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DIDBS - Reviewed Condensed Interim Financial Statements for the period ended 30 September 2021
Development Bank of Southern Africa Limited
(reconstituted and incorporated in terms of section 2 of the Development Bank of Southern Africa Act, 1997)
Registration number: 1600157FN
JSE company code: DIDBS
LEI code: 25490071AZ4HOFUNIH94
(“DBSA” or the “Bank”)
REVIEWED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 SEPTEMBER 2021
Overview
DBSA is a development finance institution; whose only shareholder is the Government of the Republic of South Africa.
This summary of the condensed financial results for the interim period ended 30 September 2021 (the “results”) is
published on the JSE Limited (“JSE”) Stock Exchange News Service (“SENS”) to provide the information to the holders
of the Bank’s listed debt securities. The 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 the requirements of sections 27 to 31 of the Companies
Act of South Africa (Act No.71 of 2008) (“Companies Act”), these being the relevant and corresponding sections
specified in the Development Bank of Southern Africa Act (Act No. 13 of 1997) (“DBSA Act”). The condensed interim
financial statements for the six-month period ended 30 September 2021 (“condensed interim financial statements’”
or “interims” and the auditor’s unmodified review conclusion are available on the DBSA website at
https://www.dbsa.org/investor-relations
Review of the condensed interim financial statements
DBSA’s auditor, the Auditor General of South Africa (hereinafter referred to as the “AG”) conducted a review of the
condensed interim financial statements in accordance with the 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.
Context of the condensed interim financial statements
The past 18 months have largely been overshadowed by the global COVID-19 pandemic (the “pandemic”), which
resulted in intermittent lockdown measures to contain the spread of the virus. At the height of the pandemic, the global
shut down resulted in 125 countries instituting some form of lockdown. Many countries were faced with finding a
balance between containment of the virus while continuing to support economic growth.
Most countries have found ways to balance the resumption of economic activity, with intermittent lockdown
restrictions, in times when COVID-19 flareups occur. A combination of increased demand as well as accommodative
monetary and fiscal policies has placed significant upside risk to the global inflation trajectory. As central banks in
developed economies start to unwind COVID-19 related support, emerging market economics, including South Africa,
will likely follow suit. Following increases of 10.6% in the fourth quarter of 2020 and 4.2% in the first quarter of 2021,
South African real gross domestic product (“GDP”) growth surprised on the upside for the fourth consecutive quarter,
increasing by 4.7% on a quarter-on-quarter seasonally adjusted and annualised basis in the second quarter of 2021.
The second quarter growth recovery was driven by, amongst others, improvements in the trade, catering and
accommodation, electricity, construction, and personal services sectors. Socio-economic hardships continue to
impact South Africans, with the official unemployment rate increasing to a record high of 34.4% in the second quarter
of 2021. From a DBSA point of view, global policy and financial market uncertainty has made the operating
environment challenging.
Despite the impact of the pandemic, DBSA remained focused, in line with its mandate, on pursuing its growth strategy
designed to augment disbursements through emphasis on its catalytic role aimed at contributing to sustainable
infrastructure development beyond the confines of its own balance sheet. Through this strategy, the Bank aims to
crowd in third party funding through de-risking projects using early-stage project preparation and structuring and
innovative solutioning.
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 IFRS and the presentation requirements of IAS 34 ‘Interim Financial Reporting’,
sections 27 to 31 of the Companies Act, 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 and methods of computation adopted are consistent
with those applied to the annual financial statements as at 31 March 2021. The preparation of the condensed 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, DBSA has been successful in raising funding from international development finance institutions, international
and local commercial banks and concluded private placements.
The Bank’s total debt funding decreased from R59bn as at 31 March 2021 to R57bn as at 30 September 2021. Despite
a reduction in debt funding, loan disbursement activities amounted to approximately R6.9bn. Repayments from the
loan book reached R8.5bn (comprising principal loan repayments of R4.5bn and interest repayments of R4bn). The
total liquidity position of the Bank substantially decreased by R2.3bn, from R9bn as at 31 March 2021 to approximately
R6.7bn as at 30 September 2021, representing a decrease of 26% in cash and cash equivalents year-on-year. The Bank
policy is to manage liquidity levels along the lines of the Basel 30-liquidity coverage ratio. From the onset of the Covid-
19 driven market dislocation however, liquidity has more conservatively been managed at a level closer to 90-day
cover. As at 30 September 2021, the 30-day liquidity coverage ratio amounted to 1 271% (31 March 2021: 879%).
Capital adequacy
The Bank continues to have strong capital buffers for unexpected events. The debt-to-equity ratio, including the
R20bn callable capital as at 30 September 2021, improved to 94% (31 March 2021: 101%), 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, increased to 41% as at 30 September 2021 from approximately 39%
as at 31 March 2021. The Bank’s balance sheet equity position increased by R2.2bn during the interim period, from
R39.1bn as at 31 March 2021 to R41.3bn as at 30 September 2021.
Loan asset quality and expected credit losses provisions
In terms of IFRS 9, the Bank is required to consider forward looking information in the estimation of expected credit
losses on the development loan book. In doing so, DBSA is required to make reasonable forward-looking assumptions.
However, forecasting under the current environment is complex and expected credit loss provisions have a higher
variability potential because of the influence from the uncertainty around ongoing economic prospects.
Despite a marginal improvement in the macro-economic base compared to the prior year, the Bank experienced an
increase in expected credit loss provisions amounting to R395m, on the back of marginal deterioration in the overall
risk of the loan book and average probability of default of the loan book increasing marginally when compared to the
year ended 31 March 2021 (“prior year”). The Bank’s expected credit loss coverage levels on the loan book remained
relatively unchanged at approximately 11.9% from 31 March 2021 to 30 September 2021. As at 30 September 2021,
the expected credit loss coverage ratios for Stage 1 and Stage 2 loans increased to 7.3% (7.2%: 31 March 2021) and
coverage ratio for Stage 3 and credit-impaired loans increased to 74.3% from 69.5% as at 31 March 2021. This resulted
in the balance sheet provision for expected credit losses (impairment provision) increasing by approximately 3% to
R11.7bn (31 March 2021: R11.4bn) in line with concomitant loan book growth of approximately 3%. However, when
compared to the interim period ended 30 September 2020 (“prior interim period”), the expected credit loss provision
(impairments) charge in the income statement increased by 47%, from R269m in the prior interim period to
approximately R395m in the current interim period.
The IFRS 9 stage 3 net non-performing loan ratio (net non-performing loans to net development loan book) decreased
from 2.6% as at 31 March 2021 to 2% of the total loan book as at 30 September 2021. The IFRS 9 Stage 3 gross non-
performing loan ratio (gross non-performing loans to total gross development loan book) decreased from
approximately 7.6% as at 31 March 2021 to approximately 6.8% as at 30 September 2021. When compared to the
prior interim period, the gross non-performing loan ratio decreased from 8.2% as at 30 September 2020 to 6.8% as at
30 September 2021.
Asset growth
The Bank’s total asset base remained at the R100bn level as at 30 September 2021 when compared to 31 March 2021,
despite loan repayments amounting to approximately R8.5bn as this was offset by currency movements of R502m and
new disbursements amounting to R6.9bn for the interim period. Development loan disbursements decreased by 24%,
from R9.1bn in the prior interim period to R6.9bn in the current interim period. As at 30 September 2021, the equity
investment portfolio increased by 2.3%, from R5bn as at 31 March 2021 to R5.1bn, as a result of new acquisitions of
R111m, currency movements of approximately R54m and fair value adjustments of R36m offset by capital repayments
of R81m.
Profitability and efficiency
The operating environment remains challenging. Despite a challenging environment worsened by the outbreak of the
pandemic, net profit for the interim period increased from R594m in the prior interim period to R2.2bn in the current
interim period. The net profit for the interim period arose mainly from the core lending activities of the Bank and also
from relatively lower expected credit loss charge on the back of cash collections from the distressed book when
compared to full prior year. There was solid growth in net interest income during the interim period, amounting to
29% when compared to the prior interim period. The return on equity for the interim period increased to 5.6% when
compared to 3.7% for the prior year.
DBSA lends in USD and Euro to fund projects outside of South Africa. Consequently, the Bank has a net foreign currency
asset position and given the depreciation of the ZAR against the USD and Euro during the interim period; foreign
currency exchange rate gains amounted to R179m compared to a foreign currency exchange rate loss of R354m in
the prior year. Whilst the foreign currency position is not fully hedged, the Bank closely monitors and manages its
exposure to foreign exchange rate risk using natural hedges and derivative hedging strategies.
The Bank remains efficient in managing operational costs and the cost optimization strategy continues to be effective.
The total cost-to-income ratio for the interim period was 22% (27%: 30 September 2020) and the ratio continues to
track in line with the Bank’s cost optimization strategy.
Condensed Statement of Financial Position as at 30 September 2021
in thousands of Rand 30 September 2021 31 March 2021
Reviewed Audited
Assets
Cash and cash equivalents at amortised cost 6 667 999 8 978 608
Trade receivables and other assets 275 328 296 376
Investment securities 451 101 455 215
Derivative assets held for risk management purposes 395 912 750 831
Other financial assets 41 796 42 451
Development loans held at fair value through profit or loss 17 236 16 847
Equity investments held at fair value through profit and loss 5 127 088 5 007 459
Development bonds at amortised cost 1 230 311 1 279 235
Development loans at amortised cost 85 676 767 82 733 448
Property, equipment and right of use of assets 429 853 405 685
Intangible assets 67 468 81 569
Total assets 100 380 859 100 047 724
Equity and liabilities
Trade, other payables and accrued interest on debt funding 725 383 739 962
Repurchase agreements at amortised cost 1 380 109 868 042
Derivative liabilities held for risk management purposes 136 747 127 276
Liability for funeral and post-retirement medical benefits 47 630 47 630
Debt funding designated at fair value through profit or loss 1 498 803 1 513 997
Debt funding held at amortised cost 54 635 748 56 982 792
Provisions and lease liabilities 113 182 114 485
Deferred income 509 757 503 086
Total liabilities 59 047 359 60 897 270
Equity
Share capital 200 000 200 000
Retained income 26 581 755 24 366 254
Permanent government funding 11 692 344 11 692 344
Other reserves 294 378 345 917
Reserve for general loan risks 2 565 023 2 545 939
Total equity 41 333 500 39 150 454
Total equity and liabilities 100 380 859 100 047 724
Condensed Statement of Comprehensive Income for the period ended
30 September 2021
30 September 2021 30 September 2020
in thousands of Rand Reviewed Reviewed
Interest income
Interest income calculated using the effective interest rate 4 360 292 3 992 046
Other interest income 91 418 88 981
Interest expense
Interest expense calculated using the effective interest rate (1 505 245) (1 789 442)
Other interest expense (62 590) (58 573)
Net interest income 2 883 875 2 233 012
Net fee income 139 565 14 061
Net foreign exchange gain/(loss) 179 087 (353 879)
Net gain/(loss) from financial assets and financial liabilities 67 606 (450 188)
Investment and other income 36 511 42 114
Other operating income/(loss) 422 769 (747 892)
Operating income 3 306 644 1 485 120
Project preparation expenditure (30 459) (23 261)
Development expenditure (30 149) (15 015)
Impairment losses (394 667) (269 309)
Personnel expenses (450 015) (433 729)
General and administration expenses (138 868) (120 865)
Depreciation and amortisation (18 261) (16 094)
Profit from operations 2 244 225 606 847
Grants paid (9 640) (13 124)
Profit for the period 2 234 585 593 723
Condensed Statement of Other Comprehensive Income for the period ended 30 30 September 2021 30 September 2020
September 2021 Reviewed Reviewed
in thousands of Rand
Profit for the period 2 234 585 593 723
Items that will not be reclassified to profit and loss
Movement due to changes in own credit risk on financial liabilities designated
(4 643) 2 362
at fair value through profit or loss
Items that may be reclassified subsequently to profit and loss
Unrealised (loss)/ gain on cash flow hedges (83 679) 370 766
Loss/(gain) on cash flow hedges reclassified to profit and loss 36 783 (214 657)
(46 896) 156 109
Other comprehensive (loss)/gain (51 539) 158 471
Total comprehensive income for the period 2 183 046 752 194
Condensed statement of changes in equity for the period ended 30 September 30 September 2021 30 September 2020
2021 Reviewed Reviewed
in thousands of Rand
Balance at 1 April 39 150 454 37 577 577
Profit for the period 2 234 585 593 723
Movement due to changes in own credit risk on financial liabilities designated at
fair value through profit or loss (4 643) 2 362
Unrealised (loss)/gain on cash flow hedges
(83 679) 370 766
Loss/(gain) on cash flow hedges reclassified to profit and loss
36 783 (214 657)
Balance at 30 September 41 333 500 38 329 771
Condensed Statement of Cash Flows for the period ended 30 September 2021
30 September 2021 30 September 2020
Reviewed Reviewed
In thousands of Rand
Net cash generated from operating activities 2 693 041 2 578 454
Net cash used in development activities (2 518 015) (1 922 453)
Net cash(utilised by)/ generated from investing activities (26 512) 690 192
Net cash (utilised by)/ generated from financing activities (2 405 397) 3 869 354
Effect of exchange rate movement on cash balances (53 726) (166 251)
Net (decrease)/ increase in cash and cash equivalents (2 256 883) 5 215 547
Cash and cash equivalents at the beginning of the year 8 978 608 3 458 836
Cash and cash equivalents at the end of the period 6 667 999 8 508 132
Events after the reporting period
There were no other adjusting events that occurred after the reporting date other than the impact of the
pandemic.
Outlook
Despite the challenging economic environment, DBSA has a strong leadership and management team steering
the Bank through the challenging pandemic, whilst following the 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. 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 2021
Debt Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 30-11-2021 10:17:00
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