The financial sustainability of South Africa's National Development Finance Institutions

Mulusa, Lucky Mabenga (2008-12)

Thesis (MDF (Development Finance))--Stellenbosch University, 2008.

Thesis

ENGLISH ABSTRACT: Development Finance Institutions (DFIs) in South Africa can enhance their role as prime vehicles for the Government to achieve the social objectives of meeting the millennium goals. This can be achieved by ensuring that higher ratios of resources available to the DFIs are applied to development lending and that such DFls stay financially sustainable. DFls have served as conduits for channelling credit to priority sectors, often at concession terms, and have directed their strategies towards achieving social and economic goals that are believed to be neglected by market forces. The absence of structured monitoring and evaluation mechanisms for both impact assessment and the application of resources make it impossible to ensure that these DFIs exist to achieve the mandates for which they were created. The perception of market failure, however, justifies the allocations of scarce public resources to DFIs. DFIs are expected to be catalysts in financial intermediation, extending long-term credit and contributing to economic development through the removal of bottlenecks associated with credit shortage within communities of the Historically Disadvantaged Individuals (HDI). The application of scarce resources, however, calls for a financially sustainable DFI sector so that there may be a sustained provision of credit to the targeted sectors, in order to achieve optimum use and allocation of state resources. The government, through the ASGISA initiative, recognises the role the DFIs can play in halving poverty and unemployment by 2014, due to the labour intensive nature of the targeted priority sectors, such as agriculture. The performance of most of these DFIs, in terms of mandate achievement and financial sustainability, has not been well balanced, as evidenced by the past and present prevalence of the use of govemment guarantees including recapitalisation and future anticipated requests for such facilities. This study was initiated in response to the anticipated growth in the number of DFIs likely to seek either government guarantees or recapitalisation or both. At present, no mechanism is in place for the National Treasury (NT) to detect financial distress of any DFI long before it occurs, so that intervention measures can be put in place.

AFRIKAANSE OPSOMMING: Ontwikkelingsfinansiering Instellings (OFIs) in Suid Afrika kan hulle rolle versterk as primere voertuie om die sosiale doelwitte van die millennium te bereik. Hierdie doelwitte kan bereik word deur te verseker dat die hoer beskikbare verhouding en middele by die OFIs aangewend word vir ontwikkelingslenings en dat hierdie OFIs finansieel volhoubaar bly. "OFIs het as wee gedien vir die kanalisering van krediet aan prioriteit sektore, dikwels teen konsessionere terme, en het hulle strategies gerig om sosiale en ekonomiese doelwitte te bereik wat geglo is deur markkragte negelaar is. Die nie bestaan van gestruktureede monitering- en evaluasiemeganismes vir beide impak evaluasie en aanwending van hulpbronne maak dit onmoontlik om te verseker dat hierdie OFIs bestaan om die mandate waarvoor hulle geskep is te bereik. Die persepsie van mark versuim regverdig nietemin die allokasie van skaars openbare hulpbronne aan OFIs. Daar word van OFIs verwag om kataliste te wees van finansiele intermediasie, die verskaffing van langtermyn krediet en om by te dra tot ekonomise ontwikkeling deur van bottelnekke weg te neem wat geassosieer word met krediettekorte binne gemeenskappe van Voorheen Benadeelde Individue (VBI). Die aanwending van skaars hulpbronne vra nietemin vir 'n finansiele volhoubare OFI sektor, sodat die volgehoue voorsiening van krediet aan geteikende sektore plaasvind, om die optimum gebruik en allokasie en staatshulpbronne te verseker. Die regering, deur die ASGISA inisatief, erken die rol wat OFIs kan speel in die halvering van armoede en werkloosheid teen 2014, as gevolg van die arbeidsintensiewe aard van die geteikende sektore, soos byvoorbeeld landbou. Die prestasie van hierdie OFIs in terme van die bereiking van mandate en finansiele volhoubaarheid was nie goed gebalanseerd nie, soos bewys word deur die oorgewig van die gebruik in die verlede en huidiglik van regerings waarborge, insluitend herkapitalisasie en toekomstige versoeke vir sodanige fasiliteite. Die studie was geinisieer in reaksie tot die verwagte groei in die getal OFIs wat waarskynlike staastwaarborge of herkapitalisasie of beide gaan vra. Huidiglik is daar geen meganisme in plek vir die Nasionale Tesourie (NT) om die finansiele nood van enige OFI te identifiseer voordat dit plaasvind en om daardeur intervensie maatreels in plek te sit nie.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/6096
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