REFOCUSING FOR RESULTSDBSA’S EXPERIENCE OF BALANCING DEVELOPMENT AND FINANCIALSUSTAINABILITY

Mr. Patrick K. Dlamini Chief Executive and Managing Director

CONTENTS

• Vision

• Mission

• The case for change

• Refocusing and restructuring

• Benefits for the Bank

• Achieving Development Results

• Conclusions

VISION

• A Prosperous and integrated

region, progressively free of

poverty and dependency

MISSION• To advance the development impact in the region by expanding

access to development finance and effectively integrating and

implementing sustainable development solution to:

• Improve the quality of life of people through the

development of social infrastructure

• Support economic growth through the investment in

economic infrastructure

• Support regional integration

THE CASE FOR CHANGE

DBSA faced a number of challengesBoard resolved to tackle the problems through restructuring

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REFOCUSINGAND

RESTRUCTURING

Three core elements to the refocusing Reorganisation on three fronts simultaneously to restorefocus and efficiency

.

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Revise the portfolio mixLending in core sectors, accelerating infrastructure delivery and enhancing operational performance

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Internal transformationMultiple initiatives to Improve systems and processes

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Six building blocks have been identified to achieve the strategic

objectives and our mission

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Strategic Enabler Rationale

High Performance Culture

• People are our most valuable resource and we are committed to attracting, developing, retaining and rewarding the best people through the continued establishment of a challenging and exciting environment, that stimulates commitment, and encourages development and growth

Balance sheet capacity • Balance sheet strengthening and implement treasury strategy in order to meet the growth ambitions

Partnerships • Developing and leveraging our strategic partnerships and relationships to profitably expand and deepen our penetration of our selected market segments and geographic markets

• Strategic Partnerships enable business to gain competitive advantage through access to knowledge and project funding

• Distinguishing ourselves by proactively partnering with our clients and development partners to originate, plan and deliver infrastructure projects

Business Intelligence • Acquiring relevant actionable knowledge and understanding of our selected industry market and geographic sectors, economic business trends, clients and competitors, in order to inform quality decisions that will drive performance

Operational Excellence • Creating within our Group operating model and organisational structure, distinctive skills processes and operating models for the effective provision of innovative finance for development and enhanced project execution capabilities

Innovative Infrastructure Solutions

• DBSA focusses on social and economic infrastructure development but with an emphasis on driving financial and non-financial investments in the primary sectors of energy, transport, water and communications, whilst providing support to various social sectors such as health, education and housing to a lesser extent

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Shareholder SupportGovernment backing for restructuring processes

Government stood behind the restricting process and agreed to inject additional capital in the amount of R7.9 billion in installments over three years starting 2013-14.

Domestic financing is now focused on four core sectors.

Infrastructure delivery is now concentrated in two sectors

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TRANSPORT

HEALTH

ICT WATERENERGY

EDUCATION

BENEFITSFOR THE

BANK

Strengthening the balance sheetBasis for sustainability

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ACHIEVINGDEVELOPMENT

RESULTS

Highlights

• Financing

• Total approvals of R3.2 billion and disbursements of R1.7 billion

• Disbursements to secondary and under-resourced municipalities increased by 141% to R815 million

• Planning and implementation support gaining traction

• 109 000 households provided access to new and improved service in water, sanitation and electricity

• 4 600 temporary job opportunities created

Metro's Secondary Under-resourced -

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000 817,562,531

211,116,081

127,197,628

835,046,206

595,992,520

218,980,537

Disbursements to municipalities

2012/13 2013/14

Municipal financing141% in disbursements (to R815M) to secondary and under-resourced municipalities

Development impact from financingPlaying a pivotal role in development in SA and the region

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Municipal Funding: Households benefited

Electrification Water Sanitation Roads -

20,000

40,000

60,000

80,000

100,000

120,000

140,000

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117

84

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Num

ber o

f hou

seho

lds b

enefi

ted

Projects supported via third party financing:

Non-municipal Funding (RSA and SADC):

Energy Generation• Renewable: 2,588 MW (16% of funding from DBSA)• Coal IPP: project preparation financing for 3,600 MW

Housing• Funded 120,000 units of housing (30% of project funding

from DBSA)

Roads• Enabled 1,880km of roads (55% of project funding from

DBSA)

Education• Student accommodation of 1,630 beds (46% of project

funding from DBSA)

• ICT broadband cable system

• Two new airports in Africa and the expansion of one in South-Africa

• Cellular operations in the rest of Africa

• Various renewable energy projects

264 000 householdsbenefiting from

municipal financing, 35% of funding from

the DBSA

Energy: Jeffrey’s Wind Farm Project

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Project Description

• Jeffreys Bay Wind Farm is a 138 MW wind project.

• One of the largest wind farms in South Africa (with 60 wind turbines erected on 3 700 hectares)

• It is located between the towns of Jeffreys Bay and Humansdorp, in the Kouga Municipality in the Eastern Cape

• Project Size: R2.9 billion• Debt: R2.2 billion (72%)• Equity: R0.8 billion (28%)

Project Investors

• Globeleq• Mainstream Renewable Power• Old Mutual• Thebe Investment Corporation• Amandla Omoya Trust• Enzani Technologies• Usizo Engineering Local/South African ownership : 41%

Project Lenders (Debt providers)

• Development Bank of Southern Africa (“DBSA”)• Barclays Africa/Absa• Liberty Group Ltd• Sanlam Life Ltd• Sanlam Credit Conduit (Pty) Ltd

Energy: Jeffrey’s Wind Farm Project

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DBSA Role in the Project

• Senior Lender: R825 million• Empowerment/Equity Funder (to facilitate the acquisition of

equity shareholding by BEE Investors) Thebe Investment Corporation: R68.2 million Amandla Omoya: 45.7 million Usizo Engineering: R15.2 million Enzani Technologies: R15.2 million

Project Status • The Project reached commercial operation date (i.e. completed construction) on 15 May 2014.

Benefits (electricity, carbon emissions, water savings)

• Expected Electricity Production: 460 000MWh/annum• Provides power to 100 000 Households per annum• Annual carbon emissions avoided: 420 000 tonnes• Project lifetime carbon emission avoided: 8 400 000 tonnes• Water savings: 590 000 000 litres per annum

Development Impact

• 6% ownership by the Amandla Omoya Local Community Trust (i.e. this exceeds the minimum ownership threshold of 2.5%)

• A % of project revenues has been allocated to be spent on socio economic and enterprise development programmes (“SED” and “ED”), over and above the Local Community Trust ownership.

• 80% of the allocated budget from SED and ED will be focused on education support programmes.

Energy: Khi! Solar One Concentrated Solar Power Project

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Project Description

• Khi! Solar One Concentrated Solar Power Plant is a 50 MW solar project.

• The tower plant will be located on a 600 ha site close to Upington, in the Northern Cape Province.

• Project Size: R4.1 billion• Debt: R2.7 billion (65%)• Equity: R1.4 billion (35%)

Project Investors • Abengoa (Spanish Company), • Industrial Development Corporation, • !Khi Local Community TrustLocal/South African ownership : 49%

Project Lenders (Debt providers)

• Development Bank of Southern Africa (“DBSA”)

• Sanlam Credit Conduit (Pty) Ltd• International Finance Corporation, • Industrial Development Corporation, • European Investment Bank (“EIB”),• Praparco & FMO

Energy: Khi! Solar One Concentrated Solar Power Project

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DBSA Role in the Project

• Senior Lender: R500 million

Project Status • The Project is currently under construction

Benefits (electricity, carbon emissions)

• Expected Electricity Production: 172 000 MWh/annum

• Provides power to 37 400 Households per annum

• Annual carbon emissions avoided: 183 000 tonnes

• Project lifetime carbon emission avoided: 3 660 000 tonnes

Development Impact

• 20% ownership by the !Khi Local Community Trust Local Community Trust (i.e. this exceeds the minimum ownership threshold of 2.5%)

• A % of project revenues has been allocated to be spent on socio economic and enterprise development programmes (“SED” and “ED”), over and above the Local Community Trust ownership.

Regional financingR3.6Bn in funding disbursed to SADC to promote regional integration

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Multi-country R0.6Bn disbursed Zimbabwe

R700M

AngolaR2.1Bn

ZambiaR200M

Roads43%

Energy21%

Other transport

19%

Com-munica-

tion9%

Infrastructure funds

8%

Disbursements per sector (2013/14)

Infrastructure DeliveryTransforming rural communities

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Replacing mud schools Building rural housing

CONCLUSION

Balancing development and financial sustainabilityLessons from the DBSA experience

• DFIs are expected by their government shareholders to scale up their contribution to development

• It is proper that our shareholders and the communities we serve should have high expectations of us, give us stretch targets and make us strive for excellence. The danger lies in going too far to satisfy those expectations and loosing focus. Ultimately that ends in institutional collapse.

• DBSA has gone through a journey to refocus and restructure. It involved a hard look at ourselves and admitting that there were things be fixed. Parts of the journey were painful, specifically the headcount reduction although it was entirely voluntary. That journey has give us wisdom on how to work smarter to improve our pricing, streamline decision making and provide better value to our clients.

• At the heart of our financing model is a portfolio approach which recognizes that our development core extends into activities that are a net cost for the Bank and these must be covered by sustainable financing activities. Additional development mandates must be accompanies by cost recovery.

• Positive results are flowing from our strategy. We are encouraged we can do more in future. 16

THANK YOU