Frequently asked questions
How long will it take before I can access the money?
- It depends on the completeness and quality of the information contained in your business plan.
- Please bear in mind the complicated nature of any application and the diligence required for each application we process.
- For completion of the basic assessment, the full due diligence investigation, credit committee approval, drafting and signing of legal agreements, as well as the clearance of conditions precedent (such as the registering of securities), we advise our clients to allow for a three-month period as a general guideline.
We are a Broad-based Black Economic Empowerment company and would like to enter into an acquisition. Can you fund us?
- The IDC supports increased industrial capacity in South Africa. If it is a pure acquisition, with a mere sale of shares, then our funding is not directly linked to new capacity. However, if it is an issue of shares and at least 50% of the IDC's funds are used within the business for expansion purposes, then the IDC can consider such funding. The National Empowerment Fund provides funding for pure BBBEE acquisition transactions.
What is the advantage of working with the IDC?
- The IDC's value proposition is that we do not merely provide funding against security. We look at the economic merit of a business and consider the risks associated with the business proposition, as well as the ability of such a business to repay loans.
- In addition, we are willing to take far more risk (even in the form of pure equity funding and or unsecured funding) where required.
- The IDC plays a strategic role in sector development and therefore has a good understanding of all specific sectors. Our project development skills are sought after and we have the capacity to develop and grow projects towards bankability.
Why does the IDC not fund pure farming activities?
- The IDC is one of a number of development finance institutions in South Africa that provide funding to businesses. The Land Bank is the preferred financier of pure agricultural activities, while the IDC focuses on agro-processing. The IDC can consider funding in a farm, if there is at least first-tier processing, such as packing and sorting, with the farming entity.
What documentation is required in order to obtain an initial assessment?
In the case of start-up businesses, we require:
- A comprehensive business plan.
In the case of expansions by existing businesses, we require:
- Your latest audited and actual financials (inclusive of your latest management accounts);
- Your updated business plan, focusing on the proposed project/expansion, inclusive of financial projections; and
- A detailed description of the nature of the expansion, and its related costs and revenues.
In the case of expansionary BBBEE acquisitions (where at least 50% of the funding remains in the business for the purpose of expansion), we require:
- A signed Offer to Purchase agreement between the seller/issuer and the buyer; or a signed Letter of Undertaking from the seller/issuer indicating the buyer's preferred bidder status.
- The Offer to Purchase should be valid for at least three months and give the IDC an exclusivity period of at least two months;
- Detailed information on the partners, such as the group structure and business activities;
- An independent valuation (including underlying assumptions) of the target company;
- Details of IDC funding request and the application thereof;
- Details of the risk sharing by the purchaser;
- A plan explaining involvement by historically disadvantaged people in the operational and/or executive management;
- Proof of limited scope of due diligence performed by historically disadvantaged people on the seller's business;
- A business plan;
- The latest audited financials, management accounts and financial projections for the target company; and
- A covering letter with details of the finance required from the IDC.
Agro-Industries projects
We are very proud of our involvement in, and commitment to, a number of successful projects that have played a significant role in growing our economy and creating jobs.
Dynamic Commodities
This company runs a state-of-the-art food processing production facility in the Coega Industrial Development Zone in Eastern Cape Province. Dynamic Commodities processes sorbet, frozen piquant peppers and other innovative frozen fruit products.
The company has a staff of 600, with a further 1 000 people employed via suppliers.
Over time, the IDC provided Dynamic Commodities with various debt facilities and supported various expansions of its business.
Arisa Pack House
Based in Swellendam in Western Cape Province, Arisa is the largest and most sophisticated packing house for persimmons (or Sharon fruit) in the southern hemisphere. It has a storage capacity of over 5 000 tons.
More than 200 people are employed directly in this project, with a further 120 farmers participating in the supply of the fruit. This project is a clear example of Broad-based Black Economic Empowerment in action.
The IDC provided R18-million in equity in Arisa and R10-million in farming, facilitating the establishment of the industry through investment in the farms and pack house.
Espadon Marine
This innovative project led to the creation of a new industry in South Africa – the first commercial marine fin fish operation.
A 300-ton fin fish (kob) farm and hatchery has been set up in East London’s Industrial Development Zone, with the help of a R23-million loan from the IDC. Some 60 jobs have also been created.
Agro-Industries
Packing the produce for saleThe IDC's Agro-Industries Strategic Business Unit provides support for a wide range of food and non-food production activities in the agricultural value chain.
Agro-Industries are often based in rural areas and provide on-site job opportunities to turn raw products into consumable goods.
Investing in these industries is critical to the economic direction of the country's development plans, encouraging ongoing economic growth, job creation and reducing poverty among those who deal with food security.
Our Agro-Industries unit provides funding in a number of sub-sectors of the agricultural value chain.
These include: agro-processing (food and non-food), which can include on-farm, first-tier processing (such as packing and sorting) and also backward integrated agro-processing projects; beverages (alcoholic and non-alcoholic); and aquaculture.
We do not, however, fund:
- Primary agricultural projects/applications – these will be referred to the Land Bank;
- Pure land-based transactions/acquisitions;
- Hard liquor, including any drink with an alcohol content of more than 12% vol;
- Any tobacco and tobacco products;
- Refinancing of existing activities;
- Pure acquisition transactions; and
- Biofuels – this falls under the Green industries Strategic Business Unit.
Who should apply for finance?
New or existing South African companies operating within the agro-industries sector are welcome to apply for funding. Two key factors will be taken into account:
- The project must create jobs; and
- The funding request must be for at least R1-million.
New or existing companies operating in the agro-industries sector in the rest of Africa are also encouraged to apply for funding. Again, there are a number of provisos:
- The project must facilitate the development of new industrial capacity;
- The project must be of direct benefit to South Africa in the form of, among other things, exports of South African capital goods and/or South African shareholding; and
- The size of the project (total funding requirement) must be at least:
- ZAR 5-million for members of the Southern African Customs Union;
- USD 3-million for countries in the Southern African Development Community (SADC); and
- USD10-million for countries outside SADC.
Funding criteria
To be considered, your application for funding must be supported by a comprehensive business plan that shows economic merit in terms of profitability and sustainability.
Businesses, projects or credit applications must be commercially viable from a technical, marketing and financial perspective, and must be environmentally sustainable.
We strive to maximise the development impact of each potential investment.
We prefer not to fund more than 60% (50% for investments outside South Africa) of the total funding requirement of a project.
Applications can include start-ups and expansions projects. However, risk-sharing from operating private-sector investment partners is non-negotiable.
Our Agro-Industries unit prefers loan funding, but will consider equity where there is a strategic reason to do so. Funding requirements from the IDC should be more than R1-million for debt funding and R5-million for equity (or equity-related) funding for South African businesses.
Exclusions
There will be no straight acquisition of shares without expansion and no refinancing made available.
Applying for funding
We consider each application carefully.
In addition to the specific requirements of the Agro-Industries Strategic Business Unit, please make sure that your application meets the IDC's minimum requirements.
The unit runs a relief scheme to help businesses that were struck by floods or drought during the 2010/2011 financial year. Some R500-million has been made available to assist businesses that fall within the agro-industries sector.
Again, specific criteria apply:
- Businesses must be viable and demonstrate that their distress was a result of the floods or droughts from 2010 and 2011;
- Funds must be applied to finance working capital shortfalls as well as infrastructure/asset rehabilitation (of non-insured assets);
- Interest on these funds will be charged at prime less 3%; and
- Applications must be made before 31 March 2012.
An amount of R250-million has been loaned to the Land Bank to assist affected agricultural businesses in the primary agriculture sector.
| Finance by sector |  |
| How to apply for funding |  |