IDC increases approvals by 26% to R14.5-billion

IDC increases approvals by 26% to R14.5-billion

For immediate release
30 August 2016

The Industrial Development Corporation (ICD) raised its funding approvals in the 2016 financial year by 26%, approving R14.5-billion as it sought to inject momentum into the South African economy.

This comes during the first year of the state development finance institution’s new, proactive, value chain-based strategy for industrial development.

In the 2016 financial year, the Corporation facilitated the creation and saving of 15 272 jobs and invested R11.4-billion, bringing the total investment over the past five years to R57.8-billion – an increase of 122%.

“The past year’s performance fills us with a tremendous sense of pride and achievement, particularly as it coincided with our 75th anniversary,” IDC CEO Geoffrey Qhena said.

“It was, however, far from an easy period due to a host of external factors that have weighed on the country’s economy. The worst drought in over a century, the commodity price slump and a slow global economy have undoubtedly hampered domestic growth.”

In pursuit of the Corporation’s mandate – to diversify ownership and industrial activity in the South African economy – approvals of R5.2-billion were directed towards black-empowered companies, with R4.7-billion aimed at companies involved in localisation initiatives.

Economic Development Minister Ebrahim Patel noted that this achievement was central to the IDC’s role as a catalyst for new investment, the resuscitation of the manufacturing sector, creating and preserving jobs and achieving transformation.

“Industrial funding remains the fuel that drives the expansion of factories, mines, farms, infrastructure capacity and tourist facilities,” he said. “Most pleasing is that a number of these IDC approvals relate to entities owned or controlled by the historically disadvantaged, and this year represents a qualitative shift towards the achievement of economic transformation.”

The Minister’s comment comes on the back of the 50% increase in funding approved for Black Industrialists to R2.9-billion, which he said would go a long way to reshaping the structure of participation in the South African economy.

In the last financial year, Mr. Qhena said, the Corporation approved R7.8-billion to assist companies impacted by adverse climatic conditions and depressed markets.

“In addition, restructuring of existing facilities amounting to R2.9-billion were effected, confirming our counter-cyclical role. This intervention will ensure that an estimated 9 480 jobs are saved and that industrial capacity is preserved. The major sectors which will benefit from this intervention are mining, agro-industries and manufacturing.

“These tough economic conditions also negatively weighed on the IDC Group’s financial performance and that of our business partners, particularly those operating in the manufacturing, mining and agricultural sectors,” he said. “This resulted in, for example, levels of impairments increasing and clients’ requirements shifting more towards preserving jobs rather than expansions.”

This resulted in a decline in revenue from R19.60-billion to R19.41-billion, which was mainly underscored by lower dividends and weaker performance of its subsidiary Scaw South Africa (Pty) Ltd. Subsequently, the Group profit fell from R1.65-billion previously to R223-million.

IDC Board Chairperson Busi Mabuza said the Corporation was acutely aware of the impact of its major subsidiaries on the IDC’s performance and sustainability and would remain an area of strategic focus going forward.

“To roll out our industrial development strategies and funding plans going forward, we need to safeguard the IDC’s sustainability through robust financial and risk management processes,” she said.

“The realities faced by the South African economy at the present time call for a strong response from an agile and dynamic organisation. The prevailing cyclical difficulties and the structural challenges are being addressed, progressively raising the economy’s growth potential for the benefit of all.

“Going forward, we will entrench this revised focus on those sectors where we can achieve targeted game-changing impacts, particularly in support of the expansion and/or modernisation of critical existing industries that can drive economic growth.

“Aligned with this strategy, we are targeting the approval of R100-billion over the next five years,” she said.

“In line with our prioritisation strategy, value chains, which include Agro-processing, Mining and Metals, Chemicals and Textiles and Industrial Infrastructure – which will receive the largest portion of the capital allocation and approximately 23% of all new investments – are expected to be in the industrial infrastructure space.”

For more information, please contact:

Mandla Mpangase
Public Relations Manager: IDC
Tel: 011 269 3282
Cell: 060 550 4586