idc results 2011/12 presentation to the portfolio committee on economic development 30 october 2012

IDC Results 2011/12Presentation to the Portfolio Committee on Economic Development

30 October 2012

2

0

2

4

6

8

10

12

14

16

05/06 06/07 07/08 08/09 09/10 10/11 11/12

Valu

e (R

'bn)

Value of funding approvals

Highlights

• Record levels of funding activity:• 55% increase in the value of funding approved -

R13.5 billion in 2011/12.• Reaching more businesses with a 33% increase in the

number of funding approvals - 293 funding approvals in 2011/12.

• Increasing impact on employment:• 45 900 jobs expected to be created and saved in South Africa

compared to 39 400 in 2010/11.• 48% of these expected jobs will be in rural areas.

Value of Funding Approvals

3

-

5

10

15

20

25

30

35

40

45

50

55

05/06 06/07 07/08 08/09 09/10 10/11 11/12

Full-

time

equi

vale

nt jo

bs (t

hous

ands

)

Direct impact on 2nd economy jobsSavedExpected to be created

Highlights (continued)

• Lowering the cost of funding for businesses:• Sourcing of an additional R2 billion from the UIF for funding

more labour intensive businesses.

• Financial sustainability underpinned by profits of R3.3 billion, a 22% increase from previous financial year.

• Emerging as a leader in the development of green-industries:• Participation in funding for 12 of the projects that received

preferred bidder status during the first round of the Renewable Energy Procurement Programme (REPP).

• Launched the R500 million Green Energy Efficiency Fund (GEEF) to provide low-cost funding to businesses to implement energy saving technologies.

Impact on Jobs

4


• Assisting to improve competitiveness in the clothing and textiles industry:• R501 million approved, expecting to create and save 2 400 jobs. • Administering the CTCIP and PIP on behalf of government:

• CTCIP - 24 transactions benefiting 123 companies were approved since inception, with an average benefit of R1.2 million per company.

• PIP - 344 grants totalling R1.0 billion approved since inception.

• Localising components for SOE Capex and renewable energy. • Local production of solar water heaters gathering pace with

approvals for two local manufacturers.

Expansion31%

Start-up60%

Distressed businesses

7%

Ownership changes

etc.2%

Application of Funding Approved (2012)

5


• Developing key sectors including motor vehicle components and pharmaceuticals.• Localisation of components for the motor vehicle industry

continues with approval for funding for component manufacturers supplying plastic interior components, chassis frame assemblies, electrical wiring harnesses and body components.

• Rural development through agro-processing and developing community forestry projects.• Funding was approval for two community forestry projects, one in

the Eastern Cape, and one in KwaZulu-Natal

Existing client40%

New client60%

Businesses Receiving Funding (2012)

6

IDC Funding Activity

2012 2011% change

2011 to 2012

Number of approvalsBefore cancellations 327 253 29%

After cancellations 293 221 33%

Value of approvalsBefore cancellations R18.8 bn R11.5 bn 63%

After cancellations R13.5 bn R8.7 bn 55%

Value of disbursements R8.5 bn R6.4 bn 32%

0

50

100

150

200

250

300

350

0

2

4

6

8

10

12

14

16

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12N

umbe

r

Valu

e: R

'bn

Value of approvals (net of cancellations)Value of disbursementsNumber of approvals (net of cancellations)

Trends in IDC Funding Activity

Indicators of IDC Funding Activity

7

• IDC aims to increase its funding levels to have a greater impact, directly and indirectly, on employment.

• Approvals during 2012 are expected to create and save 45 900 direct jobs when projects are implemented.

• Of the total number of jobs, 4 500 are as a result of funding approved to intermediaries for on-lending to businesses where draws have taken place.

• 48% of the total jobs are in rural areas, mainly as a result of mining and green industries with a significant number of jobs saved in agriculture.

• The largest impact on job creation will be felt in the mining industry, with more than 10 600 jobs expected to be created – related to funding for a large platinum mine in the North West province.

• Large contributors to the jobs saved were the agricultural industry and distressed funding for a large

furniture manufacturer.

Impact on Jobs

Direct Jobs Expected to be Created and Saved

-

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12

Full-

time

equi

vale

nt jo

bs

Direct impact on 2nd economy jobsSavedExpected to be created

8

Supporting Government Priority Sectors

ICT and Other Services (1%)

Tourism & Media (4%)

Manufacturing (25%)

Green Economy (30%)

Mining and Beneficiation (28%)

Agriculture and Forestry Value Chains (8%)

Infrastructure (3%)

Sectoral Distribution of Funding Approvals• The green-economy, mining value chain and manufacturing industries dominated funding activity.

• Green economy:• Supporting government’s renewable energy procurement

programme;• Mining value chain:

• Development of a new low-cost platinum mining project with potential to further develop downstream industry;

• Manufacturing:• Manufacture of busses;• Manufacture of cleaning chemicals;• Manufacture of windscreens for the motor vehicle industry.

9

Increasing Economic Development across South Africa

• 62% of funding approvals outside Gauteng, Western Cape and KwaZulu-Natal;

• Examples of industries supported by province:Eastern Cape• Wind energy generation• Assembly of televisions• Production of automotive glass• Dairy productsFree State• Concrete articlesGauteng• Bus bodies• Soaps and detergents• ClothingKwaZulu-Natal• Metal products• Textiles• Sugar processingLimpopo• Coal mining• Citrus processing• Hospital PPP

Mpumalanga•Coal mining•Metal products•TourismNorth West•Platinum mining•Solar power generation •Sports tourismNorthern Cape•Solar power generation •Agriculture disaster relief•Agro-processingWestern Cape•Wind power generation•Tourism•Agro-processing

Eastern Cape11%

Free State<1%

Gauteng23%

KwaZulu Natal6%

Limpopo9%Mpumalanga

2%

North West20%

Northern Cape21%

Western Cape8%

Provincial Distribution of Funding Approvals

10

Regional Representation and Rural Development

• Regional offices being supplemented by satellite offices allowing increased access by entrepreneurs to IDC;

• Role of regional offices expanded to assist with improving IDC’s turnaround times.

0%

10%

20%

30%

40%

50%

60%

70%

0

1

2

3

4

5

6

7

8

9

07/08 08/09 09/10 10/11 11/12

Shar

e in

Tot

al A

ppro

vals

(%)

Valu

e of

Fun

ding

App

rova

ls (R

'bn) Value Share in Total

Funding Approvals in Rural Areas

Regional Presence

11

- 500 1 000 1 500 2 000

Green

Chemicals

Agro

Healthcare

Other

R'm

Cost exposure

Commitments

Regional Breakdown of Portfolio – Eastern Cape

Eastern CapeTotal Exposure: R5.8 billion

Non-Rural: 59%Rural: 41%

Black women owned: <1%Black owned: 22%

Black empowered: 23%Non-BEE: 55%

Rural sectoral exposure

12

- 100 200 300

Agro

Tourism

Textiles

ICT

Other

R'm

Cost exposure

Commitments

Regional Breakdown of Portfolio – Free State

Free StateTotal Exposure: R374 million





13

- 10 20 30 40 50

Mining &Beneficiation

Tourism

Chemicals

R'm

Cost exposure

Commitments

Regional Breakdown of Portfolio – Gauteng

GautengTotal Exposure: R19.2 billion

Non-Rural: 99%Rural: <1%




14

- 50 100 150 200

Agro

Mining &…

Forestry and…

Textiles

Other

R'm

Cost exposure

Commitments

Regional Breakdown of Portfolio – KwaZulu-Natal

KwaZulu-NatalTotal Exposure: R5.2 billion


Black women owned: 2%Black owned: 16%



15

- 100 200 300 400 500 600 700

Mining &…

Agro

Tourism

Green

Other

R'm

Cost exposure

Commitments

Regional Breakdown of Portfolio – Limpopo

LimpopoTotal Exposure: R4.6 billion


Black owned: 44%Black empowered: 28%

Non-BEE: 27%


16

- 100 200 300 400 500 600 700 800 900

Forestry and…

Mining &…

Healthcare

Tourism

Other

R'm

Cost exposure

Commitments

Regional Breakdown of Portfolio – Mpumalanga

MpumalangaTotal Exposure: R2.4 billion





17

- 1 000 2 000 3 000 4 000 5 000

Mining &…

Metal, Transport…

Agro

Healthcare

Other

R'm

Cost exposure

Commitments

Regional Breakdown of Portfolio – North West

North WestTotal Exposure: R6.2 billion





18

Regional Breakdown of Portfolio – Northern Cape

Northern CapeTotal Exposure: R12.4 billion





- 1 500 3 000 4 500 6 000

Green

Mining

Agro

Other

R'm

Cost exposure

Commitments

19

- 100 200 300 400 500 600

Agro

Green

SHIP

Tourism

Other

R'm

Cost exposure

Commitments

Regional Breakdown of Portfolio – Western Cape

Western CapeTotal Exposure: R4.9 billion





20

Distressed Funding

SectorValue

committed (R'm)

Jobs to be created and

savedNumber

Agriculture and agro-processing 112 2 982 5Forestry, wood, pulp and paper 498 10 765 6Mining 594 4 589 6Textiles and clothing 319 4 958 28Chemicals, rubber, plastics and non-metallic minerals 471 2 821 16Basic metals 407 434 3Fabricated metals 313 1 613 10Machinery and equipment 579 1 330 9Motor vehicles, parts and accessories 1 685 7 589 29Tourism, trade and catering 19 120 4Transport and logistics 156 1 012 5Other 162 1 589 13Total 5 314 39 802 134

ProvinceValue

committed (R'm)

Jobs to be created

and savedNumber

Eastern Cape 930 4 397 13Free State 23 214 5Gauteng 1 780 16 043 51KwaZulu Natal 875 6 138 21Limpopo 4 85 1Mpumalanga 374 4 440 4North West 258 2 967 3Northern Cape 70 267 1Western Cape 732 5 252 34Outside SA 269 0 1Total 5 314 39 802 134

Sectoral Breakdown of Distressed Funding (2008/09 to 2012/13)

Regional Breakdown of Distressed Funding (2008/09 to 2012/13)

• 33% of the companies that were funded through distressed funding were black-empowered;• 23% of the funding were for empowered companies.

21

Industrial Development –Television Assembly

– Vektronix was the first TV manufacturing plant established in South Africa.– IDC’s involvement with Vektronix began with 2008, when it funded the

acquisition of 30% of the equity in Vektronix on behalf of a BEE grouping.– The IDC approved an initial $5 million guarantee in 2009 to allow the

company to assemble Samsung flat-panel televisions.– This was increased to $10 million in 2010 and more recently, a larger $15

million facility was approved. – IDC is supporting local assembly of flat-panel televisions from one of the

world’s largest producers.– Setting the base for increased local electronics manufacturing.

• Local assembly of products which would have been imported• Creating jobs in a high-tech industry

22

Industrial Development – Automotive Glass Production

– PG Group is the largest automotive and building glass corporation in sub-Saharan Africa.

– The company was impacted by the global recession, a strong rand, weakened local and export markets.

– IDC’s funding will allow the company to improve its competitiveness and save 430 jobs in the process.

– The transaction supports the drive to establish South Africa as a producer of motor vehicles for local and international markets with high local content.

• Retention of industrial capacity • Localising production of motor vehicle components

23

Industrial Development – Dairy Products

– Coega Dairy is a greenfields project formed by dairy farmers in the Eastern Cape to set up a modern ultra high temperature milk processing facility.

– It will produce custard, condensed milk, and butter. – The plant will increase the demand for milk in the Eastern Cape by 18%,

enabling expansion of the dairy farming industry. – The project directly employs 100 employees with more jobs being created in

services to the dairy.– Linkages to primary agriculture has the potential to create an additional 490

jobs in rural communities.

• Promoting rural development through development of agro-industries• Job creation through backward linkages with primary agriculture

24

Industrial Development – Soaps and Detergents Production

– Bliss Chemicals manufactures MAQ washing powder, a rapidly growing powder detergent in a market previously controlled by multinationals.

– IDC has funded the establishment of Bliss in 2003 and has continued to be a partner through the company’s growth.

– The new funding is to be used for working capital required for the company to expand its capacity and product mix.

– 915 additional people will be employed in the expanded plant.– Through a long-term partnership between IDC and Bliss, we are increasing

competition and offering consumers more choice.

• Increasing market competition

25

Industrial Development – Clothing and Textiles

– Thula Sindi started developing his own fashion range which hit the runway at South African Fashion Week 2006.

– He has been nominated as a finalist in numerous designer contests and showcased his collections in New York, Paris, Beijing, Hong Kong, and throughout Africa.

– Thula has developed very strategic working relationships with cut, make and trim (CMT) operators in the Johannesburg CBD. The largest of these CMT operators developed from a cooperative of 6-8 highly skilled ladies who produce the majority of the garments for the brand.

– IDC approved funding to Thula Sindi to enable the company to make the most of the increasing demand. Products are available through various leading retailers and boutiques around the country.

• Finding solutions to stabilise and grow the clothing and textiles industry by focussing on niche areas

26

Industrial Development – Sugar Processing

– The Gledhow Sugar Mill operates in the KwaDukuza area of KwaZulu-Natal.– IDC approved funding for the mill to on-lend to growers that will grow cane

on fallow land.– The 1 900 ha to be replanted will create 650 jobs in the area.– The largest number of growers that will gain from this transaction is small-

scale farmers that benefited from land restitution.– The intention is for these farmers to be provided with the necessary skills to

allow them to upscale operations over time.

• Rural development and agro-processing

27

Industrial Development – Citrus Processing

– African Realty Trust is a fruit growing and processing company.– It is embarking on a refurbishment of its processing plant as well as

replanting some of its citrus orchards to remain viable and sustainable in the long term.

– The project will create an additional 580 jobs and sustain 93 existing jobs.– The investment will ensure that the company remains competitive in the

global market and boost export volumes.

• Rural development and agro-processing• Export industry

28

Industrial Development – Hospital PPP

– Due to a lack of funds for maintenance, the Phalaborwa Hospital was in need of refurbishment.

– Clinix Health Group and Phalaborwa Health Group was selected through a tender process to renovate and operate the hospital as a 62 bed private hospital, including the installation of equipment.

– Under the PPP agreement, the group will operate the hospital for 15 years after which ownership reverts back to the state.

– The hospital’s rates will be lower than other private hospitals and improve access to healthcare in the area.

• Promoting access to health services

29

Industrial Development – Metal Products

– Tubular Construction Projects won a contract to fabricate and supply steel platforms, fans, piping, support plate work and a ducting system for Eskom’s Kusile power station.

– The company has to gear-up its workshops and requires working capital to execute the contract.

– Due to skills shortage, it has also established an in-house apprenticeship and training programme.

– An expected 680 new jobs will be created by the project.– The project is supporting the aim of Eskom to increase local sourcing of

components for its Capex programme and is giving people practical skills.

• Local procurement for SOE Capex

30

Industrial Development – Renewable Power Generation

– IDC Providing funding for 12 out of the 28 projects that received preferred bidder status;

– These projects will generate 558MW of electricity: 150MW from concentrated solar; 63MW from solar photo-voltaic; and 345MW from wind;

– Making use of natural resources in underdeveloped regions in the Northern Cape, Eastern Cape, Western Cape and North West;

– !Khi Solar One: 50 MW electricity generation capacity; Incorporates storage capacity to continue generating at night; Will be the largest concentrated solar power project in the world at the time of

completion; Combines elements of proven technologies that have not been implemented

jointly before.

• Establishing a new industry• Lowering carbon intensity of SA’s economy• Creating opportunities for local manufacturing• Rural development• Benefits to local communities

31

Industrial Development – Disaster Relief

– IDC provided funding to the LandBank and GWK for on-lending to farmers that were affected by the 2010/11 floods and the subsequent drought conditions.

– For the LandBank facility, R34 million was disbursed to 54 farmers, securing 900 jobs, mostly in KwaZulu-Natal – encouraging cooperation between DFIs.

– For the GWK facility, funding of R120 million was disbursed to 52 farmers, securing 1 900 jobs in the Northern Cape.

• Securing jobs in rural areas

32

Industrial Development – Tourism

– The Deaf Federation of SA, the umbrella body that coordinates and facilitates the services to the deaf and hard hearing communities in SA, main source of income comprises of grants which has been declining over the past few years.

– The Federation will establish a 122 room (3 star) hotel in Newlands, Cape Town, specifically designed to cater for the needs of people with disabilities.

– This business shall provide the deaf community of SA with a commercial alternative to their reliance on subsidies and enhance product provision and choice to people with disabilities.

• Allowing ongoing training of deaf people.• Improving travel facilities for people with disabilities.

33

Agency Development and Support

• 34 agencies supported to date;• Given the challenges facing development in

outlying rural areas, further funding of R27 million was approved in 2011/12 for 9 agencies to expand their work;

• R265 million was leveraged by agencies to expand their work (1:9 ratio of IDC investment to other funds obtained).

Agency Development Activity

34

Regional Development

Projects in the rest of Africa• IDC’s exposure to the rest of Africa stood at R6.2 billion on 31 March 2012;

• This represents 41 projects in 17 countries. • The bulk of the approvals revolves around:

• Mining• Industrial infrastructure• Agro-processing• Tourism (mainly hotels)

• IDC aims to be more proactive in its approach to the rest of the continent with the aim to integrate value chains and maximise the benefit to local industry.

35

Corporate Social Investment

Distribution of CSI Spend – 2011/12• Total CSI spend for the 2011/12 financial year was R18.9 million;

• Education:• Most important CSI focus area for IDC;• Focus on the Dinaledi Schools Project, initiated by the

Department of Basic Education, being the main beneficiary;• 30 schools have benefited through renovated laboratories and

new equipment;• 85 bursaries awarded to students to pursue tertiary

qualifications in science and technology, engineering and accounting.

• Economic development:• Efforts being channeled towards food security, business skills

development and craft development;• Nguni cattle project currently operational in 6 provinces with 158

farmers having been assisted.• Health:

• Examples of projects funded during the year include the renovation of Alexandra and Harry Gwala clinics’ X-ray rooms in Gauteng, providing Mafane Clinic in the Free State with clinical equipment and helping to rebuild one of the Red Cross Children’s Hospital medical wards.

Education, 44%

Economic development,

21%

Health, 14%

Employee volunteerism,

12%

Strategic interventions,

9%

36

New Initiatives to Increase Development Impact

• Rural Development– Spatial Interventions – Initiated in 2011. Allowing IDC to intervene effectively to address the socio-economic and

developmental needs of a particular targeted area. Currently reactive, but capacity is being created to enable a more proactive approach to these interventions.

– Social Enterprises – New initiative being piloted that aims to promote enterprises that place social and environmental issues and creation of social value as their primary purpose and have a long term strategy towards a degree of self-sustainability.

• Presidential Infrastructure Coordinating Commission (PICC)– IDC is managing the planning phase for the Saldanha-Northern Cape Development Corridor (SIP5);– Will potentially play a role in funding industrial projects identified in all of the Strategic Integrated Projects (SIPs);– Localisation office being set up to increase the levels of local inputs being produced for infrastructure projects.• Manufacturing Competitiveness Enhancement Programme (MCEP)– R765 million managed on behalf of the Department of Trade and Industry (dti);– Assisting manufacturers to access more affordable working capital facilities with a portion aiming to stimulate new or

underdeveloped markets, such as the boat-building industry.

37

Medium-term Prospects

• Green-economy – focus on increasing localisation of components and energy efficiency;

• SOE Capex and infrastructure development programmes – continue working with SOEs to identify and implement opportunities to shift towards local supply;

• Agro-processing – identify and develop import replacement opportunities;

• ICT – improve last-mile access and drive down communication costs;

• Healthcare – Localising pharmaceutical production;

• Tourism – underdeveloped tourism nodes;

• Media – developing a sustainable level of local production of films.

Financial Performance

39

Group2012

10 985

4 317

446

6 222

121 3 809

2 534 878

3 412 ( 2)

3 410

107

3 303

(4 155)

(852)

Foskor2012

5 152

3 739

97

1 316

76 1 132

260

260 3

263

79

184

( 5)

179

Abridged Statements of Comprehensive Income – R’m

Other subsidiaries, associates &

consolidation entries

549

578

28

(57)

45 (239)

227

2271

228

(1)

229

229

(2,799)

(2,570)

COST OF SALES

FINANCING COSTS

371 321

GROSS PROFIT 3 583 4 963

Other income Operating expenses

NET INCOME BEFORE CAPITAL GAINS Net capital gains

2 115

1 468355

2 916

2 047878

NET OPERATING INCOME Share of profit/(loss) of

equity-accounted investments

1 823(27)

2 925(6)

PROFIT BEFORE TAX

Taxation

PROFIT FOR THE YEAR

1 796

85

1 711

2 919

29

2 890

Effect of Other Compreh. income/(loss)

TOTAL COMPREH. INCOME/(LOSS)

10 558

12 269

(1 351)

1 539

REVENUE

Financing Activities

2011

3 954

2012

5 284

40

Abridged Statements of Comprehensive Income for the year ended 31 March 2012 – R’m

COST OF SALES

FINANCING COSTS

4 317

446

3 444

346

25

29

GROSS PROFIT 6 222 5 175 20

Other incomeOperating expenses

NET INCOME BEFORE CAPITAL GAINSNet capital gains

1213809

2 534878

1313 057

2 24936

(8)25

13nmf

NET OPERATING INCOMEShare of profit/(loss) of equity-accounted investments

3 412(2)

2 285633

49nmf

PROFIT BEFORE TAX

Taxation

PROFIT FOR THE YEAR

3 410

107

3 303

2 918

206

2 712

17

(48)

22

Effect of Other Comprehensive income/(loss)

TOTAL COMPREHENSIVE INCOME/(LOSS)

(4 155)

(852)

10 886

13 598

nmf

nmf

REVENUE

Group2012

10 985

Group2011

8 965

% Change

23

41

Sources of Income – R’m

42

Administration Expenses composition – R’m

* The cost-to-income-ratio excludes project costs

43

Impairments as a % of Total Financing

44

Abridged Statements of Financial Positionas at 31 March 2012 – R’m

ASSETS

Cash and cash equivalentsLoans and advancesInvestmentsPPE and InventoriesOther Assets

TOTAL ASSETS

Group2012

7 825 15 978 80 231 6 632 1 564

112 230

Group2011

5 828 12 053 81 971 5 838 1 116

106 806

% Change

34 33 ( 2) 14 40

5

EQUITY

Share CapitalReserves

Total equity attributable to holders of parentMinority shareholders’ interest

1 393 90 469

91 862 331

1 393 91 333

92 726 342

- ( 1)

( 1) ( 3)

LIABILITIES

LoansDeferred taxation liabilityCreditors and provisions

TOTAL LIABILITIES

TOTAL EQUITY AND LIABILITIES

9 923 7 290 2 824

20 037

112 230

6 677 5 011 2 050

13 738

106 806

49 45 38

46

5

45

Balance Sheet Items for the last 5 years – R’m

46

Borrowings - R’m

47

Commitments and Advances – R’m

48

Listed Investments Trend Analysis – R’m

12 893

20 698 14 648 16 125

20 853 19 317 19 782

6 183

12 844

6 802

14 645

19 836 21 830 22 243

5 492

8 080

6 344

8 519

9 127 7 894 9 516

4 621

7 716

2 863

3 263

3 173 1 973

1 262

4 401

7 722

3 824

4 488

5 498 4 491

4 210

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

2007 2008 2009 2010 2011 2012 25-Oct-12

Other

Arcelor Mittal

BHP Billiton

Kumba Iron Ore

Sasol

49

IDC Group – Strong Financial Base – R’m

50

Conclusion

Financial performance remains sound as reflected by increased profitability and a strong balance sheet, which enables us to assume high risk levels and support continued growth into the future.

The Industrial Development Corporation

19 Fredman Drive, Sandown

PO Box 784055, Sandton, 2146

South Africa

Telephone (011) 269 3000

Facsimile (011) 269 2116

E-mail [email protected]

idc results 2011/12 presentation to the portfolio committee on economic development 30 october 2012

Documents

funding levels

result of funding

lowcost funding

cost of funding

application of funding

value of funding approvals

number of funding approvals

idc funding activitytrends