By 2013, the chemicals industry was contributing 5% to gross domestic product, and was the fourth-biggest employer. Since 1994, the IDC has been involved in the sector every step of the way.
Over the past 20 years – the same number of years that South Africa has been a democracy – the Industrial Development Corporation has approved funding of R2.4-billion (R3.7-billion in 2013 prices) for the development and transformation of the Chemicals and Pharmaceutical sector.
The industry plays a key role in the economy, leading the way as the world frontrunner in coal-based synthesis and gas-to-liquids technologies. It is also among the most cost-effective producers of ethylene and propylene in the world.
By 2013, this sector contributed about 5% to South Africa's gross domestic product as the fourth-largest employer in the country, with 200 000 jobs. Petroleum, chemical products, rubber and plastic products contributed R318-million to gross domestic product in 2011, which is about 23% of total manufacturing sales, according to Statistics SA.
South Africa's chemical industry has differing characteristics. Its upstream sector is concentrated and well developed, while the downstream sector – although diverse – remains underdeveloped. But as the country celebrates 20 years of freedom, its downstream chemicals sector also celebrates being able to maintain levels of employment over the two decades. The sector employs 4% of manufacturing labour, exports 5% of manufactured goods, and contributes 7% to manufacturing output.
The related pharmaceuticals sector, though robust, has benefited from interventions. In 2007, the government stepped in to manage spiralling health care costs by introducing a single exit price, which controls the price of medicines charged by manufacturers. The sector accounts for only 0.35% of the global market, but the country is the world's largest market for antiretrovirals, with an estimated 1.06 million adults and more than 105 000 children receiving state-sponsored antiretroviral treatment in 2010. Given this, the IDC is working with public and private sector partners to establish local production facilities for antiretrovirals.
Already, the corporation has played a major role in the industry by helping black industrialists expand and develop their businesses. It has also helped to transform the industry by facilitating a black economic empowerment transaction with Aspen Pharmacare. In addition, the IDC is actively pursuing a drive to increase local production of pharmaceuticals, including funding for companies to upgrade facilities so that they comply with the Pharmaceutical Inspection Co-operation Scheme (PICS) standard.
One of the IDC's noteworthy collaborations has been with Amka Products. Amka Products was established by AM Kalla in 1965 to manufacture a range of fast moving consumer goods such as cosmetics, personal care products and household cleaning goods for the local and international market.
The IDC has been helping the group grow since 1988, when it provided R5.4-million for equipment and buildings. In 1994, the IDC helped to expand its factory. As the company grew further, the IDC was regularly approached for additional funding, with more than R90-million approved for various expansions by 2005.
In 2006, Amka approached the IDC to fund the acquisition of a portion of the shareholding in Black Like Me (which had also been supported by the IDC) and another company in the nutraceutical market as well as for further factory expansions. This acquisition allowed Amka to expand its product line. The corporation approved R39.5-million for this transaction.
In 2013, the IDC was approached for a further investment, which was used for a new state-of-the-art factory building to enable Amka to remain competitive globally and establish a health and beauty manufacturing hub in South Africa.
In another venture, Black Like Me's Herman Mashaba – who spearheaded the establishment of the first black-owned hair care company in South Africa – approached the IDC in 1999 for funding to buy back Colgate-Palmolive's share, to which he had sold a controlling portion of equity in 1997. In 2002, the company formed a partnership with a distributor in the United Kingdom to boost its export drive. Needing capital for expansion of its production capacity, it approached IDC for funding. It subsequently merged with Amka as discussed above.
MAQ washing powder manufacturer Bliss Chemicals was established in 2003 through IDC funding. It received further funding from the corporation in 2011. Its range of products has been expanded and it now offers washing powder, fabric conditioner, multi-purpose soap and dishwashing liquid, as well as bath soap.
In 2010, the IDC provided funding to Biovac Institute to build a plant where the company could produce and formulate its own vaccines through a public private partnership. Additional funding was provided in 2013 to construct a viewing, labelling and packaging building.
Pharma-Q, a pharmaceutical plant previously owned by Adcock Ingram and Wyeth SA, received IDC funding in 2010 to upgrade and modify its plant in accordance with PICS. The company produces 500 products approved by the Medicines Controls Council, serving 30 leading global pharmaceutical companies including Bayer, Pfizer and Reckitt Benckiser.