CASE STUDY

Agribank of Zimbabwe

As part of the pan African regional integration and industrialisation through development finance initiatives, the IDC has developed programmes to contribute to an enabling environment for institutions outside South Africa.

Overview of operating environment

Policy environment

The strategic orientation and operational activities of the IDC, and, by implication, our overall performance, are shaped and affected by South Africa's complex, yet dynamic policy environment.

Policy landscape shaping IDC’s strategy, operations and performance

Macro-economic Fiscal policy; Monetary policy; Exchange rate and exchange control policies; Trade policy etc.  
Governance and operations IDC Act; Public Finance Management Act; Competition policy; Tax policy etc.
Transformation Broad-Based Black Economic Empowerment Act and B-BBEE codes of good practice; Preferential Procurement Policy Framework Act etc.
Area-specific Integrated Resource Plan for Electricity; National Infrastructure Plan; National Climate Change Response Strategy; National Strategy for Sustainable Development and Action Plan; Integrated Strategy on the Promotion of Entrepreneurship and Small Enterprises; Information and Communication Technology policies; Mineral and Petroleum Resources Development Act; Land Reform Policy etc.  

Of particular importance are the following three national policies: the shorter-term rolling Industrial Policy Action Plan (IPAP); the country’s medium-term economic development strategy known as the New Growth Path (NGP); and the long-term vision for South Africa encapsulated by the recently-adopted National Development Plan 2030 (NDP).

The IDC’s operations and performance are also highly affected by the macro-economic policy environment, particularly fiscal and monetary policies, due to their impact on household and business spending patterns, investment plans and overall confidence levels, as well as their impact on the Corporation’s financial performance and fund sourcing. Furthermore, the policy framework spanning the broad areas of governance, transformation, as well as specific economic, socio-economic and environmental aspects, also shape and affect our strategies, operations and performance (refer to the previous diagram).

The NDP sets the vision for South Africa for the next 20 years or so, outlining proposals to address the triple challenge of reducing poverty, unemployment and inequality. The NDP’s adoption as the country’s anchor policy up to 2030 provides reasonable clarity for the IDC’s long-term strategy formulation process and alignment with the national vision.

The NDP sees South Africa’s industrial trajectory transitioning from its historical approach of favouring energy- and capital-intensive goods production (at times with limited domestic linkages), towards an increasingly diversified industrial base. It envisions gross fixed capital formation reaching levels equivalent to 30% of gross domestic product by 2030, with public sector investment crowding in private investment along the way. According to the NDP, development finance can play a crucial role in promoting industrial policy and fostering investment activity.

Critical in realising the NDP’s vision for South Africa are the New Growth Path and the Industrial Policy Action Plan. Under implementation for a few years now, these programmes are deemed essential in driving national government’s medium-term policy.

The NGP is the economic strategy designed to shift the trajectory of economic development over the period up to 2020, including through identified drivers of job creation. Twelve action plans were adopted in the Cabinet Lekgotla of July 2011 to implement the NGP and to set up the Presidential Infrastructure Coordinating Commission (PICC). The three-year rolling IPAP, in turn, guides the re-industrialisation of the South African economy. The IDC is one of the principal implementation agencies for the NGP and IPAP and, as such, the Corporation aligned its operational activities with their respective objectives and priority sectors during the course of the financial year ended 31 March 2012.

A large number of enterprises, whether small, medium or large, benefit from state initiatives. Such support takes various forms, with numerous practical measures having been identified to improve sectoral performance and expansion potential. Employment opportunities are being created in the process, in turn growing domestic purchasing power and the business community’s consumer base.

IPAP has focused on the following sectors: metal fabrication, capital and transport equipment; automotives, components, medium and heavy commercial vehicles; plastics, pharmaceuticals and chemicals; agro-processing; biofuels; green and energy-saving industries; clothing, textiles, footwear and leather; forestry, paper, pulp and furniture; cultural industries and tourism; business process outsourcing; and the development of capabilities associated with the nuclear and aerospace industries, as well as the production of advanced materials.

The iteration of IPAP for the years 2013/14 – 2015/16 builds on its predecessors, again setting out both transversal and sector-specific programmes and key action plans with time-bound milestones. It also identifies the respective lead and supporting agencies, thus contributing to strengthen intra-governmental integration and co-ordination.

Over and above the manufacturing sectors prioritised by IPAP, which are largely aimed at rebuilding and diversifying the country’s industrial base, the sectoral coverage of the NGP encompasses:
  • The agriculture value chain, including smallholder and commercial farming, as well as aquaculture and agroprocessing, which also feature in IPAP;
  • The optimal utilisation of the natural resource wealth through the exploitation of South Africa’s incomparable mineral reserves and more advanced downstream beneficiation, beyond refining and smelting;
  • Expanding the country’s tourism offer, including infrastructure and associated support industries and services;

A large number of enterprises, whether small, medium or large, benefit from state initiatives

  • Realising the huge potential unleashed by the greening of the economy, including energy generation through renewable sources; the introduction of cleaner and more energy- and resource-efficient production methods and practices; the adoption of emissions’ mitigation and pollution control measures; as well as improved natural resource management; and
  • Realising the opportunities that are continuously being opened up in knowledge-intensive industries (e.g. ICT, mining-related technologies, biotechnology, healthcare and higher education) due to technological innovation.

The National Infrastructure Plan was adopted in February 2012 to give effect to the NGP infrastructure driver.

The NGP emphasises the actual and potential economic benefits flowing from the ongoing public sector investment in South Africa’s physical and social infrastructure (i.e. energy, transportation, water, ICT, road construction and maintenance, housing development, healthcare and educational facilities etc.). This massive infrastructure investment programme will improve the competitiveness of local industry through enhanced service and cost effectiveness. It will also unlock the economic potential of several regions and create numerous opportunities for localisation.

Maximising the procurement of inputs from local business enterprises is thus critical, so as to realise the unprecedented re-industrialisation impetus that the infrastructure build programmes can provide to the economy. The National Infrastructure Plan was adopted in February 2012 to give effect to the NGP infrastructure driver. The IDC is contributing considerably to the work of the PICC as the body responsible for integrating and coordinating the long-term infrastructure build, as well as to the development of the respective Strategic Integrated Projects (SIPs). Two of the 18 identified SIPs, specifically SIP 5 (Saldanha-Northern Cape development corridor) and SIP 8 (Green energy in support of the South African economy) are being managed by the IDC.

The small business segment of the economy will, in general, benefit progressively from numerous NGP and IPAP-led interventions aimed at creating a more enabling investment and operating environment. These include the simplification of regulatory requirements, with the elimination of unnecessary red-tape; improved efficiencies emanating from infrastructural upgrading and expansion, as well as better logistics services provision; and, among others, a re-orientation of state agencies, ‘smart government’ and improved public sector co-ordination with the business community and organised labour. An important initiative in support of the small- and micro-business segments was the establishment of the Small Enterprise Finance Agency (sefa) in 2012 as a single funding agency, within the IDC Group, catering for the needs of such enterprises.

As a further step in the transformation of the economy, the revised Broad-Based Black Economic Empowerment (B-BBEE) codes of good practice contain significant amendments with far-reaching implications for any company seeking to measure its contributions to B-BBEE.

The NGP identified limitations with the previous model of BEE, which focused on the acquisition of existing assets and benefited a few individuals. It called for consistent implementation of broad-based, as opposed to ‘narrow’ BEE in all sectors, with a systematic assessment of the effects on the cost of capital and investment. The IDC’s focus on expansionary B-BBEE, as opposed to pure acquisition-type deals, is supportive of the national drive to develop black-owned enterprises and black industrialists.

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
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