Investing in the economy

Summary of operational performance

Venture Capital SBU
Performance   2010   2011   2012   2013  
Total value of financing approved (Rm)  68   51   187   74  
Total number of jobs expected to be created or saved   104   267   697   146  
Impairments as a % of outstanding book (at cost excluding undrawn commitments)  39%   40%   32%   30%  
Focus areas   
Globally unique technologies of South African origin in any industry or sector  
 


Highlights  

2009   2010   2011   2012   2013  
  • A record 11 new technologies were funded this year, which is the second year of IDC involvement, significantly reducing the backlog in early-stage funding
  • Global economic crisis resulted in delays in the commercialisation of IDC-supported technologies, resulting in the restructuring of drawdown terms and provision of further rounds of funding earlier than expected
  • IDC Board approved an additional R500m in venture capital funding, following the successful investment of the original R250m allocation in less than four years
  • The majority of companies in the portfolio made good progress in the development and/or commercialisation of their technologies
  • Engagement with the CSIR resulted in funding the spin-off of CSIR intellectual property into a new company which will commercialise a unique new biotechnology
  • IDC sponsored AngelHub, SA’s first managed technology start-up venture capital provider, assisting a number of entrepreneurs to source seed-funding

  

Recent performance  

Of the 32 new technology start-ups supported since IDC’s first direct venture capital investment in 2008, 27 companies are still active. Of these, three are in distress while the remainder are making satisfactory progress in the development or commercialisation of their technologies.

The proportion of venture capital applications that result in funding approval is currently 14% compared to the international norm of around 1% and the average application success rate of 9% since the start of venture capital funding.

The local venture capital market has the potential to grow but remains under-developed, with only 11 venture capital funds actively investing, according to the South African Venture Capital Association’s 2012 survey.

Once it has secured its first tranche of venture capital, the likelihood of a start-up sourcing funding from another venture capital fund is very low. As a result, eight of the companies in the IDC portfolio required follow-on funding in the year under review.

Challenges  

IDC is currently experiencing a low number of quality applications for venture capital from the public sector. This could be due to the dearth of commercially-focused research at universities and science councils, inefficiencies at their Technology Transfer Offices (TTOs) and a lack of entrepreneurs capable of commercialising intellectual property emanating from these entities.

Challenges experienced by companies in the portfolio included unexpected technical difficulties, weak management, longer than anticipated certification processes, and the effects of the prolonged economic crisis on market demand.

Strategy and prospects  

Given an already large portfolio, the IDC’s focus is turning towards managing investments towards sustainability and securing a profitable exit for the IDC by providing companies with support and advice.

The IDC will continue to collaborate with the Technology Innovation Agency (TIA) and the Support Programme for Industrial Innovation (SPII) with the objective of improving the effectiveness of public funding for technology-focused start-up businesses.

The IDC intends taking a more proactive approach to the sourcing and funding of unique technologies in the bio-technology and green technology fields, and will be engaging both private and public sector stakeholders in the process.

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