REORIENTING DFIS TO PLAY A STRONGER ROLE IN JOB CREATION

The policy brief contends that South Africa's financial sector fails to fund productive investment in labour-intensive manufacturing because these sectors are high-risk and offer low short-term profits. It argues that existing DFIs, specifically the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA), are too small and constrained by commercial funding models to fulfill their developmental mandates. The author proposes recapitalising these institutions with public funds, providing a stable low-cost funding line, and establishing an export-import (EXIM) bank to compete with other emerging markets like China and Brazil. These measures are intended to support sectors such as capital equipment exports, automotive subcomponents, and textiles to drive job creation.

• South African DFIs, primarily the IDC and DBSA, are small relative to comparator countries and are limited by a funding model that forces them to adhere to commercial principles to raise finance from private investors.
• South Africa lacks an export-import (EXIM) bank, which puts its capital equipment exporters at a disadvantage when selling to less developed African countries compared to competitors from China and Brazil.
• The combined assets of the IDC and DBSA represent just over 5% of South Africa's GDP, significantly lower than the assets of the Chinese CDB (14%), Brazilian BNDES (16%), or German KfW (17%).
• The document proposes a funding model based on the Brazilian BNDES, which historically used the FAT fund (a tax on employers) and other tax-base sources to ensure stable, low-cost, long-term funding.
• To stimulate job creation, the IDC should target high-risk, low-profitability, labour-intensive sectors such as metals beneficiation, automotive components, and export-oriented capital equipment.
• The primary risk of increasing DFI funding is a potential ratings downgrade and loss of investor confidence due to short-term fiscal costs, though the author argues these are outweighed by long-term GDP growth and tax revenue.

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} }