Investing in the economy

Summary of operational performance

Strategic business units (SBUs)

The core developmental funding interventions of the IDC are carried out by 13 SBUs, each aligned with the various sectors identified in the NGP and IPAP.

Our operational divisions and respective SBUs:

  Agro and New Industries         Mining and Manufacturing Industries         Services Industries    
  Agro-Industries  
Green Industries  
Strategic High-Impact Projects  
Venture Capital  


      Chemicals and Allied Industries  
Forestry and Wood Products  
Metals, Transportation and Machinery Products  
Mining and Mineral Beneficiation  
Textiles and Clothing  
      Information Communication Technology   
Healthcare  
Media and Motion Pictures  
Tourism  

 
                     

Agro-Industries SBU
Performance   2010   2011   2012   2013  
Total value of financing approved (Rm)  770   937   765   738*  
Total number of jobs expected to be created or saved   3 133   4 198   5 057   3 952  
Impairments as a % of outstanding book (at cost excluding undrawn commitments)  24%   19%   14%   14%  

*Approvals of R137 million utilising the Agro-Processing Competitiveness Fund (APCF) and approvals of R20 million utilising the MCEP are included.  

Focus areas   
Reduce dependence on food imported from outside Africa  
Development of under-utilised land  
Develop new and emerging industries and products  
 


Highlights  

2009   2010   2011   2012   2013  
  • Approved R200m Pro-orchard II horticultural development scheme
  • Funded new sectors such as cob aquaculture and cassava starch production
  • Increased investment activities outside South Africa, specifically in Tanzania, Ethiopia and Swaziland
  • Facilitated new citrus production capacity in black-spot free Northern Cape
  • Continued investments in aquaculture with specific support for B-BBEE abalone farming operations
  • Provided technical assistance to the Land Bank
  • Focus shifted towards agro-processing
  • Approved R100m Agro-processing Linkage Scheme to facilitate links between small-scale farmers and processors
  • First agricultural investment in Namibia
  • Provided financial crisis distress funding to a number of agro-processors
  • Launched flood relief initiative
  • Facilitated increased competition in the poultry and dairy value chains
  • Established large soya mill in Mpumalanga to localise soya value-added products
  • Diversified berry portfolio with organic berry component
  • Increased levels of funding through R250m Agro-processing Competitiveness Scheme (managed on behalf of the EDD)
  • Made investments in grain value chain – (milling, animal feed and baking sub-sectors)
  • Facilitated import replacement in the South African confectionery industry
  • Facilitated links between small-scale farmers and processors in the sugar and soya industries
  • Supported large-scale horticultural expansion projects in table grape and berry sectors

Recent performance

During the reporting period, South Africa’s agricultural value chain was adversely affected by strong agricultural commodity prices, a weaker Rand, cost pressures in terms of energy prices, labour costs and unrest, drought in parts of the country, increased competition from abroad and relatively subdued domestic consumer demand.

These conditions inevitably affected the activities of the IDC’s Agro-Industries SBU, but we continued to support businesses by providing R581 million in funding, compared with R765 million in the previous year.

This funding has specifically benefited rural SMEs within the grain processing, confectionery, edible oil, honey and malt industries. Our partnership with EDD through the Agro-Processing Competitiveness Scheme (APCF) has resulted in commitments totalling R137 million (2012: R68 million) aimed at facilitating increased competition and localisation in the sector (see the table above for details). We continue to develop large scale horticultural projects in rural areas of the Western Cape and Northern Cape with the aim of increasing job opportunities and promoting B-BBEE participation through employee ownership schemes.

Connecting small-scale farmers with large-scale processors is key to the IDC Agro-Industries SBU’s mission. We have made investments in the soya industry and are proactively developing similar partnerships within the livestock, dairy and barley sectors.

Our disaster relief partnership with the Land Bank and Griekwaland Wes Korporatief (GWK) resulted in GWK providing R150 million in funding to 63 farmers, saving 2 430 jobs in the Northern Cape. Funding through the Land Bank assisted 34 farmers in the Northern Cape and KwaZulu-Natal with R15 million and saved 760 jobs. Our relationship with the Land Bank has been extended to offer assistance to farmers in the ostrich industry and small-scale black farmers in general.

We also invested R75 million in innovative new projects such as high oleic acid content sunflower oil, a new bee-keeping model, organic wine-making and sterile insect technology.

Non-food sectors such as bio-energy, pharmaceuticals, cosmetics and textiles depend on a strong agricultural foundation, and the IDC’s involvement in the South African agricultural sector actively assists these local industries.

Challenges

The harsh economic environment called for increased intervention from the Agro-Industries SBU. A risk assessment conducted by the SBU concluded that a number of companies were facing financial, environmental, food safety, customer protection, competition and B-BBEE compliance challenges. Pressure on agro-processor margins has threatened economic viability and businesses are either consolidating or growing by acquisition. Family-owned businesses in particular find it hard to become stable commercial entities.

Despite our interest in investing in the agro-industries of neighbouring countries, no such investments were made during the year, and the Corporation had to be satisfied with building relationships on the basis of which such investments could be made in future.

Strategy and prospects

We foresee that South Africa’s agricultural sector will remain under pressure in the coming year, with continued consolidation and structural adjustment necessary to ensure viability.

Our strategy for the next financial year is based on the following three focus areas: 
 
Localisation – We plan to play a leading role in the localisation of food production in South Africa and the rest of Africa. This strategy will help address import dependence, food vulnerability and import-parity-based food prices.

Land utilisation – Agro-Industries SBU intends taking the lead in improving utilisation of the agricultural land in South Africa through: the financing of agro-processors with contract farming arrangements; the development of backward-integrated large-scale agro-processing projects; and supporting improvements in production efficiencies.

Innovation – We will continue to help diversify the industry by investing in innovative products and processes, both to enhance sector sustainability and help it to respond to changes in consumer demand.

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