Chief Executive’s Report

After 17 years of sustained growth, the South African economy has entered a recession. The domestic economy began to experience a slowdown in the second quarter of last year as the economy felt the effects of the fall-out from the international finance crisis. In this difficult operating environment, the IDC's counter-cyclical role in developing the country's industrial capacity and building sustainable small and medium enterprises has become even more relevant.

Central to our operating model is stakeholder engagement. This includes fulfilling our mandate in a way that is compatible with meeting the needs of our employees, our clients, and our shareholder, the dti. It's also becoming clear that if our projects and investments are to yield sustainable results, our decisions need to take into account our immediate environment. Environmental issues such as climate change inform our decision making processes and as far as possible we try to promote the responsible and sustainable use of natural resources.

Since the adoption of our Leadership in Development strategy, the IDC has worked hard to continue to ensure the sustainable development of projects across South Africa and the rest of Africa. Our investments aim to create jobs, develop new entrepreneurs, further black economic empowerment and develop rural areas, townships and provinces - creating a backbone for sustainable economic growth.

Over the past year, we have continued to have a positive effect at all levels of the economy, with a 27% increase in the value of funding approvals to R10,8 billion and a 39% increase in the number of approvals to 231. Most of these approvals (69%) were to fund SMEs. IDC funding will facilitate the creation of 24 200 new direct jobs in South Africa and 5 000 in the rest of Africa.

Our integrated approach to assisting companies to withstand the impact of the economic crisis saw IDC funding of R500 million approved to assist distressed companies. About 2 500 jobs are expected to be saved by these programmes and R6,1 billion has been set aside to assist distressed businesses over the next two years.

In addition, we launched and extended several schemes to support industrial and entrepreneurial development including:

• the Transformation and Entrepreneurial Scheme (R1 billion);
• the Textiles, Clothing, Leather and Footwear Competitiveness Scheme (R250 million);
• the Pro-Forestry Scheme (R100 million);
• and the Pro-Orchard II Scheme (R200 million).

The value of business support grants, for non financial support provided by the IDC to clients, approved increased by 270% to R8,9 million.

The IDC’s funding activities cover sectors ranging from agro-industries, mining, manufacturing, infrastructure to certain service industries. This sectoral approach ensures that the IDC is able to reach all areas of the economy where development finance is needed. During the year this has included funding micro enterprises through intermediaries to funding large projects, which can assist to unlock the potential of a whole region’s economic development.

To strengthen our ability to deliver sustainable solutions, the IDC has established several proactive, innovative initiatives. These include the Agency Development and Support Department, created to address the challenges of development in rural areas, peri urban and township areas. The Workout and Restructuring Department assists companies in distress. Our Business Support Unit offers wide-ranging support to entrepreneurs who help to create jobs and in turn uplift their communities across the country. At an organisational level, our employees continue to dedicate their time and resources to worthy causes.

Although sustainability has always been very much a part of our operating model, this report marks the beginning of a journey. We understand the need to be mindful of how we can contribute to positively to through our business decisions to the achievement of sustainable development for the betterment of Africa through contributing to global initiatives such as the Millennium Development Goals. The IDC has as far as possible tried to follow the guidelines of the United Nations Global Compact. We now have the necessary building blocks in place to develop a more formal strategy on sustainability.

Over the past year we have demonstrated our commitment to the basic tenets of sustainability by improving our environmental policies and guidelines and continuing to assess the Environment, Health and Safety (EHS) performance of our current and potential clients, to ensure that they are indeed operating within the laws of South Africa. For those projects that fall outside South Africa, we apply best practice guidelines as the minimum of compliance for project finance.

Through the Environment, Health and Safety department a number of initiatives have been undertaken. These include recycling and energy saving programmes with more planned as we move into an open plan office environment. We have also implemented an initiative to empower staff to reduce their energy footprint at home. The IDC offers subsidies to staff who wish to convert their water geysers to a more energy-efficient alternative. This is known as the IDC geyser scheme.