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IDC reports surge in disbursements to R17.8bn despite economic headwinds

TP Nchocho

TP Nchocho

26th September 2023

By: Terence Creamer

Creamer Media Editor

     

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The Industrial Development Corporation (IDC) has reported a 147% surge in disbursements to R17.8-billion for 2022/23, up from only R7.2-billion in the prior year – a performance that is within range of the R20-billion target that has eluded the development financier for several years, and which the Covid pandemic disrupted further.

The State-owned institution also recorded a 29.4% rise in approvals to R20.7-billion and outgoing CEO TP Nchocho told Engineering News that the transaction pipeline remained strong, despite difficult trading conditions that were being compounded by ongoing power and water cuts and the collapse of the freight rail service.

Nchocho attributed the rise in disbursements partly to the fact that several large transactions were concluded during the period, including a R3.5-billion deal to support a Northam Platinum expansion.

However, he also highlighted efforts that had been made internally to improve transaction origination and execution, including an initiative to ensure that investment and risk teams were working more closely upfront to accelerate due diligence processes.

This “new ways of working” initiative had also not been dislodged, he said, by the departure of several senior executives who had been headhunted during the period.

Some 30% of the group’s energy team had been appointed elsewhere, while Reginald Demana was named CEO of the South African National Roads Agency Limited.

Whether the approval and disbursement performance could be repeated in 2023/24 would depend largely on whether some of the bigger transactions in the pipeline – such as ones being progressed in the automotive, coal, agriculture and renewable-energy sectors – could be progressed to financial close before year-end.

While the public procurement renewables programme had failed to advance at the scale initially anticipated when procurement resumed in 2019, the IDC had a large pipeline of private independent power producer transactions in which it was hoping to participate.

“But even these have been tricky to bring to financial close,” Nchocho revealed, with only R540-million in new approvals during the year and R1.1-billion in disbursements.

The IDC had earmarked some R7-billion for renewable energy approvals in the current financial year, while continuing to focus on industrial, mining and agricultural investments and also pursuing opportunities linked to the nascent green hydrogen sector.

Group profit during 2022/23, meanwhile, rose 70% to R10.7-billion from R6.3-billion in 2021/22, supported by turnarounds at both Foskor and Grinding Media, which was formerly a Scaw subsidiary.

Foskor reported a R2.8-billion profit from a R477-million loss, the company’s first positive contribution since 2012. However, the Foskor performance was supported by a R2-billion reversal of an impairment, which would not be repeated in the current financial year.

IDC’s asset base decreased 5% to R161-billion from R171-billion, largely as a result of shifts in listed share prices, many of which remain linked to the commodity cycle, which had softened during the period.

Impairments and non-performing loans also remained of concern, although the non-performing load ratio fell to 34% from 56% in the prior year.

Three clients, namely a Uganda hotel development, Kalagadi Manganese and Foskor accounted for 43% of the total non-performing loan book, which stood at R21.5-billion.

Nchocho, who would step down at the end of December, hoped his successor would be able to continue to sharpen the IDC’s ability to execute transactions so as to sustain the momentum that had been re-established after the group was forced to retreat into survival mode during Covid.

He was also hopeful that the new leader would be able to support a more “distributed” investment model that facilitated the creation of many enterprises in varied locations rather than only a few large ones.

Following the acceleration of 2022/23, however, Nchocho expected the current year to be one of consolidation.

Edited by Creamer Media Reporter

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