The Development Bank of Southern Africa expects to lend as much as R16 billion ($970 million) this year, even as some clients put off infrastructure spending amid the fallout from the coronavirus pandemic.
The DBSA has extended about R6 billion in credit in the first four months of the financial year, signaling a “positive start,” Mohan Vivekanandan, the lender’s group executive for deal origination and client coverage, said in an interview.
“Our target this year was to do R13.5 billion worth of lending,” he said. “Overall we should exceed that.”
Still, there have been some delays in clients signing on as they change their spending priorities. The Covid-19 pandemic arrived in South Africa with the country already battling economic recession and high unemployment. The DBSA plans to extend two-thirds of its loans this year in its home market, where all but essential services were shuttered for five weeks from March 27.
“There’s a significant number of projects where we have approved but the client hasn’t signed up, so you never know whether they’ll go with our lending or somebody else,” Vivekanandan said. “When you look at it on a sub-sector basis, one sector where we’ve seen some delay is the health sector.”
South Africa’s Development Bank Seeks Loans to Plug Funding Gap
Conversely, some commercial banks are pulling out of projects, creating new opportunities for the DBSA, Vivekanandan said. The Johannesburg-based firm provides credit to government clients throughout sub-Saharan Africa for infrastructure projects in sectors ranging from information and communications technology to transport, water and energy. In South Africa it is helping the government get a R2.3 trillion infrastructure drive to boost growth off the ground.
“What we’ve seen as a development bank is, we need to be counter cyclical and we need to drive economic growth,” Vivekanandan said. “Therefore, we need to continue to be active even under these difficult times.”-Bloomberg