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Jun 30, 2011

IDC approves record R8.4bn funding for SA investments

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CEO Geoffrey Qhena discusses the IDC's investment of R102-billion over the next five years in the sectors prioritised in government’s New Growth Path. Editing: Shane Williams. Camera Work: Darlene Creamer.
Natal|Industrial Development Corporation|Refit|Renewable Energy|Unemployment Insurance Fund|South Africa|Development Finance Institution|Level Services|Long-awaited Renewable Energy Feed-in Tariff|Manufacturing|Mining|Renewable Energy|Renewable Energy Market|Cert Gouws|Ebrahim Patel|Geoffrey Qhena|Shakeel Meer|R1|R8
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The Industrial Development Corporation (IDC) would be investing R102-billion over the next five years in sectors prioritised in government’s New Growth Path (NGP), the development finance institution (DFI) said on Thursday.

The IDC approved R8.4-billion in funding for South Africa-based developments in the financial year ended March 31, with some 97% of these investments in NGP priority sectors.

This was the highest in the IDC’s history and Economic Development Minister Ebrahim Patel commented that it was an indication of the recovery of economic growth and a “big spur to investment”.

The State-owned DFI recorded a profit of R2.7-billion during the financial year and both CEO Geoffrey Qhena and CFO Gert Gouws emphasised that the IDC’s strong financial position would enable it to meet the R102-billion commitment in future.

About R11.1-billion would be invested in logistics, infrastructure and cross-sector projects, R14.8-billion in the tourism and creative industries and high-level services, and R7.7-billion in the agricultural industry.

But, the bulk of investment would be in the mining, manufacturing and green industries of R22.1-billion, R20.8-billion and R22.4-billion respectively.

Part of its newly established green industry unit’s focus would be renewable energy, over which, much anxiety and concern exists around the long-awaited renewable energy feed-in tariff (Refit).

Despite this uncertainty, the IDC remained confident that in line with South Africa Integrated Resource Plan, there would be a renewable energy market to invest in, in the future.

“A large portion of the IDC’s investment is in renewable energy and the Refit is a concern with regard to timing and the finalisation of the tariffs and the power purchase agreements. We continue to closely follow developments and we are expecting to invest – it is just a matter of how and when,” industrial sectors divisional executive Shakeel Meer told Engineering News Online.

Patel said that the IDC must lead the “green industrialisation drive” and help South Africa identify new products and technologies in this expanding part of economic activities.

In rolling out the five-year investment plan, Patel said the department would continue to work with the IDC to significantly expand the level of investment, reduce the cost to industrial borrowers and shift more investment to projects with a large labour-absorbing capacity.

STRONG BALANCE SHEET

Improved profitability from operations, performance of equity accounted investments, containment of operating expenses and lower impairments contributed to the company’s strong position, which saw a 22% higher profit than 2010.

It posted revenue of R8.9-billion, with other comprehensive income of R10.7-billion, owing to the strong performance in the JSE.

Job creation remained a strong focus of the DFI, with approvals during the year expected to create 19 650 full-time jobs and save an additional 11 650 jobs. A further 8 100 jobs are expected to be created through direct linkages to activities in the informal sector.

More than 17 000 jobs were also saved through the R1.5-billion approved to companies through the Unemployment Insurance Fund bond, which was launched in May.

As South Africa’s economy recovered steadily from the recent recession, the hard-hit manufacturing industry also experienced massive job losses, and received the largest portion of funding of 27%. This, said Qhena, was indicative of the IDC’s focus on both preserving and growing high-impact manufacturing capacity and succeeding at improving its impact on job creation.

Patel said this indicated the IDC’s commitment to deepening industrial capacity development, given that the industry is critical to prosperity, and its key role in using raw materials, supporting high-level services, expanding foreign-exchange earnings and creating decent jobs.

About R1.7-billion was approved for the automotive and components industries and R646-million in the clothing and textiles industry, to support distressed companies and assist with competitiveness improvements.

Funding in the mining industry was lower than in previous years, infrastructure investments related mostly to funding for the construction industry, telecommunications infrastructure and hospital infrastructure.

Meanwhile, the IDC saw a shift in its funding model with regard to regional distribution, where 49% of approvals were for the country’s provinces excluding Gauteng, KwaZulu-Natal and the Western Cape.

The IDC said it seeks to be more active in early stage project development, and would continue to influence policy to create a more enabling environment for industrial development.

However, its partnerships with stakeholders, including cofunders, government, civil society, businesses and social partners remained key in the unbundling of its future success, Qhena said.

 


 

Edited by: Mariaan Webb
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