The IDC achieved commendable outcomes in a year characterised by high levels of uncertainty and by a slowing economic growth momentum, globally and domestically.

The rate of increase in world output, at 3.1% in calendar year 2016, was the weakest since the global financial crisis. Rather extraordinary geo-political developments at times dominated international headlines and affected investor and business confidence around the globe.

World trade remained under pressure, impacting on the performance of many export-reliant economies. Although commodity prices recovered during the course of the year, the underlying market fundamentals have not yet supported a sustained recovery. Alongside the relatively subdued demand for most industrial resources, this continued to affect the performance of many African economies. As a key market for South Africa’s manufactured exports, Sub-Saharan Africa’s subdued growth has been of particular concern.

South Africa’s economic growth has been declining gradually for a number of years. Its gross domestic product increased by only 0.3% in calendar year 2016, the lowest rate of expansion since the 2009 recession, and the economy entered a technical recession in the second half of the reporting period. Concerns over the possible outcomes of rating agencies’ reviews of South Africa’s sovereign credit ratings also loomed large.


The IDC’s stakeholders expect us to play a counter-cyclical role during an economic downturn. Our funding activity, both with respect to approvals and disbursements, support private sector investment activity, project conceptualisation and development, as well as business partners in distress due to the currently unfavourable economic environment.

Fixed investment spending by the private sector in the South African economy declined by 5% in real terms during the reporting period. The drop in IDC disbursements on a year-on-year basis reflects, to a large extent, the challenging operating conditions and investment climate faced by the business and investor communities over this period.

Notwithstanding the unfavourable economic environment, IDC funding approvals reached an all-time high in the past year, contributing to restoring business confidence and investment activity over the short- to medium-term.

South Africa’s economic growth has been below potential for several years and also at considerably lower rates than those of some of our emerging market peers. As a country endowed with a wealth of natural and human resources, we can and must turn this performance around.

We at the IDC are confident that our industrial development strategies, which are based on a value chain approach, will enable us to contribute effectively towards this objective.

The agro-processing and agriculture, chemicals and pharmaceuticals, and metals and mining value chains have been prioritised, and our efforts aimed at their expansion and improved competitiveness are achieving some notable successes. While exploiting opportunities for their downstream and upstream development, with the local, regional, and/or global economies as target markets, the associated business activities funded by IDC are generating much-needed employment opportunities and preserving existing jobs, directly and indirectly.

The Board has noted the progress achieved in value chain development, and emphasised the need for a more integrated approach for greater impact, particularly with regard to competitiveness improvements, jobs-rich and inclusive development, as well as economic transformation.

Although our strategies did not deviate significantly from the previous year, the environment in which the Corporation is operating has necessitated the prioritisation of existing initiatives, such as those aimed at addressing economic inclusivity and assisting businesses in distress.

South Africans have manifested frustration with the slow pace of transformation of the economy. In this regard, the IDC’s strategies to enhance inclusivity are bearing fruit. The funding approved for Black Industrialists and black-empowered companies, as well as for women and youth entrepreneurs was substantially higher in the year under review. This is enabling their increased participation in the formal economy and in sharing the rewards of its growth.

In February 2017, the Ministers of Trade and Industry and of Economic Development reached an agreement that the National Empowerment Fund should become a wholly-owned subsidiary of the IDC. This will be an important milestone in South Africa’s quest for inclusive growth and economic transformation. A legislative process needs to be followed and we are currently in the process of obtaining all requisite approvals.

Financial sustainability is imperative for the IDC to continue delivering on its mandate in the long run. In the current difficult economic environment, which not only affects the performance of our existing portfolio, but also tends to raise the risks associated with new funding applications, we are monitoring trends in key financial indicators such as impairment levels very closely, and are taking the necessary pre-emptive actions. The performance of our subsidiaries is also crucial in this regard, hence the emphasis on closer oversight and strategic decision-making on future support so as to achieve the required return on investment.

We also embarked on certain new initiatives during the year, including an assessment of our leadership’s competencies vis-à-vis the strategic requirements. The process started with the executive team and will be followed next year by our senior managers and their possible successors. The aim is to enhance the IDC’s leadership capabilities and ensure continuity by building leadership bench strength.


The trust of our stakeholders is of paramount importance. We believe that we have earned and maintained their trust over the years, but do not take it for granted.

Our robust governance system, which is based on best practice globally, has played a major role in this regard. Sound corporate governance is vital for the IDC’s success and, accordingly, the Board and management are committed to applying the principles and processes deemed necessary to ensure that good governance is practised in all of its dealings and other day-to-day operations

Taking into consideration changing circumstances and the feedback received from stakeholders, we reviewed the Board Charter during the year. The emphasis was on avoiding and/or managing directors’ conflicts of interest, decision-making by consensus and voting mechanisms in instances where consensus is not possible, improved transparency, and refining the role of each Board Committee. The Directors’ Rotation Policy was altered to limit the participation of individual directors on the Board to a maximum of three terms of three years each.

We approved changes to the Directors’ Conflict of Interest Policy, which now prohibits directors from doing business with the IDC. On matters in which directors are regarded as being conflicted and in line with the requirements of the Public Finance Management Act (PFMA), it ensures that they are not provided with the respective Board documentation or participate in the relevant deliberations so as to safeguard objective decision-making.

In keeping with high levels of transparency, the Corporation is identifying appropriate forms of disclosing transactions, including those involving politically exposed persons.

In addition, and complementing the messaging already effected through our website and media releases, the IDC is making increased use of public announcement platforms, such as the Johannesburg Securities Exchange SENS system, for timely communication of important matters.


On behalf of the Board, I congratulate the Chief Executive Officer, Mr Geoffrey Qhena, his executive team, as well as the management and staff of the IDC for achieving admirable outcomes during a challenging year.

We thank Mr Brian Molefe, who retired during the year under review, for his contributions to the Board’s deliberations.

Our gratitude is also extended to the Minister of Economic Development, Mr Ebrahim Patel, the Economic Development Department under the leadership of Acting Director General Mr Malcolm Simpson, and to the members of the Portfolio Committee for Economic Development and the Select Committee on Economic and Business Development, for the invaluable guidance and support provided to the IDC in executing its important developmental mandate.

BA Mabuza
Board Chairperson

28 June 2017

Minister Ebrahim Patel
Industrial funding is a key instrument to reignite growth and to shift our economy onto a new inclusive growth path. The funding strategy has to adjust to both structural and cyclical trends in an economy.

Technological innovations, developments in the political economy (local and global) and demographic factors will reshape the South African economy over the next decades in profound ways:

  • The greater use of robotics, artificial intelligence and data-based networks in more economic and social applications will disrupt economies, markets and jobs.
  • Economic populism in developed country markets may result in changes to trade, investment and migration policies that affects the economic integration project
  • Pressures to address high levels of ownership concentration in the economy, inequality in the society and joblessness will require structural changes to the economy to ensure a fairer, more inclusive and broader-based growth model
  • Sharp levels of urbanisation and inward migration to South Africa and a large youth demographic that is not being tapped sufficiently with job and entrepreneurial opportunities, will place pressure on infrastructure, labour markets and social policies.

These developments come on top of contemporary or cyclical factors: changes in the commodity demand cycle, a domestic economy that has gone into recession, a sovereign ratings downgrade to sub-investment level by some agencies, serious concerns about governance within public enterprises and in procurement systems, slow global and continental growth.

They place greater value on smart governance to manage these new and older challenges - and sometimes contradictory forces and outcomes - to the benefit of South Africans as a whole and we should identify what we can do (for example skills retraining, R&D investments, job-rich industrialisation).

To achieve national economic goals require that we build on our advantages: location on a continent with huge potential; leveraging more from our position as Africa’s largest industrial base; a strong and sophisticated financial market, a technical and professional skills base that is expanding; valuable deposits of natural resources that can be a source of new industrialisation, pockets of industrial innovation; advanced infrastructure in many parts of the country, a youthful population that can be a source of energy and enterprise, growing cities and urban densities that can benefit the economy, among many strengths.

The Industrial Development Corporation presents its annual report and releases its financial statements in this context.

The report records a number of gains that the IDC has made: increasing its approval of new projects and the expected jobs impact and expanding transformation through higher levels of funding for black industrialists and youth and women-empowered companies. It also increased its net profit last year.

The report points to significant headwinds and challenges in the economic environment that impacted on the IDC, resulting in slower levels of disbursements as companies postpone investment decisions, weaker approval levels for manufacturing (including the labour-intensive agro-processing and clothing & textiles sectors) and limited progress to achieve the corporate investment targets set for the IDC.

A new “national deal” to get back to investment grade and to address the needs of our people requires a roadmap consisting of four crucial elements:

  • Developing a credible growth story that places emphasis on sectors and market-opportunities with high growth and jobcreation potential, attracts investment and ensures effective implementation of the State’s nine-point plan.
  • Transforming the economy to make it more inclusive, bringing black South Africans, young people, the rural poor and the urban unemployed into the economy with speeded-up actions against high levels of economic concentration, inequality, social exclusion and joblessness
  • Ensuring integrity in governance and decision-making, manage our fiscal policies responsibly and sustainably, to inspire confidence among our people
  • Deepening domestic economic partnerships, with greater efforts to pursue a social compact between government, business and labour that focusses on jobs, investment and transformation.

The IDC can play a key role, with other public agencies, to respond to this forward-looking agenda:

Growth story: through its funding for industrial development, the IDC is attracting investors to the economy and facilitating the creation of sustainable jobs. The R15.3 billion funding that IDC approved during 2017, the highest nominal level yet, is facilitating R47 billion of investment in the economy. The report provides a number of case-studies of partnerships with private sector investors and industrialists.

To assist priority sectors, government has set up a Steel Competitiveness Fund to be administered by the IDC. The R95 million that the Economic Development Department will be transferring from its budget over the next three years, will allow the IDC to make available R1.5 billion at lower interest rates to improve the ability of this industry to compete on the international stage. The Fund will be available to foundries, valve and pump manufacturers, steel fabricators and capital equipment manufacturers including black industrialists, to help the core of our manufacturing industry to survive difficult global economic conditions.

The corporate targets set for the IDC for the new financial year will require that it expands its approval and disbursement levels and focus on a greater economic growth impact to its work.

Transformation: in the past 12 months, IDC investment resulted in 20 881 jobs that will be created and saved. R10.1 billion of the funds approved were for to black-empowered companies (which refers to companies with at least 25% shareholding by black South Africans). Of this sum, R4.7 billion will benefit companies that are controlled by black industrialists. Funding to women-empowered and youth-empowered businesses also increased to R3.2 billion and R2.3 billion respectively. Transformation is both a social imperative and a source of growth as the economy is opened up to more black and youth entrepreneurs, the structure is shifted to greater local value-addition rather than export of raw materials only and more jobs are created for each billion investment committed.

Governance integrity: in executing its duties, the IDC is responsible for the approval of large sums of money and must always be subject to high levels of integrity in its decisions. The IDC has systems of corporate governance in place and to enhance transparency and accountability and has from June 2017, begun publishing details of all the investors to whom it provides industrial funding. The IDC and state-owned companies will need to further strengthen systems of governance to take account of legitimate public concerns about corruption. The IDC has focused on growing its portfolio and deepening its transformation impact whilst maintaining its financial sustainability.

The IDC’s status as a financially sound, administratively well-run institution is a result of dedicated people who focus on the task of industrial funding and good governance. I wish to thank Ms Busisiwe Mabuza and the Board of the IDC for their guidance and support to IDC’s management as well as the strong governance culture which they instil. I also thank Geoffrey Qhena, who continues to leads the Corporation through challenging times and the IDC management and staff who support him.




In an environment where various forms of capital are scarce there are many competing needs from multiple stakeholders. To create value for our shareholder, trade-offs are made. This requires us to proactively make tough decisions to allocate resources effectively to the strategic focus areas that will deliver the most value in the long term.

The primary trade-offs that are made and the respective rationales are presented below.




The IDC’s strategy is focused on the need to maximise development impact through jobs-rich industrialisation and competitiveness improvements, achieving other development outcomes, and ensuring the long-term sustainability of the Corporation by addressing specific issues related to financial capital, our human capital, stakeholders, the natural environment and by increasing the efficient use of resources.

Our strategy development is a continuous process with a formal annual review. These reviews take into account changes in the operating environment and are guided by robust discussions by the Board, executive management as well as other senior management. Strategies targeting specific industries and functional areas are developed with inputs from experts in their respective fields throughout the Corporation.

Details of the pillars of our strategy and how they address different aspects of our business model can be seen on page 6 of this report.


To enhance certain aspects of our strategy, as from April 2015, we implemented a project to prioritise industries so as to ensure that we increase our effectiveness and maximise our impact on the economy. The selection of these priority industries was based on assessments of South Africa’s current and long-term growth potential, our ability to make a meaningful impact, and their alignment to government priorities. Three value chains were identified where our proactive support could make the largest impact on direct and indirect job creation through increased competitiveness, the development of downstream industries and higher levels of exports – especially into markets in the rest of Africa.

In addition, we are assuming a greater role in proactively nurturing and developing industries that might not currently play a significant part in the South African economy, but have the potential for growth in the future. New sectors that derive their strength from innovation, science and technology are particularly important. Another priority area aims to address the negative impact that the infrastructure backlog has on the development of industry. We are targeting infrastructure projects that can unlock industrial development.

Projects in the rest of Africa are supported where they benefit South African industry through procurements from local businesses, local ownership, or forming part of a regional value chain.

Project Evolve also identified opportunities to increase the IDC’s operational efficiencies and effectiveness.


The funding that we provide to businesses is directed at increasing investment in industrial sectors. Our investments are aimed at expanding capacity in productive sectors, enhancing value addition to raw materials, improving the competitiveness of industries, increasing exports and import replacement, and integrating value chains across borders.

It is through these investments and the resulting enhancements to industry, that development outcomes that deal with the socioeconomic issues facing the country are addressed.


The Corporation consists of 11 divisions, each headed by a Divisional

Executive reporting to the Chief Executive Officer (CEO).

Four of these divisions are directly involved in transactions, performing due-diligences on businesses applying for funding and developing projects. These divisions consist of individual units focusing on specific value chains and industries, with applications and projects pertaining to a specific industry being handled in the relevant unit. This approach allows the units to specialise and build industry expertise.

These operational units are supported by four divisions that provide support in terms of:

  • The legal aspects of transactions
  • Assisting with business turnarounds
  • Strategy formulation
  • Supporting targeted groups of entrepreneurs
  • Assessing internal and external risks.

Other corporate support functions such as ensuring compliance, providing secretarial services, IT services, risk management and others are also performed in these divisions.

Three divisions provide administration and support functions related to finance and funding, corporate affairs and human capital, with the internal audit function reporting operationally to the CEO.

Our funding for Fair Price Furnishers, with its 100% black ownership, supported the company to increase its capacity. Fair Price Furnishers manufactures a range of furniture products for low-to middle-income groups. IDC's funding enabled the company to purchase plant and equipment to expand its operation in Brits, North West. The funding created 183 jobs.