Lumkile MondiAs a development finance institution, the IDC supports South African companies to compete globally in primary commodities, agricultural or minerals, as well as value added services including manufactured goods. In the 21st century, the IDC’s role as an industrial developer has changed quite dramatically from what it was in the 1940s.
Now, value added services have increased drastically in the services space, we are now dealing with call centres, telecommunications, health, logistics, etc. For us today, industrial development includes funding the services sectors enabling our clients to compete in the global marketplace thus positioning South Africa as a global player in the 21st century.
Our core aim as an institution is industrial capacity development and entrepreneurship. That is what defines us today as the IDC. Critically, we don’t run businesses, our clients and stakeholders run businesses. The IDC is a strategic partner, facilitating the journey from initial idea or business opportunity to successful implementation. For example, in the nut industry we have identified new market opportunities and have played a role in the introduction of new nut production to meet that market need, such as walnuts, cashew nuts and pistachio nuts, into such areas as Kwazulu-Natal. Although in this case, the IDC went alone in the venture, typically, in such industrial project environments, we partner with the private sector as facilitators to such projects.
Addressing unemployment
One of the key challenges in South Africa is that of unemployment and globally it has been found that small to medium-sized enterprises are the biggest value-add in terms of GDP and employment growth. Historically, the IDC has been known as a big project player. However, we play a huge role in the small to medium enterprises space, precisely to ensure that South Africa’s entrepreneurs are developed and to ensure that as an outcome, money is put into projects that have real job outcomes to address current unemployment problems and to contribute towards the achievements of the country’s millennium goals. Critically, the small to medium enterprise sector is a huge supplier to manufacturing services sector, downstream industries, etc. if you look at the steel sector, for example, it is not just a matter of focusing on beneficiation. There is a huge amount of sectoral activity around the manufacturing of steel end products for the domestic marketplace, such as gates, security equipment, etc. Typically, much of this type of activity is carried out by small to medium-sized enterprises.
Black economic empowerment
In South Africa, one of the key focus areas is around black participation. We do not see evidence of many black entrepreneurs in the marketplace. A key focus area of the IDC is to facilitate black participation in the mainstream economy through the stimulation of a culture of entrepreneurship through specific funding schemes and support for key government initiatives such as black economic empowerment. This has enabled us to put money into businesses that are looking to comply with the government charters to stimulate black economic empowerment of such industry sectors as financial services, health etc. We have also practically worked in partnership with the private sector to bring black shareholders into their corporate structures. Effectively, we have worked to stimulate a culture of black entrepreneurism which previously did not exist in the country. However, many people in the marketplace confuse the IDC and its mandate with that of the National Empowerment Fund. The mandate of the National Empowerment Fund is exclusively for black entrepreneurs, supporting black initiatives across all industry sectors. The IDC, by comparison, reaches across all sectors of the population and industry, and across all types of businesses. BEE is part of a bigger plan within the organisation. In addition, because the IDC is one of the oldest development finance institutions, it has a long-standing track record of self-sufficiency and return on development, attracting a wide base of clients across South Africa and on the African continent.
Global trade
Since 2001, some of the sectors which have shown the greatest amount of growth have been the services sectors, as well as the minerals and commodities sectors. Coal, precious metals, iron and steel, etc, have been the growing sectors and what we have seen is that the global business climate and current worldwide credit crunch has had a huge impact on services. But the movement we have been seeing has been around the commodities space, where on the African continent, due to high demand from China, India, Brazil and to some extent in Europe, despite current pressures, the current demand for commodities has benefited Africa. What we are seeing is that within the African continent, South African companies in the commodities space are now expanding their marketplace to a wider global environment. As the IDC, we want to work with our African counterparts to move them from a commodity based environment into a more diversified manufacturing, valued-added economies. The IDC is very excited about the range of African opportunities which currently exist and is actively looking for partnerships with South African companies who have got the necessary capabilities and interests in the rest of Africa. The IDC can work with such companies along the value chain to successfully realize these new opportunities.
Creating new industries
We believe as a leader in development that what is important for us is also to look at the creation of new industries. Last year, we established a venture capital department, aimed at creating new industries around the technology and biotechnology space, but focusing on the early stages of those new industries and companies. The country has a large number of research and development individuals who need help to commercialise a new project. With this new department, the IDC is supporting the foundation of a new biotech industry sector which can be a leader in the global marketplace.
In conclusion, our biggest challenge in the IDC remains getting the right partners to join in the right business ventures for the benefit of the continent as a whole. That is why we, as an organization, are very excited about the government infrastructure programme and opportunities on the African continent. Four or five years from now, the IDC will have put over R20 billion rand into the African economy. We are sitting in an excellent position to do more in this regard, to develop industry on the rest of the continent and to bring in a new generation of entrepreneurs into the South Africa and the pan-African marketplace.
