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The fit of NDBs/DFIs with public policy The Africa Development Finance Week Kabelo J Seitshiro.

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Presentation on theme: "The fit of NDBs/DFIs with public policy The Africa Development Finance Week Kabelo J Seitshiro."— Presentation transcript:

1 The fit of NDBs/DFIs with public policy The Africa Development Finance Week Kabelo J Seitshiro

2 PUBLIC POLICY A choice made by govt to undertake some course of action A choice made by govt to undertake some course of action Developing, translating and implementing of public policy into a successful practice is an art and a craft Developing, translating and implementing of public policy into a successful practice is an art and a craft Insight Insight Creativity Creativity Imagination Imagination To accurately identify societal problems To accurately identify societal problems The clear articulation of these problems and proposed strategies to solve them The clear articulation of these problems and proposed strategies to solve them Effective implementation strategies at a policy level Effective implementation strategies at a policy level

3 CENTRAL ROLE OF GOVERNMENT Aimed at addressing: Aimed at addressing: Private sector oversight in areas of public policy – Mkt failure, path dependencies, etc. and Private sector oversight in areas of public policy – Mkt failure, path dependencies, etc. and Policies governing the private sector playing field Policies governing the private sector playing field This requires a mix of state and market interactions that foregrounds a development agenda This requires a mix of state and market interactions that foregrounds a development agenda Investment Investment Finance Finance Human capital development Human capital development Technology acquisition Technology acquisition Promotion of policy and institutional reforms Promotion of policy and institutional reforms NDBs/DFIs can act as an effective bridge NDBs/DFIs can act as an effective bridge

4 ROLE OF PUBLIC MANGERS “On occasion, public managers have an obligation to instigate public deliberation rather than simply make policy decisions, in directing public attention towards these ideas, public managers broaden the range of possibilities for public action and deepen society’s self understanding” Robert Reich “Policy analysts as well as office holders have a responsibility of improving the quality of discourse by probing assumptions, raising issues, and thereby helping the public consider different formulations of problems and a wider set of possible solutions.” G Majone

5 ROLE OF NDBs/DFIs Market failure correction widely accepted as justification for intervention – (state/market/DFIs) Market failure correction widely accepted as justification for intervention – (state/market/DFIs) NDBs/DFIs generally used to address market failure in credit risky socio-economic strategic sectors NDBs/DFIs generally used to address market failure in credit risky socio-economic strategic sectors Agressively filling gaps in the supply of financial services Agressively filling gaps in the supply of financial services Crowding in the private sector Crowding in the private sector

6 ROLE OF POLICY BASED DFIs/NDBs “Policy based DFIs have their raison d’ etre in the recognition that risk and profitability criteria often mean that, private institutions are not willing to provide finance in certain government priority areas and on the conditions which are necessary for development. As a consequence, policy based DFIs were created to provide government with a mechanism through which funds could be directed to these priority areas, in an effort to support economic growth and development. In so doing, the problem of supplying long term funds for capital investment in priority fields is addressed” Mateyisi 2001

7 ROLE OF A DEV FIN SYSTEM A mechanism of identifying societal problems A mechanism of identifying societal problems Processes that assist in clearly articulating govt policy objectives Processes that assist in clearly articulating govt policy objectives Aid in meeting challenges faced by different sectors of the economy Aid in meeting challenges faced by different sectors of the economy Mobilising private and public resources Mobilising private and public resources Close the gap between first and second economies Close the gap between first and second economies

8 INTERNATIONAL EXPERINCE Appropriate & efficiently managed DFIs can contribute to economic growth and development Appropriate & efficiently managed DFIs can contribute to economic growth and development Indonesian DFI landscape – a structured financial sector which effectively contributes to development Indonesian DFI landscape – a structured financial sector which effectively contributes to development Developing countries Developing countries Policy based DFIs have given rise to severe market distortions – Zambia’s Agriculture Sector Policy based DFIs have given rise to severe market distortions – Zambia’s Agriculture Sector Failed to promote growth and development Failed to promote growth and development Many international experiences from which lessons can be drawn Many international experiences from which lessons can be drawn

9 LESSONS LEARNED Promoting pvt sector activities Promoting pvt sector activities Avoiding competition for the same investment opportunities Avoiding competition for the same investment opportunities DFI functions could include DFI functions could include Generation and provision of information Generation and provision of information Filling financial gaps where pvt sector is unwilling to participate Filling financial gaps where pvt sector is unwilling to participate Leveraging pvt sector involvement Leveraging pvt sector involvement Undertaking certain govt functions Undertaking certain govt functions Augmenting capacity in communities Augmenting capacity in communities Linking SME projects to macro projects Linking SME projects to macro projects Assisting in Policy articulation Assisting in Policy articulation Continuous monitoring of the development process Continuous monitoring of the development process Identifying market constraints to pvt sector participation Identifying market constraints to pvt sector participation

10 ENSURING THE FIT WITH PUBLIC POLICY Clearly articulated policy objectives Clearly articulated policy objectives Prioritisation of the policy objectives Prioritisation of the policy objectives Co-operation and co-ordination between govt ministries themselves and the finance ministry Co-operation and co-ordination between govt ministries themselves and the finance ministry Identification of market gaps in addressing these policy objectives Identification of market gaps in addressing these policy objectives Outlining the role of DFIs Outlining the role of DFIs Periodic reviews and alignment of DFI mandates Periodic reviews and alignment of DFI mandates Aligning DFI strategies to policy objectives Aligning DFI strategies to policy objectives Determining pre-agreed KPIs Determining pre-agreed KPIs

11 THE SOUTH AFRICAN EXPERIENCE Public policy not well articulated Public policy not well articulated Evolving policy vs. static mandates Evolving policy vs. static mandates DFI ownership structures vs. policy objectives DFI ownership structures vs. policy objectives A mismatch between policy objectives and DFI activities A mismatch between policy objectives and DFI activities Incentive structures promote competition with pvt sector Incentive structures promote competition with pvt sector Financial sustainability risks promote a profit focus Financial sustainability risks promote a profit focus Focus on financial vs. development performance measures Focus on financial vs. development performance measures Limited DFI collaboration and coordination Limited DFI collaboration and coordination Access to DFIs by target communities remains difficult Access to DFIs by target communities remains difficult A general urban bias A general urban bias

12 EVOLVING DFI LANDSCAPE ASGI-SA ASGI-SA Unspent cash – from approx R10bn to R4bn Unspent cash – from approx R10bn to R4bn Prioritisation of government projects Prioritisation of government projects DFI Review DFI Review Continuing self assessment Continuing self assessment SA DFI network SA DFI network Improving collaboration and coordination Improving collaboration and coordination

13 HARNESSING THE PRIVATE SECTOR “The starting point in thinking about the public role in financing development is that private markets exist within institutional frameworks that are created and maintained by governments and the international organisations they establish. Those markets are generally guided by policies that the official bodies determine….Thus both directly and indirectly, governments and international institutions help to shape the financing for development, even in a world of largely private economic activity.” B Herman, F Pietracci, K Sharma

14 FINANCIAL SECTOR CHARTER CLEARLY ARTICULATED POLICY - BEE + VISIONARY PVT SECTOR LEADERSHIP PVT SECTOR RESOURCES FOR DEVELOPMENT

15 FINANCIAL SECTOR CHARTER Human capital development Human capital development Procurement policies Procurement policies Enterprise development Enterprise development Shareholder activism Shareholder activism Access to financial services Empowerment financing Financial sector ownership Control in the financial sector Corporate Social Investment Voluntarily developed by the financial sector Voluntarily developed by the financial sector Establishes principles upon which BEE will be implemented in financial sector Establishes principles upon which BEE will be implemented in financial sector Partnership with govt on BEE Partnership with govt on BEE Establishes measurable targets Establishes measurable targets

16 A REMARKABLE ACHIEVEMENT A first of its kind world wide A first of its kind world wide Beyond compliance Beyond compliance How the financial sector makes business sense of a more sustainable, inclusive and equitable future How the financial sector makes business sense of a more sustainable, inclusive and equitable future Collective partnership and stakeholder capitalism Collective partnership and stakeholder capitalism Co-operation and collective effort to overcome information asymmetry and economies of scale Co-operation and collective effort to overcome information asymmetry and economies of scale

17 CORPORATE GOVERNANCE TRANSPARENCY – adherence to established accounting norms, and annual audits TRANSPARENCY – adherence to established accounting norms, and annual audits EQUITY – equitable treatment of shareholders EQUITY – equitable treatment of shareholders ACCOUNTABILITY – enforceable fiduciary duties, conflict resolution processes ACCOUNTABILITY – enforceable fiduciary duties, conflict resolution processes

18 NDB/DFI OWNERSHIP STRUCTURES Diffused ownership structures Diffused ownership structures Used for political motives Used for political motives Complex agency relationship Complex agency relationship Competing policy objectives Competing policy objectives Protecting the public good Protecting the public good

19 TREASURY MANAGEMENT DFI treasury issues include DFI treasury issues include Funding Funding Debt management Debt management Cash management Cash management Foreign exchange Foreign exchange Liquidity risk Liquidity risk Interest rate risk management Interest rate risk management

20 TREASURY GOVERNANCE Development of treasury policies and strategies Development of treasury policies and strategies Independent treasury risk reporting to the Board Independent treasury risk reporting to the Board Treasury management to align with business and financial objectives Treasury management to align with business and financial objectives Appropriate identification of treasury risks Appropriate identification of treasury risks Annual internal audit of the treasury function Annual internal audit of the treasury function

21 ENTERPRISE-WIDE RISK MANAGEMENT Development of a Risk Management Framework/Strategy; Development of a Risk Management Framework/Strategy; Completion of operational risk assessments; Completion of operational risk assessments; Awareness sessions regarding Risk Management; Awareness sessions regarding Risk Management; Development of risk reporting dashboards for key identified risks; Development of risk reporting dashboards for key identified risks; Preparation of fraud prevention plans; and Preparation of fraud prevention plans; and Development of a Compliance register Development of a Compliance register

22 CONCLUSION Clearly articulate and prioritise govt policy objectives Clearly articulate and prioritise govt policy objectives Align DFI strategies to policy objectives Align DFI strategies to policy objectives Harness pvt sector participation Harness pvt sector participation De-politicise DFI operations De-politicise DFI operations Appropriate risk management and corporate governance Appropriate risk management and corporate governance

23 THANK YOU Kabelo J Seitshiro


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