!Khi Solar One

Once completed, this concentrated solar tower power station will be one of the largest in the world. One of the benefits of this project relative to most other renewable energy projects is its ability to store energy and to deliver electricity to the grid during peak times.

Leadership commentary

Chairperson’s statement

The imperative of economic inclusion in South Africa’s growth and development trajectory was clearly brought to the fore by the South African government, our shareholder, during the year under review. Unacceptable levels of poverty and inequality underpinned popular manifestations of frustration and discontent in various parts of our country. The adverse implications were not only felt by the sectors directly affected, but also reverberated throughout the economy.

It has become increasingly evident that growth in itself does not suffice. Economic expansion must be unequivocally development-orientated, inclusive, employment-generating and, in light of South Africa’s historical legacies, it must be transformational. Furthermore, a sustainable development path also relies on adopting environmentally-responsible practices, reducing our carbon emissions, among other environmental risks, to sustainable levels, and ensuring a just transition whereby national socio-economic objectives are not hindered.

These formidable challenges must be confronted within an economic climate that, in the aftermath of global crises and a subsequently fragile recovery, remains far from satisfactory.

As South Africa’s largest development finance institution with an extensive industry coverage and geographical reach in South Africa and in the rest of the continent, a significant catalytic potential and developmental impact, the IDC is understandably often in the spotlight. Rising stakeholder expectations across the operational spectrum and the rapid pace of change in the IDC’s operating environment demand a resolute focus on our strategic imperatives, on the clear identification, prioritisation and planning of the necessary interventions, as well as on their monitoring to ensure that the desired outcomes are being realised.

A comprehensive review of our five-year corporate plan during financial year 2013 led to important adjustments. These were largely in terms of emphasis regarding key aspects of our business, such as entrenching the project development approach in our operations and enhancing their developmental impact. This will amplify the progress achieved over the past couple of years with respect to project pipeline expansion and disbursements.

The review of our multi-year plan also entailed, where necessary, a sharper focus in our industrial sector alignment with the objectives of the New Growth Path and the Industrial Policy Action Plan. An analysis of the National Development Plan 2030 and its long-term priorities revealed a good corporate alignment, specifically in areas pertaining to industrial development.

We have placed greater emphasis on effective and wider stakeholder collaboration and partnerships for greater leverage. In the process, we are increasing our resilience and augmenting our capacity to confront the challenges that lie ahead. By and large we are progressively succeeding in accommodating the rising demands on IDC as a development financier and enhancing its relevance in this arena.

A comprehensive review of our five-year corporate plan during financial year 2013 led to important adjustments. These were largely in terms of emphasis regarding key aspects of our business.

During what proved to be another challenging year in South Africa and internationally, particularly from the economic and social perspectives, we sustained financing approvals above the R13 billion mark and increased funding disbursements by 91% to R16 billion. This was achieved in spite of large reversals associated with cancellations of funding approved in prior years, as well as reduced demand for distress-type funding.

The leading role that IDC envisions to play in the development of the industrial capacity of South Africa and the continent is firmly entrenched in our corporate plan for 2014–17. Integral to this multi-year strategy are our commitments towards industrial rejuvenation, growth and improved competitiveness. Furthermore, we aim to contribute meaningfully to the structural transformation of our economy, employment creation and towards a more egalitarian or fair flow of the benefits of national wealth creation to all South Africans.

In specific manufacturing industries we are being called upon to assist existing businesses in countering the adverse effects of fiercely competitive forces at play in domestic, regional and global markets. The textiles and clothing industries are cases in point, where IDC interventions alongside other forms of state support, particularly competitiveness-enhancing assistance programmes offered by the Department of Trade and Industry, appear to be succeeding in stabilising their performance, retaining productive capacity and safeguarding employment.

In certain economic sectors, structural transformation is required to maximise positive spin-offs through forward linkages, particularly downstream manufacturing and beneficiation. Hence our efforts aimed at improving the competitive landscape and market development potential in an industry such as steel manufacturing, which included the acquisition of Scaw as well as an equity stake in Palabora Mining Company during the year. Nationally, renewed impetus is being given to the minerals beneficiation drive, with the IDC participating in several projects – for example, the world’s largest manganese sinter plant in the Northern Cape province, which has been cold commissioned whilst work proceeds on the underground mine.

Opportunities for the expansion of productive capacity or for the introduction of entirely new operations have been emerging in various industrial and services sectors as a result of the public sector’s infrastructure-build programme and its extensive procurement requirements. These are exemplified by our funding of rolling-stock production facilities on the back of Transnet’s railway infrastructure development, which is further complemented by the potential presented in regional markets. Financial support provided to a manufacturing operation supplying components for wind turbines under our country’s ambitious renewable energy plan is an additional example.

The work of the Presidential Infrastructure Coordinating Commission (PICC), as the body responsible for the overall coordination and integration of the infrastructure build programme and its Strategic Integrated Projects (SIPs), is providing a sharper focus on the input procurement potential from local businesses. During the year under review, the IDC compiled and submitted the business plan for SIP 5 (Saldanha-Northern Cape Development Corridor) and initiated a similar process for SIP 8 (Green energy in support of the South African economy), which we are also managing on behalf of the PICC.

The IDC’s escalating experience and catalytic participation in the green economy are proving invaluable for SIP 8, not only in renewable energy generation, where we have participated in 19 projects over the first two rounds of the Renewable Energy Independent Power Producer Procurement (REIPPP) programme, but also in the areas of energy efficiency and emissions and pollution mitigation.

In certain economic sectors, structural transformation is required to maximise positive spin-offs through forward linkages, particularly downstream manufacturing and beneficiation.

Furthermore, we have been mandated by the PICC to identify and investigate localisation opportunities across the eighteen SIPs, focusing on opportunities for the expansion of existing production capacity, for the rejuvenation of capacity previously in place but progressively lost over the years due to various reasons, and for the introduction of new capacity in the economy.

Visibility, approachability and efficient service delivery underlie our approach to our customer base, both existing and potential. Process improvements and a considerably larger geographical footprint are bearing fruit in this respect. Strong emphasis is being placed on assisting black industrialists in establishing and growing their businesses, as part of our expansionary approach to black economic empowerment. The weight attributed to maximising the socio-economic benefits of our financing activities on the staff complement of our business partners and the positive externalities of project development endeavours on the surrounding communities reflect the importance of broad-based empowerment in our developmental objectives.

With the initial phases of sefa’s implementation as the principal public sector financing agency dedicated to SMME development largely completed, its capacity must now be strengthened so as to enable the effective and expeditious roll-out of its mandate and business plan, in line with IDC expectations as its shareholder.

Strategic relationships with key stakeholders are essential determinants of success in implementing our mandate. We are building stronger partnerships with other state entities such as the Public Investment Corporation, the Unemployment Insurance Fund and sister development finance institutions, among others. Closer ties are being developed with private sector players across the board, including industry associations. The underlying benefits of these strategic relationships encompass greater financial leverage, improved risk-sharing, pipeline development, the crowding-in of investment activity and collectively enhancing our socio-economic developmental impact.

We must remain highly dynamic and adaptable, ensuring that our flexible organisational structure is complemented by continuous innovative improvements to our systems and processes.

Our partnerships with other public sector entities, including the three tiers of government and specific state-owned companies, have been strengthened considerably. The resulting collaboration has taken various forms. A much closer interaction with the departments of Economic Development and Trade and Industry, for instance, is proving highly beneficial. It is informing the policy and strategy formulation processes, facilitating implementation through improved coordination, gradually addressing certain bottlenecks and, in the process, creating a more enabling environment for investment and industrial development.

The acquisition of Scaw during the year largely underscored the 33% increase in the Group’s revenue to R14.6 billion in 2013. Higher interest income and dividends received also made positive contributions, offsetting to a considerable extent the decline in revenue earned by our subsidiary, Foskor. Lower capital gains and substantially higher impairment levels due to the difficult economic climate during the review period underpinned the 42% reduction in the Group’s profit before tax to R2.0 billion.

Our robust balance sheet is envisaged to expand considerably as we roll out our five-year corporate plan. Cumulative advances over this period are projected to range between R89 billion and R108 billion. Concretising such an ambitious developmental plan will be challenging in the current economic environment, considering excess production capacity across a variety of sectors, relatively weak demand conditions both domestically and abroad and, as a result, subdued business confidence and investment activity levels.

If successful, the plan will be largely funded through borrowings and, to a lesser extent, through sales of equity holdings as well as retained earnings. Critical measures are being taken to ensure that the IDC’s long-term financial sustainability is not compromised in the process. New investments will be pursued to replace those sold for capital raising purposes. We will have to ensure the appropriate structuring of equity investments and pricing of facilities, and our equity portfolio will be progressively diversified to mitigate sector concentration risk. Moreover, we will continue to monitor impairment levels very closely and take remedial action where necessary.

Enormous demands will be placed on our human resources as we roll out our plan, thus requiring strong focus on the continued development, attraction and retention of core professional competencies to ensure corporate sustainability and growth. Importantly, we must also remain highly dynamic and adaptable, ensuring that our flexible organisational structure is complemented by continuous innovative improvements to our systems and processes, as well as their effective integration, in order to accommodate rising expectations from stakeholders, including our shareholder, business partners and communities.


The Chief Executive Officer, Mr Geoffrey Qhena, his Executive team and the management and staff of the IDC are collectively rising to the challenges facing the Corporation, largely anticipating and successfully adapting to the powerful forces for change in an increasingly complex, yet delicate operating environment. On behalf of the IDC Board, I thank them immensely for their commitment, loyalty and tireless efforts in delivering on our developmental mandate.

I also extend my appreciation to my fellow Directors for their continued support, their multi-faceted insights underpinned by a vast knowledge base, diverse experience and wisdom, as well as for their integrity in upholding the laudable governance of the Corporation.

We express our utmost gratitude to Minister Ebrahim Patel for his guidance and support in the execution of our mandate, and for the continuous recognition of the achievements of this treasured national asset.

MW Hlahla

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.

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