Expanding industrial capacity for development
SADC DFRC CONFERENCE , DURBAN SOUTH
4TH DECEMBER 2014
Presented by Lerato MangopeHead of Corporate Funding at IDC
Introducing the IDC
• Industrial Development Corporation ofSouth Africa Limited (“IDC”) establishedin 1940 to spearhead the developmentof domestic industrial capacity
– Key implementing agency of industrialpolicy by fulfilling a strategic industrialdevelopment role
– Instrumental in implementing South Africa’sindustrial policy by establishing some of thecornerstone industries to South Africa’smanufacturing sector
– Committed to the objective of developing thecountry’s industrial capacity and, in doing so,playing a major role in job creation
– IDC’s mandate was expanded in the 1990s toallow investments in the rest of Africa
– Self-sustaining relying on internalprofitability, exits from mature investments,borrowings from commercial banks andDFIs, and bond issuances.
– Execution of the IDC’s mandate centresaround:
• National Development Plan (“NDP”)• New Growth Path (“NGP”) and• Industrial Policy Action Plan (“IPAP”)
Mission
Objective
Vision
The industrial Development Corporation (IDC) is a national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable
economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves
this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles.
Leading industrialcapacity development
To be the primary driving forceof commercially sustainableindustrial development andinnovation to the benefit ofSouth Africa and the rest of
Africa
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Operational Divisions and Respective SBUs
Operational Divisions and Respective SBUs
Agro and newindustries
Agro-Industries
Green Industries
Strategic High Impact Projects (SHIP)
Venture Capital
Mining and manufacturing industries
Chemicals and Allied Industries
Forestry and Wood Products
Metals, Transport and Machinery Products
Mining and Minerals Beneficiation
Textiles and Clothing
Services industriesand regions
Information Communication Technology
Healthcare
Media and Motion Pictures
Tourism
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IDC Project Footprint
ABCFHIKL
Agriculture and agro processingAutomotiveChemicals and plasticsFood processingHealthcareIron and steelMachineryMetal products
MNERTUWZ
MiningNon-metallic mineral productsEthanol projectRenewable energy: wind and solarTextilesTourismWood and paperFilm studio
A TrawalISaldanha
WCape TownC
z
T AtlantisA PaarlK ARiviersonderend
UMosselbaai
A Prince Alfred Hamlet
R Caledon
R PofadderA UpingtonR
A Kakamas
R Kenhardt
A PrieskaR
A DouglasM
M Postmasburg
M Kuruman
M Hotazel
M Kimberley
ROyster Bay
ARouxville
L F
BUitenhage
E CradockA Stutterheim
F CoegaWHB U Port Elizabeth
U East London
W UmkomaasW Weza
HHillcrestT Pietermaritzburg
T Hammarsdale
B ProspectonH DurbanL
C Verulam
LRichards Bay
KNewcastle
LA Winterton
M Mpukunyoni
F Reitz
C Secunda
U Skukuza
M SekhukhuneHPhalaborwa
I
W Sabie
A TzaneenM LephalaleHPolokwane
MLebowakgoma
M BethalLI Middelburg
M Ledig
MMahikengU
LJohannesburg
H PretoriaBUTMBrits
LK C
A
M Germiston
I OH INFU
W
South AfricaSelect IDC projects and investments of more than R50 million are reflected
Senegal
Sierra Leone
Ghana
DRC
Angola
Namibia
Botswana
Swaziland
Zimbabwe
ZambiaMozambique
Tanzania
UgandaKenya
Ethiopia
Sudan
Tourism
Infrastructure
Manufacturing
Franchising
Mining
Financial services
Transport, logistics and storage
Healthcare
ICT
Agriculture and agro-processing
Energy
Rest of Africa
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Financial Sustainability
IDC Funding Model• Borrowings
• Retained earnings
Loan funding
Interest payments
Capital payments
Equity funding
Dividend payments
Capital growth
• IDC is self-sustaining through:
- Internal profits- Divestment of
mature investments
- Borrowing in the domestic and international markets
• Remains financially independent
• Continues paying tax
• Pay Dividends
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Balance Sheet Growth
88,631
106,806
112,230
126,885
138,593
79,189
92,726
91,862 96,766
106,769
4.5%
7.2%
10.8%
19.7%20.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2010 2011 2012 2013 2014
Total assets, Capital and Reserves and Debt to Equity (R’ million)
Total Assets Capital and reserves Debt/Equity
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Loans and Equity Investments
10,374 12,053 15,978 18,666 20,818
23,334 24,969
25,822 28,609 29,204
45,557
57,002 54,409
55,507
64,206
-
20,000
40,000
60,000
80,000
100,000
120,000
2010 2011 2012 2013 2014
Loans, advances and investments (R’ million)
Loans and advances Investments @ cost Revaluation of investments to fair value
Sources of Debt
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29%
7%
22%
9%
24%
9%
Sources of Debt
DFI Foreign Loans (USD)UIF Bond PIC Green BondDomestic Loans (ZAR) Public Bonds
• Current focus is to growPublic bonds.
• Funds received through thePIC Private Placement GreenBond to support GreenIndustries initiatives.
• Funds received through theUIF Private Placement Bondearmarked to create andsustain jobs.
Borrowing Profile
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3,396
7,203
2,793
977
135
1,719 500
977
3,500
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
< 1 yr < 1 & > 3 yrs < 3 & > 5 yrs < 5 & >7 yrs < 7 & > 10 yrs > 10 yrs
Drawn Facilities Approved Undrawn Facilities
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Competing Lenders Interests
•Industrial Policy•Shareholder oversight•Dividends
•Transparency•Credit Ratings•Interest obligation
•Defined Criteria•Interest obligations•Reporting•Credit Rating
• Compliance to BASEL rules
• Credit Rating• Interest Obligations
• Reporting
BanksMultilateral Agencies (DFIs)
GovernmentFixed Income Investors
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Competing Internal Interests
Cost of funds
• SBUs expectations of the cost debt
Matching product
• Is the type of debt suitable for the asset financed
Asset and Liability
Management
• Internal limits set by asset and liabilities Committee (ALCO)
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Credit Ratings
National Rating * Rating Date
Long-Term AA+(zaf) September 2014
Short-Term F1+(zaf) September 2014
Rating Outlook Stable
Fitch National Scale Credit Rating
Moody’s International Scale Credit Rating
International Rating Rating Date
Foreign Currency Long-Term Baa2 November 2014
Rating Outlook Negative
* Fitch upgraded IDC’s National Long-term credit rating and affirmed its National Short-term credit rating - 18September 2014
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Expanding industrial capacity for development
The Industrial Development Corporation19 Fredman Drive, Sandown
PO Box 784055, Sandton, 2146South Africa
Telephone (011) 269 3000Facsimile (011) 269 2116
E-mail [email protected]