The Industrial Development Corporation (IDC) has committed to continue increasing its level of finance approvals and disbursements, despite a surge in impairments to over R3-billion. Funding approvals increased to a record R14.5-billion during 2016 from R11.5-billion a year earlier, while disbursements came in at a more modest R11.4-billion.

Economic Development Minister Ebrahim Patel, who is the IDC’s shareholder Minister, says the R100-billion, five-year funding target remains intact, notwithstanding the current weak economic climate.

“The increase in new investments must be maintained in the year ahead, particularly in greenfield investments,” he argues, noting that the IDC’s R1-billion contribution to the R4.5-billion Beijing Automotive Industrial Corporation plant in Coega is yet to be reflected in its financials.

The Minister acknowledges the need to rein in impairments, but cautioned the group against becoming risk averse simply to recover its impairment ratios. “You achieve everything, because you do nothing. It’s about getting into the economy, without risking the essential viability of the institution.”

He said the IDC had to be the country’s “countercyclical investment force that crowds in private investment by showing public-sector commitment to an investment-led recovery”.

The State-owned development financier reported a sharp fall in profits for the year to R223-million, from over R1.6-billion in 2015, with the level of impairments rising 99% to R3.64-billion. The impairments ratio as a percentage of the IDC’s total funding of R47.2-billion rose to 16.9% at cost, and to 10.1% at market value.

CFO Nonkululeko Veleti reports that interventions are being made to reduce the ratio to below 15% over the longer term, but stresses that the IDC will not abandon its mandate of providing early-stage risk capital.

Patel is also challenging the country’s oldest development finance institution, which is marking its seventy-fifth anniversary, to home in on jobs-rich industrialisation and move beyond its capital-intensive “legacy” investments, largely located in the metals and minerals and chemicals sectors.

The group has nevertheless also been encouraged to find the “next Sasol” – the chemicals and energy group remains a significant part of its listed-investment portfolio, at over R23-billion, despite low oil prices.

The value of the IDC’s listed portfolio declined in 2016 to R39.9-billion from R44.9-billion in 2015, having peaked at over R65-billion in 2014.

Many of the commodity-related underlying investments also failed to pay a dividend during the year, which meant that the IDC would need to lean more heavily on other sources of finance to meet its rising approvals target.

CEO Geoffrey Qhena says the IDC remains committed to the R100-billion target, but also underlines the group’s drive to support more labour-intensive activities.

He highlights the agroprocessing sector as a key focus area, but says it will also move to save jobs in the manufacturing sector through its support for companies in distress. “We are committed to supporting the revival of manufacturing and 61% of our funding is earmarked for the sector,” Qhena says.