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Development Bank of Southern Africa is in talks with multilateral lenders and commercial banks to help plug a funding gap as disruptions in debt capital markets hinder its ability to sell bonds.
The bank needs the extra financing to keep disbursing loans as demand jumps from countries trying to cope with the fallout from the coronavirus pandemic, DBSA Chief Executive Officer Patrick Dlamini said on a video call. Potential lenders include the African Development Bank, the New Development Bank and Agence Francaise de Developpement, he said, without naming the commercial entities.
The additional capital will help fund a pipeline of more than R20 billion of deals this year, the CEO said.
The bank provides credit to government clients throughout sub-Saharan Africa in sectors ranging from information and communications technology to transport, water and energy. Almost three quarters of its loans are extended in South Africa, which is easing lockdown restrictions that brought the economy to a halt.
Much of the loan demand is coming from South African municipalities, which need to procure personal protection equipment and ventilators, and boost testing capacity for the virus. In the rest of the continent, the lender is looking at ways to finance a variety of projects, including rail and road infrastructure, Dlamini said.
DBSA, which has R40 billion of debt, last sold bonds at the end of January, when it issued R700 million of five- and seven-year floating-rate notes, according to data compiled by Bloomberg.
Credit downgrades
The lender is counting on measures introduced by the South African Reserve Bank to help stabilise markets as pressure to ramp up its funding mounts, Dlamini said. The central bank slashed borrowing costs to a record low, eased capital rules for lenders and bought government debt.
Credit-rating downgrades to South Africa, a global economic recession and clients increasingly unable to service their debts under the financial toll of the virus have complicated matters for the lender, he said.
“The beauty is we are a long-term player and infrastructure is a long-term game,” he said. “At least we are hoping that over time we would be able to come out of this difficult period, but it is going to take some element of creativity.”
