idc – parliamentary briefing geoffrey qhena chief executive officer industrial development...
TRANSCRIPT
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IDC – Parliamentary BriefingIDC – Parliamentary Briefing
Geoffrey QhenaChief Executive Officer
Industrial Development Corporation of South Africa
24 February 2005
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Contents
•IDC mandate
•BEE Funding
•SME Funding
•IDC in provinces
•Involvement in Government prioritised sectors
•Conclusion
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The IDC mandate
IDC Offices
• Creating employment opportunities
• Fostering entreprenuership
• Development of SME businesses
• Promoting broad based economic empowerment of HDPs
• Promoting industrial development in Africa
• Improving living standards of all South Africans in:
• Poor provinces• Rural areas• Townships
• Promoting women advancement in business
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IDC funding instruments
• Equity
• Loans
• Bridging finance
• Wholesale finance
• Export / import finance
• Shareware housing
• Guarantees
These apply for all IDC funding including BEE and SME in all provinces
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IDC development basket
• Job creation
• Exports
• Financing SME
• Financing in poor provinces
• Financing BEE
• Financing projects in Africa
• Financing development nodes
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• IDC approved over 3 500 applications valued at over R51
billion
• IDC’s investment approvals amounted to R4.8 billion
involving 259 deals in 2003/04
• IDC’s investments as a percentage of private sector
investment activity amounted to 3% (2003/04)
• IDC’s Moody’s credit rating upgraded to Baa1 in Jan 2005
Overview of IDC’s approvalsIDC approvals:July 1995 to June 2004
0
1000
2000
3000
4000
5000
6000
7000
8000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year
R'million
0
100
200
300
400
500
600Total value of aprovals
Total number of approvals
Number
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Jobs and exports generated by province: July 1995 to June 2004
0 5 10 15 20 25 30 35
Free State
North West
Mpumalanga
Northern Cape
Eastern Cape
Limpopo
Kwazulu-Natal
Western Cape
Gauteng
% of total
0 5 10 15 20 25 30 35
% of total jobs created
% of total exports generated
Development impact of IDC’s approvals
• IDC approvals creating 164 400 new job opportunities in last
10 years
• Export earning potential worth R41.2 billion
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IDC on BEE Funding
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IDC’s position on BEE
• As SA’s largest development finance institution, the IDC remains fundamental to the national agenda to realise BEE objectives namely skills and equity transfer
• To augment these BEE objectives and remain a significant player in BEE funding, BEE is an overarching factor in all IDC’s funding activities
• A more focussed BEE policy reflects IDC’s fundamental BEE funding practices and mandate
• Broad based BEE and advancement of women are central to the overall IDC’s BEE policy
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The IDC’s participation in BEE funding is guided by the following imperatives :
• Creation of ownership of businesses for HDP’s
• Management capacity and entrepreneurship through transfer of skills
• Advancement of HDP employees through share and/or profit participation; and
• Adherence to the national BEE agenda, affirmative action and affirmative procurement policies
• Empowerment at IDC is across all IDC funding activities
IDC policy on BEE
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IDC’s BEE portfolio
• Since July 1995 the IDC has approved 870 BEE approvals
worth over R9.8 billion
• In 2003/04 financial year alone, 64% of the of the R2.6 billion
approvals were BEE deals
IDC BEE approvals:July 1995 to June 2004
0
500
1000
1500
2000
2500
3000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year
R'million
0
40
80
120
160
200
240
Total value Total number
Number
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IDC’s BEE funding within sectors
BEE approvals by sectors: July 1995 to June 2004
0 3 6 9 12 15 18 21 24 27
Construction
Hotels & restaurants etc
Agriculture, hunting, forestry & fishing
Mining & quarrying
Financial, insurance and business services
Food, beverages & tobacco
Clothing, textiles & leather products
Chemicals & other mineral products
% of total
0 3 6 9 12 15 18 21 24 27
% of total number
% of total value
• IDC BEE funding dominant in Chemicals sector in number
terms (13%)
• BEE funding dominant in Clothing and textile sector in value
terms (9.5%)
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IDC on SME Funding
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IDC approach to SME
• SMEs viewed as bridging the
gap between first and second
economy
• Deals to the value of over R1
million
• SME funding predominantly in
South Africa
• Credit Committee (which
includes external members)
established to evaluate deals
less than R10 million
• The IDC funding instruments
mentioned earlier are applied
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IDC’s SME funding portfolio
• SME transactions worth R12.2 billion were approved involving 2 900 businesses since July 1995
• SME transactions make up 24% of total IDC approvals
SME approvals: July 1995 to June 2004
0
20
40
60
80
100
120
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
% of total IDC number
0
100
200
300
400
500
600SME number as % of total IDC number
Number of SME approvals
Number
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IDC’s SME funding within sectorsSME approvals by sectors: July 1995 to June 2004
0 2 4 6 8 10 12 14 16 18 20
Electricity, gas & water supply
Construction
Hotels & restaurants etc
Transport, storage & communication
Community, social & personal services
Electrical & electronic products
Financial, insurance and business services
Mining & quarrying
Wood, paper & printing
Other manufacturing
Wholesale & retail trade
Clothing, textiles & leather products
Machinery & metals products
Food, beverages & tobacco
Chemicals & other mineral products
Agriculture, hunting, forestry & fishing
% of total
0 2 4 6 8 10 12 14 16 18 20
% of total SME number
% of total SME value
• SME transactions dominant within Agriculture sector in number terms (18.2%)
• SME transactions dominant in Chemicals sector in value terms (16.5%)
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IDC in Provinces
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IDC approach to provinces
• IDC looks for inappropriate
distribution to exploit
opportunities
• Comparative advantage in
sectors
• Addressing market failures
• Capacity building for third tier
Government through
Development Agency
• IDC in discussion with
Provincial Development
Corporations to address:
•Risk management capacity
building
•Training
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IDC’s total funding in provinces
IDC approvals by provinces: July 1995 to June 2004
0 5 10 15 20 25 30 35
Free State
North West
Limpopo
Mpumalanga
Eastern Cape
Northern Cape
Kwazulu-Natal
Western Cape
Gauteng
% of total
0 5 10 15 20 25 30 35
% of total number
% of total value
• Gauteng dominant in number of approvals (32% of total IDC approvals)
• Western Cape dominant in value terms (23% of total IDC approvals)
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• IDC BEE exposure remains high in Gauteng and Kwazulu-Natal
• IDC making inroads in poorer provinces ie Limpopo
• IDC is aiming at closing expectations gap from BEE companies and operating partners ie. through transfer of skills
BEE approvals by provinces: July 1995 to June 2004
0 9 18 27 36 45
Northern Cape
Free State
Limpopo
North West
Mpumalanga
Eastern Cape
Western Cape
Kwazulu Natal
Gauteng
% of total
0 9 18 27 36 45
% of total number% of total value
IDC’s BEE funding in provinces
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IDC’s SME funding in provincesSME Approvals by Province: July 1995 to June 2004
0 5 10 15 20 25 30 35
Free State
North West
Limpopo
Mpumalanga
Eastern Cape
Northern Cape
Kwazulu-Natal
Western Cape
Gauteng
% of total
0 5 10 15 20 25 30 35 40
% of total SME number
% of total SME value
• Most approvals dominant in Gauteng, Western Cape, and Kwazulu-Natal
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• Mostly Gauteng & Western Cape import raw materials from other provinces for processing in manufacturing and services, creating sustainable jobs and profitability
• All other provinces which net exporters of primary raw material to urban based provinces (Gauteng and Western Cape) and internationally, hence erratic job creation and profitability
Provincial sector competitiveness
0% 20% 40% 60% 80% 100%
FREE STATE
NORTHERN CAPE
EASTERN CAPE
MPUMALANGA
LIMPOPO
WESTERN CAPE
NORTH WEST
AFRICA
KWAZULU NATAL
GAUTENG
Agriculture
Agroprocessing
Chemicals
Metals
Mining
Other
Services
Textiles
Wood
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Steel plantCold rolled steelTourismMineral sandsPersimmonsBiotechnology…
Table grapesPistachio nutsDiamonds…
Carbon blackAutomotive catalystsWood plantations Aluminium smelterRefrigerated containers…
Ferrochrome…
ChemicalsGold…
Aluminium smelterWood plantationsFertilisersMineral sands – titanium oxide…
Stainless steelChemicals…
PlatinumTeaWood plantationsPhosphates…
Paper millsPorcelain tilesX-Ray machines…
IDC exploiting provincial competitiveness
• IDC funding strategy
takes advantage of
provincial sector
competitiveness
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IDC’s major projects in the pipeline
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IDC’s Development Agencies in provinces
• Agency Development Department was established in 2002
• Total funding value of R14 million through Agencies
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IDC involvement in Government
prioritised sectors
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•IDC is taking advantage of
opportunities in:
•Agriculture
•Mining
•Tourism
Maximizing the above sector
potential for Job Creation, BEE,
SME, Geographic spread and
rural development
Maximising priority sectors’ opportunities
Examples of deals include:
• Keboes Fruit Farms (Agriculture)
• Rustenberg Minerals (Mining)
• Chuene Resort (Tourism)
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Keboes Fruit Farms
• Technical• Marketing
• 1200 jobs created• Empowerment & training strategy
in place
Project Fact SheetSector: Table Grapes
Town: KakamasProvince: Northern Cape
IDC & RCF Exposure: R49 mJobs created: 1200
Export oriented: Yes
Karsten Boedery(Pty) Ltd
Keboes FruitFarms (Pty) Ltd
Workers’ Trust
BMFI (Pty) Ltd
IDC warehouses shares(19.6%)
• Managerial involvement• Overseeing empowerment & Training
RCF warehouses shares
25%
50%
25%
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Rustenberg Minerals
Project Fact SheetSector: Mining
Town: PilanesbergProvince: North-WestIDC Exposure: R9.1 m
Total transaction value: R26 m
Jobs created: 132
Africa Mining Trust
Rustenberg Minerals Development
Corporation (Pty) Ltd
Mampa Investment (Pty)
LtdIDC warehouses shares
(19.6%)
• Managerial involvement• Access to existing
infrastructure• Overseeing training and
procurement for the benefit of local communities
Development Impact
• 132 jobs created• Broad based Empowerment• Compliance with Mining Charter
• Provides technical expertise
• Marketing• Transfer of skills
44%
56%
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Chuene Resort
• 28 jobs created• Broad Empowerment in place
Project Fact SheetSector: Tourism
Town: PolokwaneProvince: Limpopo
IDC Exposure:R1.85mJobs created: 28
Investment facilitated: R3m
LIMDEV
Chuene Resort
Chuene Community
Bally Chuene45%
30%
25%
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Conclusion
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- monitoring developments in a dynamic environment (global & national fronts)
- challenge: being flexible to quickly respond to change
- achieving its goals of prosperity for all
• Focus on Government’s policy
objectives (BEE, SME, Rural and
Women Development)
• Apply a commercial approach based
on sound business principles
• Provide a unique combination of
resources (capital & knowledge)
• Gearing itself for the future by :
In conclusionIDC will continue to ….
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THANK YOU