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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Notes

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 callcentre@idc.co.za