Standard & Poor’s Ratings Services has revised its outlook on the Development Bank of Southern Africa Ltd (DBSA) to positive from stable.

At the same time, Standard & Poor’s affirmed its ‘BBB-‘/’A-3’ foreign currency and ‘A-‘/’A-2’ local currency issuer credit ratings on DBSA, as well as its ‘A-‘ senior unsecured debt rating.

The rating actions reflect the recent outlook revision and ratings affirmation on the Republic of South Africa (local currency A-/Positive/A-2; foreign currency BBB-Positive/A-3), the bank’s sole shareholder.

DBSA is the South African government’s primary vehicle for promoting infrastructure development in South Africa’s municipal and utility sector and in the countries of the Southern African Development Community.

The outlook change on South Africa reflects the government’s continued strong fiscal performance and ongoing improvements in the country’s external position. In addition, the government has continued to strengthen its track record of sound economic management in a challenging external environment, and it is not expected to deviate from its course of orthodox economic policies in the foreseeable future. The ratings on DBSA incorporate strong support from the South African government.

“Going forward, we expect that DBSA will maintain its sound financial profile, prudent management, and strong public policy role,” says Standard & Poor’s credit analyst Mary Nnachi. “Moreover, in addition to continuing to play a major role in South Africa’s development policies, which ensures continued government support, the bank’s contribution toward achieving development objectives for the African region as a whole is likely to grow over time.”

DBSA’s asset quality compares favourably with that of other development finance institutions, and lending policies remain cautious. Despite a difficult operating environment, nonperforming loans, estimated at 7% of gross loans at fiscal year-end 2001/02, have been kept at a manageable level and are more than fully provisioned.