moody’s subsequent decision to place the credit ratings of most of the SOEs under review did not damp investor sentiment.

"Demand for our bonds and commercial paper is rising," he said.

"We have given assurances to funders, commercial banks … to say the money is in good hands," he said.

Yields on all but four outstanding bonds fell after the Futuregrowth decision, showing that investors still believed the quality of the bank’s debt was good. Nevertheless, the DBSA has held "very good discussions" with Futuregrowth.

"They wanted to know how we work in terms of governance.… They’ve asked about the [Cabinet], is it going to mess with SOE governance? We don’t believe so."

A week before Futuregrowth’s decision Cabinet decided to establish a presidential co-ordinating council for state-owned companies.

During the presentation, DBSA chairman Jabu Moleketi tackled another concern Futuregrowth had raised about the independence of board committees and conflicts of interest.

The bank’s policy required directors to declare their interests or recuse themselves from discussions in each of the board committees where there was a conflict, especially in the case of nonexecutive directors, said Moleketi.

"We never received instructions from anybody to say how we should [invest] any money," he said.

On Moody’s, Dlamini said the ratings agency’s statement was the "exact opposite of what we’re trying to do".

During its ratings review, Moody’s plans to look at the bank’s funding, including when it matures, and its alternative plans in case funding dried up.

Dlamini said the bank was planning to "crowd in private sector" investment as part of its plan to invest R120bn into infrastructure projects over three years. During the past financial year, the private sector invested R431m in the bank’s project preparation phase, while the bank itself put in R14.7m.

For its 2017 financial year, the bank is targeting R5.6bn in funds from third parties. This will rise to R9.6bn in 2019.

"More and more third parties are coming to work with us," said the DBSA CEO.

This has helped the bank beat its record for funds, which reached R17.1bn this year, paid out to infrastructure projects, up from last year’s R13bn and the R9.2bn paid out before its 2014 restructuring.