A thesis submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in fulfillment of the requirements for the degree of Master of Management by Research and Dissertation / This study focuses on the gap-filling role of the Development Bank of Southern Africa (DBSA). The use of development banks as a policy instrument to spur economic growth has been a practice followed internationally since World War II.
Development banks are intended to extend financing to undertakings in the market economy deemed by the private sector as posing too much financial risk. Usually, these are development-orientated, low-profit green-fields projects initiated by clients in the public sector. By financing such development projects traditionally excluded by the market, the development bank fills a gap in the market. The DBSA was established in 1983 to bridge the gap between the industrialised central government and the underdeveloped Bantustan states and independent territories.
At the time, the Bank could finance any development project so long as it fell within the Southern African region. However, post 1994, the DBSA mandate changed, shifting its focus to the public sector – low-income municipalities – and to particularly, specialise in financing infrastructure projects. Now altered, its development finance functions extended far beyond the Bantustan territories and independent states.
Interest in the DBSA’s gap-filling role was generated by the observation that it had not been providing development finance according to the traditional tenets of understanding development finance. The problem was two-fold. The Bank’s target client was not necessarily the most deserving. Additionally, projects financed by the DBSA did not automatically fall within the infrastructure development mandate.
This thesis has explored how, in light of its financier role prior and post 1994, the DBSA interpreted and acted in relation to its mandate as set out in its policy documents and strategies. This study also delved into the nature of projects financed and if they were in line with the traditional understanding of gap-filling. As well, this report investigated factors contributing to the DBSA’s deviation from its gap-filling role.
To carry out this research, case study methodology was used in tandem with the qualitative approach. To answer research questions in-depth-unstructured interviews and document analysis were used. The study was both an exploration of the DBSA’s gap-filling role as well as examination of development finance in action in the South African context.
The study drew on literature in New Institutional Economics (NIE) as an umbrella theory best suited to explore the DBSA’s gap-filling role. It was found that prior to 1994 the DBSA did act in line with its gap-filling role. However, post 1994 the Bank most certainly deviated from its gap-filling role. Contributing factors to this divergence were found to be an increasingly competitive private sector, confusion
over its development mandate, a challenging municipal client base and a self-sustainability funding model.
Prior to 1994, the DBSA enjoyed a monopoly over its target client base, the Bantustan states and independent territories. It had a broad development mandate coupled with capital backing from the Republic of South Africa (RSA) central government. Post 1994, the DBSA mandate was infrastructure development targeted towards the public sector.
The Bank was required to adopt a self-sustainability funding model. This, coupled with entry into a competitive private sector moving into the development space, placed a great deal of pressure on the Bank. Therefore, it became necessary to finance profit generating projects rather than those initiated by its mandated low-income high risk client base – poor municipalities.
This study contributed to DFI literature by illustrating what functions DFIs are mandated to perform compared to what they do in reality. Also, this analysis has shown traditional market-failure studies assume DFIs perform a gap-filling role. This has to be re-examined taking into account the changing institutional environment. And, particularly in South Africa, more studies need to be conducted to further understand limitations and opportunities the DFI model offers for overall development.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/20982 |
| Date | 31 August 2016 |
| Creators | Mhlanga, Letta Kaseke |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf, application/pdf |
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