One of Geoffrey Qhena’s first assignments as a newly recruited Industrial Development Corporation (IDC) business analyst was decidedly uncomfortable. It was 1994, the year of South Africa’s first democratic election, and the young accountant from Meadowlands, Soweto, had been handed a business plan for a project proposal in Potchefstroom. The document was written entirely in Afrikaans, a language Qhena, now 53, had last properly read 11 years earlier, while completing matric. Anxious, he bought an Afrikaans-English dictionary to prepare for an impending meeting with the project sponsor. In the event, the meeting was conducted entirely in English and Qhena remembers the white Afrikaans business owners being nothing but polite and accommodating.

That was not always the case, however. Despite South Africa’s successful political transition, the business environment in the 1990s was still overwhelmingly white and male. Qhena, who will be stepping down as IDC CEO at the end of the year, recalls how one Northern Cape farmer flatly refused to even discuss his table-grape project when he discovered that the team from Johannesburg was comprised mostly of young, black professionals. “At the time, we used to spend a full week assessing a project. But, because the farmer’s rejection had come on the very first day of our visit to Kakamas, we were at a loss as to what to do with ourselves. Fortunately, we had the number of a far smaller farmer who had reached out to us only a week earlier. He was so impressed by the speed of our response that he welcomed us into his home and we had a very productive meeting around his dining room table, where we agreed to support his table-grape venture.”

After a year at the IDC, Qhena left for Transnet with the feeling that the organisation, which was so instrumental in supporting the National Party’s industrial ambitions, including the creation of South Africa’s coal-to-liquids behemoth, Sasol, was not quite ready to fully embrace black professionals. Nevertheless, the stint had given him a taste for the role that development finance could play in helping to unlock economic potential – big and small. In some ways, his engagement with that small Kakamas farmer helped shape the way he approached his 13 years at the helm of the organisation. It made him realise that, to “make a difference”, the IDC should always have an open door and be willing to listen to all-comers.

Risk versus Recklessness

“That does not mean we will definitely fund your project, but people should never feel that the IDC is unapproachable,” Qhena told Engineering News during a wide-ranging interview.

However, in taking risk, the self-funding development finance institution could not be reckless. Likewise, its systems should be impenetrable to political interference, despite deriving its mandate directly from its political principals. The IDC, Qhena asserts, was “not captured” during his tenure, notwithstanding the now notorious R250-million loan to the Gupta family’s Oakbay Resources & Energy. The loan was extended in 2010 for the purchase of Shiva Uranium and was approved having been subjected to the IDC’s normal due diligence, which has since been beefed up to cater for politically exposed people. “Back then, very few people even knew who the Guptas were.” Nevertheless, the deal has undoubtedly hurt the organisation’s reputation, which is why it has been persistent in trying to recover the money owed. The IDC is currently suing to recover R287.5-million from Oakbay, which is now in business rescue. The amount is made up of R37.5-million in outstanding loan commitments, while the balance is in the form of interest and equity.

“What I can tell you is that, never in my 13 years as CEO, have I once received a phone call from anyone telling me who to fund. Either I have been lucky, or we have the right systems in place, or both.”

Qhena says the IDC’s loan approval systems are built on a simple philosophy of “no special treatment”. All approvals have to follow the same rigorous processes, “no matter what”. The IDC reported record disbursements of R15.4-billion in 2018, up from R11-billion in 2017. In addition, the gap between approvals and disbursements was also narrowed, despite record approvals of R16.7-billion.

Qhena admits that IDC approvals take longer than what many clients would like. However, he dismisses the persistent suggestion that the IDC is as risk averse as any commercial bank. “For evidence that we are taking risk . . . this is reflective in our appetite to support startups and, naturally, the resultant impairments.” The IDC reported that impairments surged by 178% to R2.7-billion in 2018. Impairments as a percentage of total financing also increased to 17.4%, only marginally below the IDC’s self-imposed threshold of 20%.

In response, a specialised unit has been established to monitor some of the IDC’s large investments and subsidiaries with the intention of lowering the risk of future impairments, or even reversing impairments. In many ways, the unit draws reference from the intervention made by the IDC in 2001 to deal with the risks to its sustainability as a result of the Saldanha Steel project and Iscor. At the time, Qhena was CFO and presided over what was the only loss ever made by the IDC in its nearly 80-year history. “We had no option but to intervene, but we also learned that it is better to have uncomfortable conversations early rather than to allow for a disaster.”

The other lesson to emerge from Saldanha Steel was the importance of securing reliable partners when seeking to turn around a struggling enterprise. This lesson has since been applied across a range of large and small investments and is likely to be deployed again at phosphate rock miner and fertiliser company Foskor, which contributed R1.8-billion to the 2018 impairment. Qhena says the IDC is currently preoccupied with ways to turn Foskor around and says all options are being considered, including a partnership. The company recently disposed of stakes in lossmaking subsidiary Scaw to strategic equity partners, with only one of the three Scaw units set aside for disposal not yet sold.

Marathon Man

However, Qhena believes the most valuable lesson he can pass on to his successor is to “focus entirely on the IDC, while motivating the IDC’s dedicated professionals to do everything in their power to make a visible difference to the lives of South Africans.” Having been raised in a disadvantaged setting, Qhena puts his unlikely success down to the collective efforts of his extended family, especially his late grandmother, Lucy, in ensuring he received an education. “I was number three in a family of seven, and the first one to finish matric, which made me realise that I had to get my act together. But I was also lucky, as I had uncles who bought me shoes and others who helped out. For me, it was really a collective effort, which is the story of many of us who grew up in the townships.”

Likewise, Qhena believes the “selfless” collective efforts of employees and leaders at institutions such as the IDC will be critical in helping to lift South Africa from its current economic and social difficulties. What role Qhena himself will play in that effort is uncertain. “I plan to use the month of January to figure out my future contribution,” he muses, while implying strongly that his marathon is far from run. This from an individual who has completed 15 Comrades ultramarathons and counting!