Foreword by Shareholder Representative: Minister Ebrahim Patel

The Industrial Development Corporation is an important national asset. It is the country’s largest development finance institution. It has a unique mandate: to industrialise South Africa and to grow decent and productive job opportunities. It has a strong balance sheet, a dedicated staff and a large industrial footprint.

In 2009 I asked the IDC ,on behalf of its sole shareholder, to use these strengths in mandate and resources to help respond to the recession caused by the global economic crisis; to support government efforts to develop a new growth path for the economy; to increase the level of industrial funding; to become more responsive to the needs of its users; and to retool itself to play a stronger developmental and empowering role.

This Integrated Report contains details of successes by the IDC in giving effect to this mandate and it is a story that deserves to be told more widely.

Since 2009, the value of new investments by the IDC has grown strongly and total assets for the group at market value rose from R89 billion to R127 billion.

In the past four years, the IDC approved R45 billion in project finance, either in equity or loans. Disbursements to partner companies amounted to R36 billion, doubling what was achieved in the previous four years. This is a very significant injection of investment funds into the economy, expanding the country’s industrial base and creating jobs.

The IDC group generated profits of R10 billion over the past four years and its contribution to the state in the form of income and capital gains taxes and dividends was more than R800 million.

Development is not measured simply by these financial indicators, though they are an important yardstick of economic sustainability and commercial health. We also expect the IDC to show its value in how well it is expanding the country’s industrial capacity and, through those efforts, its impact on jobs and economic inclusion.

Consistent with the New Growth Path framework adopted by Cabinet in 2010, the IDC has shifted its investments into areas identified as strong growth and jobs drivers.

These include infrastructure development; investment in the core productive sectors (manufacturing, agro-processing and mineral beneficiation); promoting high-level service sectors including tourism; developing new sectors such as the green economy and supporting regional integration and African industrialisation.

One of the remarkable messages is that the IDC’s overall funding over the four-year period supported the creation of 90 000 new direct formal sector jobs and more than 8 000 jobs in the informal economy and saved a further 35 000 existing jobs, bringing the overall employment impact to more than 133 000 direct jobs.

The Corporation supports infrastructure development through new partnerships with state-owned companies and private investors to take advantage of the boost in infrastructure investment to build local component supply capacity. An example of this is IDC co-finance for the local assembly of buses used for inner-city transport and expansion of rail manufacturing capacity.

The institution is now playing a role in the co-ordination of our efforts to scale-up and speed up the implementation of new infrastructure projects. The IDC is the implementing agent for two of the National Infrastructure Plan’s Strategic Integrated Projects focusing on the development of the Saldanha-Northern Cape Development Corridor and expansion of Green Industries.

The IDC has helped to grow the green economy through investments in government’s renewable energy programme, with the IDC supporting 17 projects that will increase generation capacity by 750 megawatts of green energy. It is also a lead investor in developing a commercially viable biofuels production sector, which can have a positive impact on rural jobs.

It has supported major industrial enterprises such as Bell Equipment and the Ford motor company’s local operation during difficult economic times and created a platform for the expansion of companies as growth prospects improved. Since the start of the programme five years ago, the IDC invested R5.7 billion through its special facility to companies in distress.

Manufacturing matters greatly to our long-term economic prospects. It creates direct jobs and sustains a large number of jobs in raw material suppliers and service sectors, it is vital to deepening the technological base of the country and its growth helps to create a balanced economic structure that can weather global turbulence better. I am pleased to note that the IDC has deepened its presence in the core manufacturing sector and one of the more significant investments was the R3.4-billion deal to take majority ownership of Scaw Metals, a large diversified manufacturer of steel products that employs about 7 000 people. Its exposure to the consumer-goods sectors is important too, given the large employment potential of such industries.

The IDC has supported broadening the pool of entrepreneurs, with a reported R26 billion in financing approvals over the past five years to black empowered companies.

The institution has introduced new financing arrangements to ensure that it meets its development targets.

One notable example is a facility aimed at projects with a high employment impact, at a price considerably below market rates. Already, R3.5 billion has been approved under this scheme which will create 26 000 jobs.

The IDC has helped to grow the green economy through investments in government’s renewable energy programme, with the IDC supporting 17 projects that will increase generation capacity by 750 megawatts of green energy.


Small business development is a core part of the IDC mandate. In April last year, the Small Enterprise Finance Agency (sefa) was launched, combining three small business funding programmes. The institution is being bedded down and its level of lending is being expanded.

The Corporation recently launched a R1-billion funding initiative targeted at youth enterprises, geared to supporting the entry of young people into the economy and encouraging their entrepreneurial energies as a source of growth and innovation. Its subsidiary sefa is targeting a further R1.7 billion for youth-owned enterprises over the next five years, bringing a combined resource of R2.7 billion for youth enterprise and employment.

Innovative partnerships support the IDC’s mandate.

In partnership with the Economic Development Department, the IDC manages the Agro-processing Competitiveness Fund, focused on bringing in new entrants, improving competition and supporting job creation. The fund committed R207 million to 31 projects by 31 March 2013.

Working with the dti, the IDC administers the Manufacturing Competitiveness Enhancement Programme (MCEP) and the Clothing and Textiles Competitiveness Programme and together, more than R2.3 billion was committed to companies to improve their industrial performance. This is in addition to the IDC’s own large investment and funding exposure to various parts of the manufacturing sector. This is an example of focused and co-ordinated action to save jobs and promote industrial capacity.

The IDC also secured lines of credit to further enhance its capacity to support industrialisation. Examples include the R5-billion Green Bond it launched with the PIC and the R4 billion Jobs Bonds with the Unemployment Insurance Fund. A US$100 million loan at concessional rates from the China Development Bank will be used to support small business development.

The Annual Report contains examples of successful efforts to support industrial development elsewhere on the continent as part of the economic integration project supported by government.

One of the key challenges we face is to ensure that large public institutions become more responsive to the needs of those they serve. The IDC has benchmarked its operations to identify ways to improve performance. Increasing attention is being paid to the speed with which IDC decides on applications by refining internal systems and application processes. As a result the turnaround time for non-complex transactions improved by 37% during 2013 to 17 working days.

Based on the demonstrated strengths of the IDC, the shareholder expects the IDC to achieve more in the years ahead.

We have set a stretch target for increasing its level of investment in the economy. This requires that the IDC actively develops its project pipeline as well as its capacity to assess risk and support its investment partners.

This pipeline itself should have a greater impact on job creation, youth employment, small business development and increase investment in under-served provinces. Priority must be given to greenfields investment that create new jobs and deepen industrialisation. In particular, we need to expand the number of black industrialists in the economy and support commercially sustainable empowerment that is broad-based and widen the pool of skills, innovation and enterprise that we draw on to grow the economy and promote inclusion.

As it pursues these objectives, IDC will need to continue its focus on strengthening its human resource capacity to ensure its continued financial sustainability.

I wish to thank the IDC Board, under the leadership of Ms Monhla Hlahla and the executive team under Mr Geoffrey Qhena, for working closely with the shareholder to align the IDC’s resources to the country’s industrial and development needs. This Report shows the positive impact of their work.

Ebrahim Patel MP
Minister of Economic Development
August 2013

CASE STUDY

Platmin

This regionally optimised mega mine will lead to the creation of an operation of significant size, allowing for mining of the ore body in a continuous and sustainable manner.

Coega Dairy Holdings

The IDC has identified increased competition in the dairy value chain and import substitution in the cheese industry as key sector development goals. We also singled out the need for increased farmer (and specifically B-BBEE) participation in dairy value-adding initiatives.

Windtown Lagoon Resort 

The newly built Windtown Lagoon Resort and Spa reflects the IDC’s focus to funding community-based projects that have potential to create employment opportunities in far-flung regions.


APPROVALS
R13.1 billion
DISBURSEMENTS
R16.0 billion
JOBS FACILITATED
18 922
JOBS SAVED
3 950
© The IDC 2013. All rights not expressly allowed are reserved. P.O. Box 784055, Sandton, 2146, South Africa