When the ANC came to power, the state's focus expanded to include rural areas, where poverty was rife and jobs hard to come by. The IDC has worked hard to meet this directive.
With the birth of the democratic government, the Industrial Development Corporation used its mandate to boost industrial capacity to impact on poverty alleviation and job creation, particularly in rural areas.
Over the past 20 years, the corporation has had a meaningful impact by building its presence in the forest sector. The sector has a particularly strong rural presence and high socio-economic impact. Looking specifically at the value chain, however, the sector faces several challenges, including dwindling timber supplies, rising operational costs and inflows of competitively priced imports, especially from South America.
South Africa's paper packaging sub-sector, however, has remained fairly competitive in world markets, despite the difficult economic conditions globally. Market conditions in the pulp and paper sub-sector have improved modestly since the 2008/9 global economic crisis. But the furniture sub-sector has not fared as well, and has posted negative growth in recent years. This can be attributed to increases in Asian imports, lack of modernisation and age skill resulting in South Africa not being able to be competitive.
The IDC's Forestry and Wood Products Strategic Business Unit has played a significant role in ensuring that the sawmilling industry – and to a lesser extent the forestry industry as a whole – is well-balanced and globally competitive. In the 2000s, this focus was complemented by a strong empowerment drive to fast-track the transformation of the sector, in line with the transformation agenda of the democratic government.
In the mid-2000s, the business unit launched its Pro-Forestry Scheme to help set up new commercial afforestation and the transfer of ownership of existing commercial forestry areas. The IDC made a concerted effort to encourage small and medium enterprises in the sector and to support downstream beneficiation and value add industries, such as pulp and paper, packaging, and furniture manufacturing.
Then, in the 2010/11 financial year, a R20-million forestry development grant was rolled out to support community forestry projects. It was designed to address some of the challenges in the sector, particularly skills development and entrepreneurship amongst communities who found themselves owners of undeveloped land. The corporation has supported several notable projects in the forestry and sawmilling sector since 1994, among them:
- It acquired a 30% shareholding in Global Forest Products and SA Plywood, an integrated forest products company. It subsequently co-funded GFP’s large capital expenditure programme. York Timbers replaced the Global Environment Fund (70% shareholding) in GFP in 2007 and IDC became a shareholder (29.8%) in York Timber Organisation as a result of the transaction.
- It gave funding to the Mabandla Community Trust to buy plant and harvesting equipment in KwaZulu-Natal, which funding has resulted in other sectors being developed around this project;
- It assisted the Mabandla community to beneficiate its plantation with IDC funding being used to setup a sawmilling operation;
- It gave funding assistance to Ntuso Project Holdings, a large commercial forestry plantation in KwaZulu-Natal;
- It developed a 364ha forestry project called Amandla Emvelo in a rural area near Hermannsburg in KwaZulu-Natal;
- It helped in the expansion of sawmill operations at White River Saw Mills, in Mpumalanga;
- It acquired a 42.6% equity stake in Hans Merensky Holdings, a major industry player with softwood and hardwood plantations as well as sawmills in the Eastern Cape, KwaZulu-Natal, Limpopo and Mpumalanga; and
- It is supporting development of at least 24 communities’ projects in the Eastern Cape.
In the pulp, paper and packaging subsectors, the IDC has been involved in major expansions of production capacity over the last 20 years. The most notable projects it has been or is still involved in include:
- Expansion of a dissolving pulp manufacturing facility at Saiccor in 1995;
- Expansion of a new, large-scale paper manufacturing mill and acquisition of a 25.1% stake in Unicell Paper Mills SA;
- Expansion of a tissue paper manufacturing plant at Sunny Packs Manufacturing;
- Expansion of an operation to increase exports of treated timber poles to various African countries for use in infrastructure development at Treated Timber Products; and,
- Financing a paper recycling company using mobile shredding vehicles in 2010.
The IDC has also supported some of the country's major and small furniture manufacturing companies over the past 20 years. It provided funding assistance to a large furniture manufacturer in support of an import replacement project; and expansion of Afri-Chair, a furniture manufacturer in Pretoria.