REORIENTING DFIS TO PLAY A STRONGER ROLE IN JOB CREATION

This policy brief by the Institute for Economic Justice (IEJ) argues that South Africa's development finance institutions (DFIs), specifically the IDC and DBSA, are constrained by their funding models and cannot sufficiently support labour-intensive manufacturing. The document proposes recapitalising these institutions with public funds, establishing an export-import (EXIM) bank, and adopting a funding model similar to Brazil's BNDES to drive job creation and industrial growth.

• South African development finance institutions (DFIs), primarily the IDC and DBSA, are unable to fully meet their developmental mandates because they lack a stable source of low-cost government funding. This forces them to follow commercial principles to attract private investors, which limits their ability to fund high-risk, low-profit developmental activities that are not profitable in the short term.
• South Africa is the only emerging market country without an export-import (EXIM) bank. This deficiency harms the competitiveness of South African capital equipment exports to other African countries, as exporters lose deals to China and Brazil due to an inability to compete on trade finance provision.
• The combined assets of the DBSA and IDC represent just over 5% of South Africa's GDP, which is significantly smaller than comparable institutions in other countries, such as China's CDB (14%), Brazil's BNDES (16%), and Germany's KfW (17%).
• To stimulate job creation in labour-intensive manufacturing sectors—such as textiles, metals and engineering, and automotive subcomponents—the IEJ proposes recapitalising the IDC and DBSA with public funds and granting them a stable, long-term funding line via budgetary allocations or tax sources.
• The document recommends adopting the Brazilian BNDES model, which historically used the FAT fund (a tax on employers) and other tax-base sources to ensure low-cost funding. This model allows for strategic equity stakes in large firms to influence investment decisions and the use of subsidised loans with strict domestic content requirements (e.g., 60%) to support the domestic capital goods sector.
• The primary risk of increasing DFI funding is a potential ratings downgrade and loss of investor confidence due to short-term fiscal costs. However, the IEJ argues that these costs are outweighed by long-term benefits, as DFI loans target productive investments that increase GDP growth, tax revenue, and reduce unemployment.

APA

Naqvi, N. (2018). REORIENTING DFIS TO PLAY A STRONGER ROLE IN JOB CREATION. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2020/07/Stream-1-Policy-Brief-4-Reorienting-DFIs-to-Play-a-Stronger-Role-in-Job-Creation-.pdf

Chicago

Naqvi, Natalya. REORIENTING DFIS TO PLAY A STRONGER ROLE IN JOB CREATION. Institute for Economic Justice, 2018. https://iej.org.za/wp-content/uploads/2020/07/Stream-1-Policy-Brief-4-Reorienting-DFIs-to-Play-a-Stronger-Role-in-Job-Creation-.pdf.

Wikipedia

{{cite report |last1=Naqvi |first1=Natalya |title=REORIENTING DFIS TO PLAY A STRONGER ROLE IN JOB CREATION |publisher=Institute for Economic Justice |date=August 2018 |url=https://iej.org.za/wp-content/uploads/2020/07/Stream-1-Policy-Brief-4-Reorienting-DFIs-to-Play-a-Stronger-Role-in-Job-Creation-.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{naqvi2018reorienting, author = {Naqvi, Natalya}, title = {{REORIENTING DFIS TO PLAY A STRONGER ROLE IN JOB CREATION}}, institution = {Institute for Economic Justice}, year = {2018}, month = aug, url = {https://iej.org.za/wp-content/uploads/2020/07/Stream-1-Policy-Brief-4-Reorienting-DFIs-to-Play-a-Stronger-Role-in-Job-Creation-.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }