ActionAid South Africa Draft Discussion Paper – Financing for Development? The Development Bank of South Africa and its Footprint in Africa

Conclusions and Recommendations for ActionAid and progressive civil society more broadly

In the ANC’s 2012 national conference the role of state-owned institutions was discussed in a policy paper presented by the National Executive Committee. The paper noted the “absence of a common comprehensive policy framework” that guides DFIs. An important point made in the paper that such institutions are not created to “maximise profits or incur losses” but for the dual mandate of achieving a “balance between the required level of self-funding and undertaking development projects that the private sector would ordinarily not”. The purpose of DFIs was to operate as “powerful instruments of economic transformation and remain firmly within the control of the state in order to have the capacity that is capable of responding effectively and efficiently to the developmental agenda of the ANC government”.
The policy proposes that “Government as shareholder managers must build relationships with likeminded shareholder managers from around the world, with a particular emphasis on the BRICS alliance, so as to enable knowledge sharing and international collaboration between SOEs and DFIs to achieve mutual strategic objectives. BRICS partners are of necessity in terms of seeking to advance their own national interests. In this context the position is that the South African government must be “well coordinated with respect to its own SOEs and DFIs in these interactions.”

In the context of the role of the DBSA these policy pronouncements together with the new mandate requires astute political management if it is to meet its development finance role as a publically owned institution competing with private sector banks in the in the country and in the region. Whilst the DBSA has only a 20% target for projects outside South Africa, the institutional expertise and knowledge developed within bank over the years is regarded as an important asset to be constructively used by amongst others NEPAD, BRICS DFIs and the Pan-African Parliament. The Bank houses the Pan-African Development Facility.

The agreement to house the EU-SA Infrastructure Investment Programme was preceded by stringent tests which the DBSA successfully passed. The Bank is seen by its peers in the region, on the continent and globally as an important player in the field of development finance and has established a set of strategic institutional learning partnerships for example, together with the Industrial Development Corporation (IDC), the DBSA also supports and hosts the SADC Development Finance Resource Centre, which provides support to similar agencies in the region.

In addition that bank is part of a network, the African Association of Development Finance Institutions (AADFI) which provides information, training and policy development advice for African bankers, finance officers and other DFI’s. The Bank also works with the UN Environment Programme Finance Initiative, a network of over 200 financial institutions to promote linkages between sustainability and financial performance.

There have been a few studies by the for example the World Bank, the AfDB and by the Bank itself to address institutional and project weaknesses in development financing. At a global level, following the financial crisis and the resultant economic climate, the financial sector is now under greater scrutiny by citizens across the globe.

Globally there are several progressive reputable civil society organisations working on issues of development and on development finance institutions that have a long history of engagement and institutional knowledge to promote better engagement. On the back of the global financial crisis, the main weakness has been the lack of shared information, insights and strategies on the DFIs could be transformed to achieve global socio-economic and environmental equity and sustainable development goals. Organisations such as ActionAid International are well positioned to initiate a more collaborative approach to dealing with this gap within global civil society.

One of the challenges facing SA civil society is to build a critical group of key activist “experts” on development finance and to collaborate, share knowledge and build a strategy for proactive engagement with the SA-based DFIs particularly on good development practice. In the course of this report, several discussions were help with current and former senior leadership and board members. There is a unanimous view that the tension between the development mandate and financial sustainability is an on-going and dynamic one. There is a willingness to engage. ActionAid should consider taking forward an agreement reached in principle on the proposal of a civil society –bank executive roundtable discussion.

In SA, there is no civil society watchdog dedicated to monitoring and evaluating the country’s DFI’s. In Brazil, the Brazilian Institute for Social and Economic Analyses (IBASE) has secured state funding for independent research into the role and impact of the country’s largest development finance institution, BNDES. Given future growth and expansion plans for SA DFIs in terms of domestic policy and international agreements, the conceptualisation and establishment of a similar institution in SA is necessary and timely. This will enhance the building of capacity inside and across organisations and with the constituencies they serve and represent. In this way we could build a network of community based activists keen on engaging the issue of development finance locally and globally.

In the 2013 Integrated Annual Report, the DBSA annexes a Sustainability Report based on the Global Reporting Initiative (GRI). The three broad categories (there are over a hundred sub indictors) are institutional, social and environmental. In introducing this annexure the CEO is “proud to announce” and publish its third sustainability report as reviewed by its Internal Audit Department. It is noted that the report is not externally reviewed but important to note that it is published as part of its annual report. The process of stakeholder input as part of the report is regarded as good practice. This is over and above the AAA scores benchmarked against models used rating agencies such as Moody’s and Standard and Poor.

The DBSA Appraisal Guidelines have recently undergone an internal revision and at the time of writing there were not available. It is necessary for ActionAid and civil society organisations to study the revised guidelines when available and assess whether these are useful and suggest any improvements based on comparable instruments available in other civil society allies. In the sustainability report the overwhelming result for the respective indictors – over hundred and ten including sub-indicators - are “fully” met whilst in only three the result is “partially” met.

An area that will need further investigation is monitoring and evaluations at the coal face - the actual development impact of the DBSA for each project. A critical issue here is the role of “beneficiaries” described as the “poor” and the extent to which their lives and areas in which they live have changed for the better. It is possible that NGOs in such communities have their own policies and instruments by which good development projects and practice is measured. If not then, if requested, ActionAid, with its knowledge, skills and experience could assist them develop their own.

In the context of SADC, SA civil society has strong connections with the SADC-NGO Council which is based in Botswana. It is suggested that ActionAid in partnership with the South Africa Forum for International Solidarity (SAFIS), explore the possibilities of a joint conversation and or study on the experiences and development impact of DFI’s in general and the DBSA in particular in the region and what the lessons were and what could from the basis of a future policy intervention in the region.

Beyond SADC, ActionAid has already begun work on DFIs in BRICS countries. It is understood that globally the organisation is working towards developing a strategy for engagement in the event a BRICS Development Bank is established.

At the continental level the AfDB has developed a Framework for Engagement with Civil Society. A copy of this policy is available on the website of the AfDB. SA civil society could learn from the process and outcomes of the AfDB approach by engaging with our counterparts on the continent. Similar work has been undertaken by EU NGOs such as Concord, Eurodad and Climate Action Network for EU development finance institutions.

Given sustained average growth in member countries and the view that African countries can finance their own growth through revenues whether from increased taxes, inward remittances and investment, the AfDB believes that this requires an effective governance framework to manage these in order to meet the demands and expectations of citizens. The Bank recently launched an online public consultation on its new Governance Strategic Framework and Action Plan (2014 – 2018). The main purpose of this plan according to the Bank is to strengthen transparency and accountability in the use of state resources and to promote an enabling environment which supports Africa’s socio-economic transformation, job creation and financial inclusion. In the words of Donald Kaberuka, the AfDB President, quoted in the Bank’s magazine, the African Banker (Issue No. 24, second quarter 2013):

“We will need leadership and I mean leadership at all levels – political leadership, business leadership and civil society leadership to all pull in one direction, the direction which gets Africa to the next level, which is economic transformation. This is vital”.

To this end, it is worth exploring within civil society networks how to effectively and positively engage so that peoples’ voices are amplified within institutions such as the AfDB, the Pan African Parliament, the AU and NEPAD to achieve these democratic development goals at a Pan-African level.

Another example of consultations on transparency and accountability is that of the Inter-American Development Bank (IDB), which operates in Latin America and the Caribbean countries. Two months ago the IDB launched a public consultation process to review their Independent Consultation and Investigation Mechanism (ICIM) Policy and its operation. The Bank’s board mandates this review in order to increase transparency and accountability and to strengthen its mission, accessibility, independence and responsiveness.

In conclusion, there is an ambitious continent wide vision and plans for infrastructure development as a necessary pillar to drive socio-economic growth for the decades to come. With the DBSA, a relatively young and influential global player undergoing its own evolutionary phases within its structure and strategy, it is an opportune time to set the basis now for a medium to long term civil society engagement strategy with the Bank on its domestic, regional and continental policies and practices.

A successful engagement strategy will ensure that citizens in general and their organisations will play an active role in ensuring development needs are planned, designed, implemented and monitored effectively this contribution to the principles of active citizenship, effective institutions and accountability on the continent.

If we do preferably take a long-term view, we might want to explore the possibility of creating a more permanent mechanism as a resource for building civil society’s capacity to engage effectively with the DBSA and other DFIs on the continent and globally.

References:

DBSA, The Evolution of the Development Bank of South Africa, 2010. Midrand, DBSA.

DBSA, Integrated Annual Report, 2013. Midrand, DBSA.

SADC Council of NGO’s, Poverty Eradication in Southern Africa, April 2011. SADC-CNGO, Gaborone.

SADC-CNGO, Concept Note – 9^th Southern Africa Civil Society Forum, 2013. Botswana.

Zarenda, H. South Africa’s National Development Plan and its implications for regional development, June 2013. Tralac, Stellenbosch.

DBSA, The role of South Africa FDI’s in regional infrastructure development in Africa, March 2011. Midrand, DBSA.

NEPAD, African Heads of State to be held accountable for regional infrastructure projects, July 2013. www.nepad.org.

Hall,R. The Many Faces of Investor Rush in Southern Africa: Towards a Typology of Commercial Land Deals, February 2011. PLAAS, University of Western Cape, Cape Town.

AU Commission, Statement of the Chairman to the Roundtable on financing Africa’s transformation, July 2013. Tunis.

Omotola, A.H., What the BRICS Development means for Africa, August 2013. Johannesburg. Economy Watch.

DBSA, Perspectives of DBSA on Infrastructure Investments in the SADC Region, March 2011. Japan, DBSA.

Mwanza, W., Operationalising the SADC Regional Infrastructure Development Master Plan, July 2013. Stellenbosch, Tralac.

DIRCO, Strategic Plan 2013-2018, 2012. Dirco, Pretoria.

Bond, P., Is post-apartheid South Africa still “sub imperialist”? BRICS banking and frustrated global development finance reform, September 2013. Durban.

CONCORD, Financing for development negotiations – what should the EU bring to the table, August 2013. Brussels.

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