IDC funding approval near all-time high

21 October 2010

South Africa’s Industrial Development Corporation (IDC) approved R9.4-billion in funding in 2009/10, helping to save or create some 19 300 jobs as the country recovered from its first recession in 17 years.

Briefing Parliament’s economic development portfolio committee in Cape Town this week, IDC executive Shakeel Meer said that R4.8-billion was disbursed last year, just short of the record R10.8-billion of 2008/09.

Jobs target missed

The 19 300 jobs created fell below the IDC’s target of 37 745 jobs, despite 9 651 of these being created in rural areas – above the target of 8 554 jobs targeted for rural areas.

Meer attributed the low jobs figures to some clients having cancelled their applications for finance with the onset of the recession, and to lower than expected uptake in distressed funding – with only R1.4-billion of the R6.1-billion allocated for distressed firms being taken up.

However, the IDC was running several promotional workshops and activities to boost the awareness of this funding.

Support for manufacturing

Meer said the IDC last year approved R376-million to vehicle component and transport equipment manufacturers, which was expected to save 1 500 jobs.

A further R292-million in funding was approved to companies in the clothing sector to improve their competitiveness, which was expected to save or create 2 100 jobs.

The IDC was also increasing its focus on green investments, targeting projects in wind and solar power, energy management and recycling. Among these were 11 wind projects, three concentrated solar power and four solar voltaic projects.

However, Meer said that setting up wind farms created very little jobs, so it was important that South Africa began manufacturing technologies for renewable energy, rather than importing these.

Financing suppliers

Among its other funding commitments, the IDC was focusing on financing suppliers of rail equipment for the Passenger Rail Agency (Prasa) and Transnet, as well as suppliers to Eskom’s build programmes.

These included R45-million to woman-owned business in upgrading commuter rail coaches and R30-million to a company manufacturing ducting for the Medupi power station.

The IDC also approved R34-million to help abalone farms in the Western Cape to expand and allow black entrepreneurs to acquire a stake in the business.

Over a third of IDC’s total investments went into the capital-intensive mining sector, with the highest number of loans going to the agro-processing sector and to businesses in the trade, catering and accommodation sector.

About two-thirds of loans went the way of Gauteng province, with about five percent of loans to the rest of the country. Operations in the Free State benefited from the least number of loans.

Moving toward riskier investments

The IDC continues to hold significant shareholding in various companies, including fertliser company Foskor, where it holds a 59% stake, Hulett Aluminium (30%) and Mozambican smelter Mozal (24%).

Among its other results, the IDC funded 124 small and medium-sized businesses and approved R1.8-billion to fund businesses in other African countries.

Impairments increased from 10.2% in the 2006 financial year to 16.3% in the last financial year, in line with the IDC’s move towards riskier investments.

Source: BuaNews