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Reviewed condensed interim financial statements for the period ended 30 September 2020
Development Bank of Southern Africa Limited
Registration number: 1600157FN
JSE alpha code: DIDBS
(“DBSA or “the Bank”)
REVIEWED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Overview
DBSA is a development finance institution; whose only shareholder is the Government of the Republic of South
Africa. This summary of the condensed interim financial results is published on SENS to provide information to
the holders of the Bank’s listed debt instruments. The condensed interim results are prepared in accordance with
the requirements of International Financial Reporting Standards (IFRS) and its interpretations as issued by the
International Accounting Standards Board (IASB), the presentation requirements of IAS 34 and requirements of
section 27 to 31 of the Companies Act of South Africa (Act No.71 of 2008), these being the relevant and
corresponding sections specified in the Development Bank of Southern Africa Act. The condensed interim financial
statements and the auditor’s unmodified review conclusion are available on the DBSA website
(https://www.dbsa.org).
Review of the condensed interim financial statements
DBSA’s auditor, the Auditor General of South Africa (hereafter referred to as the AG) conducted a review of the
condensed interim financial statements for the period ended 30 September 2020 in accordance with International
Standard on Review Engagements 2410, ‘Review of Interim Financial Information Performed by the Independent
Auditor of the Entity’. The AG has expressed an unmodified review conclusion on the condensed interim financial
statements for the period ended 30 September 2020.
Context of the condensed interim financial statements
During March 2020, most countries closed their borders and implemented lockdown measures to contain the spread
of COVID-19. Many countries have since reopened their economies, which brought with it a resurgence in COVID-19
cases, especially in Europe. South Africa moved to Alert Level 1 in September 2020. The South African government
released the Economic Reconstruction and Recovery plan to accelerate the infrastructure-led economic recovery. All
of the short-term economic indicators point to some form of a normalization in GDP growth towards the third quarter
of 2020. However, these indicators have not fully recovered the losses made in the second quarter. The economic
recovery will likely be slow and choppy, similar to what is expected at a global level.
Preparation of the condensed interim financial statements
The directors take full responsibility for the preparation and for correctly extracting the financial information from
the underlying reviewed condensed interim financial statements for inclusion in this SENS announcement.
Basis of preparation
The condensed interim financial statements have been prepared in accordance with the recognition,
measurement and disclosure requirements of International Financial Reporting Standards (“IFRS”) and the
presentation requirements IAS 34 ‘Interim Financial Reporting’, Section 27 to 31 of the Companies Act, No 71 of
2008, and the Development Bank of Southern Africa Act. The condensed interim financial statements have been
prepared on the historical cost basis, except for Financial instruments held at fair value through profit or loss,
Financial instruments designated at fair value through profit or loss, Derivative financial instruments, Equity
investments, Land and buildings, Post-retirement medical aid benefit investment, Funeral benefit and post-
retirement medical aid liability.
Accounting policies adopted and methods of computation are consistent with those applied to the annual financial
statements as at 31 March 2020. The preparation of the interim financial statements requires management to
make judgements, estimates and assumptions that affect the application of accounting policies and reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis.
Key impressions of the financial results and activities
Funding and liquidity management
The Bank’s liquidity and capital positions remain strong. Notwithstanding the disruption of the local fixed income
market, the DBSA has been successful in raising funding from international development finance institutions as
well as international and local commercial banks and concluded bond market private placements. Total debt
increased from R61bn as at 31 March 2020 to R64bn as at 30 September 2020. The increase in debt capital was
used to fund the Bank’s development activities and infrastructure financing activities and increase Bank’s liquidity
holdings.
Capital adequacy
The debt-to-equity ratio including R20 billion callable capital as at 30 September 2020 amounted to 110% (31
March 2020: 108%), well below the Bank’s regulatory debt-to-equity ratio cap of 250%. The Bank’s capital ratio
expressed as a percentage of balance sheet shareholder capital to unweighted total assets as at 30 September
2020 amounted to approximately 37% (March 2020: 37%). Callable capital is defined as authorized share capital
but not yet issued. The Bank’s equity position increased from R37.6bn as at 31 March 2020 to R38.3bn as at 30
September 2020.
Loan asset quality and expected credit losses provisions
IFRS 9 requires that the Bank considers forward looking information in the calculation of expected credit losses.
In doing so, the Bank is required to make reasonable forward-looking assumptions. However, forecasting under
the current environment is complex and expected credit loss provisions have a high variability potential because
of the influence from the ongoing economic recession and recovery prospects. Given the current deterioration in
the macroeconomic base, the Bank experienced a rise in expected credit loss provisions for the year ended 31
March 2020. However, as at 30 September 2020, expected credit losses increased by 2.5% to R10.4 billion (31
March 2020: R10.2 billion). Further, when compared to same 6 month interim period in the prior year, the total
expected credit loss charge decreased from R1.1bn to R269m. As at 30 September 2020, gross non-performing
loans to total gross development loan book ratio increased from approximately 7% to approximately 8%.
Asset growth
The Bank’s total asset base increased by 3.2% from R100bn as at 31 March 2020 to R104bn as at 30 September
2020 primarily due to increase in liquidity holdings. Despite the growth in the asset base, net interest income on
the gross development loans increased despite the cut in interest rates by SARB. Development loan disbursements
for the interim period amounted to R9.1bn, representing an increase of more than 155% when compared with
prior year interim period development loan disbursement of R3.5bn. As at 30 September 2020, the equity
investment portfolio decreased by 12.5% from R5.9bn as at 31 March 2020 to R5.2bn due to currency movements,
capital repayments and COVID-19 mark-to-market adjustments.
Profitability and efficiency
The Bank has remained profitable despite a challenging environment which has been worsened by the outbreak
of the COVID-19 pandemic. The net profit for period decreased by R211m from R805m at September 2019 to
R594m as at 30 September 2020. When compared to 30 September 2019, the decrease in net profit is primarily
driven by a foreign exchange loss amounting to R354m. However, the Bank remains efficient in managing
operational costs and the cost optimisation strategy continues to be effective. The total cost-to-income ratio for
September 2020 amounted to 27% (September 2019: 27%) and this ratio continues to be on track with the Bank’s
cost optimization strategy.
Condensed Statement of Financial Position as at 30 September 2020
in thousands of rand 30 September 2020 31 March 2020
Reviewed Audited
Assets
Cash and cash equivalents at amortised cost 8 508 132 3 458 836
Trade receivables and other assets 301 184 328 069
Investment securities 566 149 1 787 361
Investments under resale agreements at amortised cost 600 315 -
Derivative assets held for risk management purposes 824 707 812 053
Other financial assets 39 450 36 152
Development loans held at fair value through profit or loss 22 413 22 413
Equity investments held at fair value through profit and loss 5 242 903 5 993 951
Development bonds at amortised cost 1 288 277 1 288 278
Development loans at amortised cost 85 852 286 86 240 264
Property, equipment and right of use of assets 412 033 417 518
Intangible assets 76 028 80 220
Total assets 103 733 877 100 465 115
Equity and liabilities
Trade, other payables and accrued interest on debt funding 999 148 696 324
Repurchase agreements at amortised cost 1 549 781 587 338
Derivative liabilities held for risk management purposes 355 322 784 835
Liability for funeral and post-retirement medical benefits 42 885 42 885
Debt funding designated at fair value through profit or loss 1 557 523 1 505 805
Debt funding held at amortised cost 60 725 664 59 040 495
Provisions and lease liabilities 173 783 229 856
Total liabilities 65 404 106 62 887 538
Equity
Share capital 200 000 200 000
Retained income 23 596 463 23 005 253
Permanent government funding 11 692 344 11 692 344
Other reserves 350 220 191 749
Reserve for general loan risks 2 490 744 2 488 231
Total equity 38 329 771 37 577 577
Total equity and liabilities 103 733 877 100 465 115
Condensed Statement of Comprehensive Income for the period ended 30
September 2020 30 September 2020 30 September 2019
6 Months Reviewed 6 Months Reviewed
in thousands of rand
Interest income
Interest income using the effective interest rate 3 992 046 4 016 996
Other interest income 88 981 134 007
Interest expense
Interest expense calculated using the effective interest rate (1 789 442) (1 687 975)
Other interest expense (58 573) (289 411)
Net interest income 2 233 012 2 173 617
Net fee income 14 061 96 617
Net foreign exchange (loss)/gain (353 879) 280 366
Net loss from financial assets and financial liabilities (450 188) (104 742)
Investment and other income 42 114 40 710
Other operating (loss)/ income (747 892) 312 951
Operating income 1 485 120 2 486 568
Project preparation expenditure (23 261) (25 592)
Development expenditure (15 015) (22 515)
Expected credit losses on financial assets held at amortised cost (269 309) (1 062 323)
Personnel expenses (433 729) (409 445)
General and administration expenses (120 865) (141 755)
Depreciation and amortisation (16 094) (14 604)
Profit from operations 606 847 810 334
Grants paid (13 124) (5 427)
Profit for the period 593 723 804 907
Condensed Statement of Other Comprehensive Income for the period ended 30 30 September 2020 30 September 2019
September 2020 6 Months Reviewed 6 Months Reviewed
in thousands of rand
Profit for the period 593 723 804 907
Items that will not be reclassified to profit and loss
Movement due to changes in own credit risk on financial liabilities designated
2 362 (18 552)
at fair value through profit or loss
Items that may be reclassified subsequently to profit and loss
Unrealised gain/ (loss) on cash flow hedges 370 766 (63 420)
(Gain)/loss on cash flow hedges reclassified to profit and loss (214 657) 53 167
156 109 (10 253)
Other comprehensive gain/(loss) 158 471 (28 805)
Total comprehensive income for the period 752 194 776 102
Condensed statement of changes in equity for the period ended 30 September 30 September 2020 30 September 2019
2020 6 Months Reviewed 6 Months Reviewed
in thousands of rand
Balance at 1 April 37 577 577 37 172 254
Profit for the period 593 723 804 907
Movement due to changes in own credit risk on financial liabilities designated at
fair value through profit or loss 2 362 (18 552)
Unrealised gain/(loss) on cash flow hedges
370 766 (63 420)
(Gain)/loss on cash flow hedges reclassified to profit and loss
(214 657) 53 167
Balance at 30 September 2020 38 329 771 37 948 356
30 September 2020 30 September 2019
Condensed Statement of Cash Flows for the period ended 30 September 6 Months Reviewed 6 Months Reviewed
2020
In thousands of rand
Net cash generated from operating activities 2 578 454 1 293 500
Net cash (used in)/generated from development activities (1 922 453) 258 710
Net cash generated from investing activities 690 192 463 947
Net cash generated from/(utilised by) financing activities 3 869 354 (1 216 885)
Effect of exchange rate movement on cash balances (166 251) (34 028)
Net increase in cash and cash equivalents 5 049 296 765 244
Cash and cash equivalents at the beginning of the year 3 458 836 2 922 876
Cash and cash equivalents at the end of the period 8 508 132 3 688 120
Events after the reporting period
There were no adjusting events that occurred after the reporting date.
Outlook
Despite the challenging economic environment, the DBSA has a strong leadership and management team
steering the Bank through the challenging COVID-19 pandemic-driven recessionary environment whilst
following principles of good corporate governance. The Bank has a resilient balance sheet and continues to
play a significant role in infrastructure development through lending and non-lending activities, whilst making
progress in the implementation of the country’s Infrastructure Fund and playing an active role in crafting
enhancement of municipal service delivery through the District Delivery Model. The Bank’s continued success
hinges on its ability to grow developmental impact using its own balance sheet and partnering with others.
Both domestic and global economic factors are critical to the achievement of the Bank’s objectives. The Bank
has a healthy pipeline of projects that form a solid springboard for success in the future and will continue to
focus on disbursing to infrastructure projects to grow developmental impact in line with its mandate.
30 November 2020
Debt Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank.
8
Date: 30-11-2020 08:00:00
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