Similo Sibisi Divisional Executive & General CounselWe speak to Similo Sibisi, IDC's General Counsel who also oversees the International Finance Department (IF), about the products and services on offer to those looking to do business on the African continent and abroad...
IF primarily assists the various Strategic Business Units (SBU's) and departments in terms of transactions relating to import finance and export finance. Import finance is used to support South African entrepreneurs who want to import capital goods and where these entrepreneurs provide some value add to those goods thus creating jobs or where a plant is to be established in South Africa and the goods and services are imported.
Historically there has not been much demand for import finance due to, amongst other,slow down in investment in South Africa. Export finance on the other hand, is available to South African exporters of capital goods and services. Although IDC's mandate is to provide support on the African continent, IDC can also provide support outside the African continent, provided the goods and services originate from South Africa.
So how does a South African company obtain assistance for industrial development projects in Africa? When a South African company obtains a contract to deliver goods and/or services to a foreign buyer, be it a once off contract or a project, IDC will fund that contract and/or the project by either providing an Export Credit Insurance Corporation of South Africa Limited (ECIC) supported export credit facility or a commercial loan facility.
The purpose of the ECIC supported Export Credit Scheme is to enhance export of South African goods and services. The ECIC provides support by providing the financial institution with political and/or commercial insurance as well as providing interest support in terms of favorable foreign currency interest rates. ECIC administers the Scheme and reports directly to the Department of Trade and Industry (DTI). In terms of the Scheme, IDC can finance up to 85% of the South African contract and requires a 15% downpayment from the borrower. The borrower can be either the South African supplier or the foreign buyer.
The main criteria of the scheme is that at least 50% of the goods and services in terms of the South African contract are local SA content. This content requirement can be waived under certain circumstances provided certain criteria are met by the South African exporter, for example, that the South African exporter complies with DTI's BEE criteria. IDC can through the Scheme provide competitive foreign currency interest rates to the borrower and thus enhancing the import of goods and services from South Africa. The interest rates are supported by the Scheme provide for both fixed and floating rates. The floating rate is linked to the London Interbank Offer Rate (LIBOR) whereas the fixed interest rate is based on the Organisation for Economic Cooperation and Development"s (OECD) commercial interest reference rates for United States Dollars.
In terms of commercial loan facilities, these facilities are not linked to South African content and are not supported in terms of interest support. Interest rates in terms of commercial loans are floating rates and various currency loans are available.
The IDC through IF is currently involved in a number of projects across a wide number of industrial sectors and services sectors ranging from tourism, mining, financial and agriculture. .Specific countries where the IDC's involvement through IF in terms of projects supported includes, the Democratic Republic of Congo, Nigeria, Botswana and Ghana. This support not only cuts across most industry sectors but also covers the African continent as a whole as well as outside Africa. In countries such as Kenya for example, IDC is involved in supporting agro industries, such as a sugar project in Egypt, IDC's involvement is in the biofuels sector. In Ghana, IDC's involvement is in the tourism sector through development of a hotel.
In addition to providing support in terms of exports from South Africa, IDC, through IF, also provides support to exporters by providing bridging finance to execute export contracts as well as guarantees.
Any prospective South African exporter to the African continent or globally wishing to know more about the range of products and services on offer should contact the IDC's International Finance Department for assistance and information.
