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Industrial Development Corporation

Industrial Development Corporation. 30 June 2011. Financial Results. Abridged Statements of Comprehensive Income. Abridged Group Statements of Comprehensive Income for the Year Ended 31 March. Sources of Income. Sources of Income. Operating Expenses.

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Industrial Development Corporation

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  1. Industrial Development Corporation 30 June 2011

  2. Financial Results

  3. Abridged Statements of Comprehensive Income

  4. Abridged Group Statements of Comprehensive Incomefor the Year Ended 31 March

  5. Sources of Income Sources of Income

  6. Operating Expenses

  7. Impairments as a % of Total Financing at Cost Impairments as a % of Total Financing at Cost

  8. Impairments as a % of Total Financing at Market Value Impairments as a % of Total Financing at Market Value

  9. Abridged Statements of Financial Positionas at 31 March 2011

  10. Abridged Statements of Financial Positionas at 31 March 2011

  11. Balance Sheet Items for the Last 5 years Balance Sheet Items for the Last 5 years

  12. Borrowings Borrowings

  13. Listed Investments Trend Analysis Listed Investments Trend Analysis

  14. IDC Group – Strengthened Financial Base 100 140% 133% 130% 123% 90 120% 109% 80 100% 70 89% 86% 57.0 80% 60 77% 80% 45.6 71% 70% 67% 48.2 50 76% R billion 33.1 59% 69% 60% 54% 40 63% 48% 29.2 23.6 42% 39% 37% 30 40% 35% 31% 31% 29% 29% 29% 28% 31.6 27% 15.4 20 36% 13.4 11.3 35.7 9.2 25% 33.6 16% 16% 10.4 20% 14% 10% 27.6 22.9 10 21% 19% 15.4 14.3 12.8 12.8 10.5 13.2 11% 0 0% 8% 8% 7% 5% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Fair value revaluation Excl. fair value revaluation Debt/Equity ratio Debt/Equity ratio (excl. reval.) Debt/Equity ratio (incl. commitments) Debt/Equity ratio (incl. commitments, excl. reval.)

  15. Highlights Value of Funding Approvals • Net funding approvals for South African based development of R8.4 billion at the highest levels ever; • Impact on South African job creation improved with approvals during the year expected to create 19 650 full time jobs and save an additional 11 650 with a combined impact on employment of 31 300 • An additional 8 100 jobs expected to be created through direct linkages to activities in the informal economy. • Alignment of operations with New Growth Path (NGP) and establishment of a Green-Industries business unit; • 97% of new investment approvals in the priority sectors as identified in the NGP. • Success with sourcing of alternative funding: • R1.5 billion approved to companies through the UIF bond, creating and saving more than 17 000 jobs; • Low cost funding secured from an international lender for the promotion of energy efficiency initiatives. • Successful interventions in manufacturing to sustain and increase job creation: • R646 million approved for businesses in the clothing and textiles industry to curb job losses and increase competitiveness with an additional R648 million approved for schemes managed on behalf of the dti targeting the industry. • R1.7 billion approved for investments in the motor vehicle industry covering both assembly as well as component manufacturers, some ofwhich were in distress. Impact on South African Employment

  16. Supporting Industrial Capacity Development Distribution of Value of New Funding Approvals (2010/11) • The manufacturing industry received the largest portion of funding. • R1.7 billion approved for motor vehicles and components industry • R646 million was approved in the clothing and textiles industry to support distressed companies and assist with competitiveness improvements; • Infrastructure investments related mostly to funding for the construction industry and telecommunications infrastructure, with hospital infrastructure also receiving a significant portion of funding; • Funding in the mining value chain was considerably lower than in previous years. Funding approved focussed on coal mining; • Although funding the green economy is still a new area for IDC, several transactions were funded, including the roll-out of solar water heaters and a co-generation project. Infrastructure(16%) Agricultural Value Chain(7%) Mining Value Chain(16%) Manufacturing(27%) Green Economy(13%) Tourism & High Level Services(3%) Knowledge Economy(4%) African Development(10%) Not Aligned to NGP (3%) Excluding cancellations

  17. Western Cape Northern 12% Cape Eastern Cape 2% 28% North West 3% Mpumalanga 7% Free State Limpopo 4% 5% KwaZulu Gauteng Natal 27% 12% Regional Distribution of Funding Distribution of Value of New Funding Approvals (2010/11) • 49% of approvals during the year destined for developments in provinces other than Gauteng, the Western Cape and KwaZulu-Natal compared to the 36% that these provinces contribute to the SA economy. • Examples of industries supported by province: • Eastern Cape • Motor vehicle production and components • Assembly of televisions • Hospital • Free State • Chicken abattoir • Gauteng • Motor vehicle production and components • Pharmaceuticals • KwaZulu Natal • Electricity co-generation • Motor vehicle components • Jewellery • Limpopo • Agro-industries • Mpumalanga • Mining services • Electricity pylons • North West • Motor vehicle components • Northern Cape • Malt production • Western Cape • Film studios • Clothing • Agro-industries

  18. Sector Focus

  19. IDC Focus Area: Green Industries The establishment of a unit focusing on green industries allows IDC to cover a range of sectors related to environmental products and services Energy efficiency Fuel based energy • Cleaner production / Industrial Efficiency • Heat, Electricity & building efficiency • Waste to Energy • Co-generation • Transport Efficiency Renewable energy: Non-fuel power • Local manufacturing related to renewable energy & energy efficiency • Services related to renewable energy & energy efficiency • Concentrated Solar Power • Wind Power Generation • Solar Photo Voltaic Power Bio-fuels • Bio Diesel Emission and pollution mitigation • Bio Ethanol • Water & treatment • Air pollution control • Clean stoves • Waste Management/ Recycling 19

  20. Green Industries • Solar Academy of Sub-Saharan Africa • The IDC approved funding for the roll-out of 200 000 solar water heaters to the South African market. The company has a diversified portfolio of projects including the mass roll out of the low pressure SWH, high pressure SWH and investigating opportunities within the renewable energy space. • The low pressure SWH project is the first programmatic CDM SWH Carbon Project globally to be registered at the UNFCCC. • The project has rolled out 60,000 LPSWH units to the impoverished RDP Communities, uplifting their standards of living by providing them with hot water on tap, benefiting at least 240,000 individuals. • The project supports localisation and in doing so is currently establishing a local manufacturing plant. The manufacturing facility would allow the local content of the product offering and service, creating 535 local job opportunities. The second phase of training will see 10% of all installers being trained to become qualified plumbers. Gauteng North West Free State KwaZulu-Natal Eastern Cape Western Cape

  21. Green Industries • SA Calcium Carbide • SA Calcium Carbide is the only producer of calcium carbide in Africa, through the beneficiation of local limestone and coal mineral resources. • The company uses a large portion of the electricity supplied to the town of Newcastle. • Apart from the strain put on the electricity supply, recent tariff hikes will result in significantly higher production costs. • IDC will provide funding to assist with the installation of a co-generation facility, utilising furnace off-gas currently being flared, to reduce the company’s reliance on the national grid for electricity. • Co-generation promotes energy efficiency and reduces the use of coal in power stations and hence qualifies for carbon emissions reductions. KwaZulu-Natal

  22. IDC Focus Area: Agro-Industries By focussing its efforts on agro-industries IDC will increase demand for labour intensive primary agricultural products and add value to currently produced products Agro-Industrialisation Demand side Supply side • International demand • Import replacement • Value addition • Other (niche and new products) • Improved competitiveness Primary agriculture Creating backward linkages to drive job creation and rural development Legend IDC focus areas Linkages to other industries 22

  23. Agro-Industries • Peppadew™ International • Peppadew International (Pty) Ltd manufactures products based on the unique “Sweet Piquanté Peppers” and markets them locally and internationally under the Peppadew™ brand. • The company started in the late 1990s and has a processing facility in Nkowankowa, Limpopo, sourcing produce for processing through contracts with farmers in the surrounding region and its operations in Peru. • The economic crisis negatively affected the company in 2009 and projected sales growth failed to materialise. As a result, Peppadew received a working capital facility from the IDC to meet working capital requirements for the 2011 production season. • The IDC funding will save 1 700 jobs in the factories and farms contracted to supply the peppers. • The funding offers additional potential for the IDC to partner with Peppadew to fund further land reform projects and establish a wholesale facility to fund emerging black farmers • The funding will also contribute towards the preservation of a uniquely South African international brand. Limpopo

  24. Agro-Industries • The Noodle Factory • This start-up in the Western Cape, will manufacture instant noodles, which would previously have been imported from Asia.. • The IDC approved a loan for the Noodle Factory for the establishment of a greenfields noodle production factory. The funds will be used for the construction and completion of the factory, for working capital and to acquire equipment. • This project will beneficiate low value commodities (wheat flour and vegetable oil) into higher value products. • This operation will create 21 direct jobs in Philippi and it has the potential to create more jobs once it expands. Western Cape

  25. Agro-Industries • Green Farms Nut Company (GNFC) • Part of the biggest nut processing operations in South Africa with processing factories in Mpumalanga, KZN and Limpopo. • Established in 1991 to process macadamia nuts in the Levubu area in Limpopo. • IDC approved a loan facility to Green Farms Nut to upgrade its existing factory and provide a more competitive service to both its growers and customers. • The upgrade will result in a doubling of capacity over the next five years. • GNFC, together with the European Union, supported the Vhembe Co-Operative, owned by ±350 Black Farmers for the establishment of macadamia production in the area. • The company is currently in talks with the local Ravele community to establish a joint venture to dehusk and dry nuts for the benefit of small scale emerging farmers. Limpopo

  26. Agro-Industries • Grainfield Chickens • GFC will be a new sizable chicken (broiler) abattoir in the Free State; • With a first phase capacity of slaughtering 160 000 chickens per day, it will be the fifth largest in the country; • At the end of the first phase of the project, it will be employing 780 people directly; • Suppliers to the project will be setting up their own chicken houses, adding to the employment impact of the project; • Through the project, c.a. 80 000 tons of maize will be beneficiated annually and imports of frozen chickens will be replaced. Free State

  27. Agro-Industries • Dynamic Commodities • Established in 1996 and relocated to Coega IDZ in 2006 with assistance from IDC; • Manufactures sorbet and other frozen fruit based products for the export market; • IDC provided various loans over the years and has recently approved another application for expansionary funding • Currently employs 860 people (annualised figure) with another 92 jobs (annualised) to be created. Eastern Cape

  28. IDC Focus Area: AutomotiveSector, Fabricated Metals and Capital Equipment IDC’s efforts in this industry revolve around increasing local content Automotive sector • Component manufacturers • Automotive assembly SOE Capex programmes creates demand for locally produced goods Downstream metals • Fabricated metals • Capital equipment Legend IDC focus areas Linkages to other industries 28

  29. Automotive Sector, Fabricated Metals and Capital Equipment • The Motor Vehicle Industry • IDC approved R1.7 billion in 16 transactions to companies in the motor vehicle assembly and components industries; • Funding approved to Ford Motor Company of SA to revamp its Silverton plant and upgrade its engine plant in Port Elizabeth; • Components and other equipment supported include: • Aluminium heat exchange and radiator tubes • Tooling and presses for the automotive industry • Exterior mirrors • Automotive plastics • Cross car beam assemblies • Assemblies for catalytic converters • Exhausts and mufflers • Interior carpets • Door insulators • Loadbin liners • Truck trailers • Chassis frame assemblies • Forged wheel hubs • Automotive control cables Gauteng North West KwaZulu-Natal Eastern Cape Western Cape

  30. Automotive Sector, Fabricated Metals and Capital Equipment • Africa Cellular Towers • The company was established in 1999 to fabricate, supply and erect lattice towers for the telecoms industry; • In 2007 the company took a decision to diversify by expanding into the electrical transmission and distribution industry; • The company was awarded tenders by Eskom to install power lines and approached IDC to assist with the funding required to deliver on these contracts; • IDC approved funding to cover the purchase of equipment, working capital requirements as well as a guarantee facility; • The funding provided by IDC will assist the company to retain its existing labour force and create another 220 full-time equivalent jobs during the implementation of the contracts. Limpopo North West Mpumalanga

  31. Automotive Sector, Fabricated Metals and Capital Equipment • Electro Inductive Industries • The company was established in 1999 with IDC’s support as a small fledgling service and distribution centre for electrical transformers; • Have been able to grow to a fully fledged original equipment manufacturer with the third highest market share in the domestic market; • During the year, IDC provided funding to the company to sustain its operations through renewal of revolving credit facilities and guarantees as well as conversion of portions of its revolving credit facility to loans; • The transaction saved 220 jobs. Western Cape

  32. IDC Focus Area: Other Manufacturing Industries Other Manufacturing Industries • Clothing, textiles, footwear, leather • Plastics and chemicals • Pharmaceuticals • Non-metallic minerals • Advanced manufacturing • Etc.

  33. Other Manufacturing Industries • Econo-Heat™ Energy Efficient Appliances • The company was formed in 1990 to manufacture innovative and safe wall mounted heaters that are more energy efficient compared to competitor products; • It has a strong presence in the local market and exports to 38 countries across the globe; • They employ 109 workers in their Wetton, Cape Town factory; • The company, which has been expanding over the past few years, has been funded for working capital requirements to deliver on local and export orders. • The funding will allow the company to sustain current operations and fulfil potentially growing orders. Western Cape

  34. Other Manufacturing Industries • Ellen Arthur • Ellen Arthur was originally founded in 1959 as a cut, make and trim manufacturer of blouses for a major South African retailer. • It has since expanded to design and manufacture a range of ladies clothing; • The company saw margins reducing and ultimately losing orders to domestic and international competitors as retailers put pressure on manufacturers to cut prices in an effort to maintain their margins; • IDC provided a guarantee to allow the company to retain its overdraft facilities at a commercial bank that is vital for the company’s working capital requirements; • IDC’s facility will assist the company to reconfigure their business to cater for a wider range of clients and diversify its client base; • 460 jobs have been saved as a result of the transaction. Western Cape

  35. Other Manufacturing Industries • Chic Shoe Manufacturers • Chic Shoes was established in 2004 following the closure of a shoe factory in Cape Town. This was done partly through funding raised from IDC; • The company has grown from strength to strength and is ready to expand following an opportunity to supply several footwear ranges to a major South African retailer; • With most of the funding IDC provided in the past paid up, the company approached IDC for new funding and a guarantee facility to assist the company with working capital requirements for the expanded capacity was approved; • 64 new jobs will be created in addition to the 120 currently employed. Western Cape

  36. Other Manufacturing Industries • Synthecon Surgical Sutures • Synthecon is a local sterile surgical sutures manufacturer and distributor based in Isando. The company manufactures about 400 different sutures based on needle type and size, which are used to close the edges of wounds or incisions and to repair damaged tissue. • Synthecon has achieved a number of milestones since inception, including SABS certification for its products. • The company has successfully penetrated the export market, providing sales in Malawi, Mozambique, Swaziland, Uganda, Rwanda and Mauritius. • The initial funding created 45 jobs, mainly for women, with an additional 13 jobs created through the latest funding package. Gauteng

  37. Other Manufacturing Industries • WG Wearne • WG Wearne was incorporated in 1910 by the Wearne family and is a significant player in the ready mix concrete, aggregate and building materials market. The company has successfully grown since inception and has been profitable until 2008. • Wearne’s operates across the country and employs people at its quarries, as well as through its distribution system. • The economic crisis and the downturn in the construction industry resulted in declining demand for the company’s products. • During the year IDC approved funding to assist the company with its turnaround strategy and in the process save 700 jobs. Gauteng Limpopo North West Free State KwaZulu-Natal

  38. Other Manufacturing Industries • Vektronix • Vektronix was established in 1974 as SATV and was one of the first television manufacturing plants in the country; • The company has since expanded to other products and is today a cost-effective electronics contract manufacturer; • The company had been assembling CRT televisions for a major South Korean manufacturer for 6 years and in 2009, the company was awarded a contract to assemble flat panel (plasma, LCD) televisions for the same manufacturer; • Initially the company applied for a guarantee facility from IDC to enable it to meet the requirements of its international supplier. • This was subsequently increased to meet additional demand in the previous financial year based on the company’s good performance. Eastern Cape

  39. Other Manufacturing Industries • Pharma-Q • Pharma-Q contract manufactures and packages pharmaceuticals from its facility in Industria, Gauteng; • The company services more than 30 leading global companies for a diverse range of products including ampoules, dental cartridges, eye drops, oral syrups, sprays, topical ointments, tablets and capsules; • As a result of changed regulations by the Medicines Controls Council, the company had to upgrade its facilities and at the same time modernise its plant and introduce new equipment; • IDC approved funding to enable the company to upgrade and modernise , this should enable it to more aggressively enter the export market. Gauteng

  40. IDC Focus Area: The Mining Value Chain IDC is involved in funding extractive mining activities and encourages local downstream beneficiation The Mining Value Chain • Stage 1 beneficiation (e.g. smelted or refined products) • Extraction • Stage 2 beneficiation (e.g. alloys) • Stage 3 beneficiation (e.g. semi-manufactured articles) • Stage 4 beneficiation (e.g. fabricated articles) 40

  41. The Mining Value Chain • Opencast Mining Services • Diesel Power Opencast Mining is an opencast contract mining and earthmoving contractor. Diesel Power was established in the mid 1980’s and is now one of the largest opencast contract mining and earthmoving contractors in SA; • The slowdown in the world economy resulted in a surplus of second-hand fleet, which significantly reduced used fleet prices. • This, together with the tougher credit climate, resulted in Diesel Power not being able to replace its fleet timeously resulting in downtime which negatively impacted the performance of the business since March 2009. • The IDC facility will enable Diesel Power to replace a portion of its fleet thereby reducing maintenance costs and downtime and restoring the business to profitability, saving 1 357 permanent jobs. Mpumalanga

  42. The Mining Value Chain • Creative Design Manufacturers • Creative Design Manufacturers was established in 1995 with the aim of providing quality gold jewellery chains to the local and export markets; • During its previous expansions, the company received funding from IDC which has been fully repaid. • The company currently manufactures yellow gold chains, bangles and earrings and it needed working capital to expand its product range to include white gold jewellery; • The working capital facility approved in 2010/11 will assist the company to expand its operations and create 4 new jobs in the process. KwaZulu-Natal

  43. IDC Focus Area: Tourism, creative industries and high-level services Tourism, creative industries and high-level services • Film • ICT • Tourism • Healthcare services • Etc.

  44. High-Level Services, the Knowledge Economy, Tourism and Film • Cape Town Film Studios • Cape Town Film Studios was built in response to a call by the Western Cape Provincial Government, the City of Cape Town and Wesgro for proposals to invest in and build a film studio in Cape Town; • The construction of the 4 sound stages and 2 workshops have been completed and these are the only studios in Africa suitable for the production of big budget movies; • Shooting of the first film to use the studio, the big budget new Judge Dredd production completed earlier in the year and at the height of the production saw 400 South Africans and 50 top internationals working at the studios; • The SA Film value chain will benefit from attracting more and bigger films into SA for production. • IDC’s investment in the studio will provide local movie makers with world class facilities. Western Cape

  45. High-Level Services, the Knowledge Economy, Tourism and Film • Cross-Med Health Centre – Mthatha Private Hospital • Cross-Med Health Centre, trading as Mthatha Private Hospital will construct a new 52 bed hospital in Mthatha; • The hospital will provide ambulatory surgical services, inpatient surgical, medical and maternity services including primary healthcare and diagnostic services; • IDC’s funding, which includes an equity portion will result in the creation of 205 permanent jobs as well as 224 jobs during the construction phase. Eastern Cape

  46. Prospects

  47. IDC Sectoral Focus Areas R102 billion funding available in the next five years. R11.1 billion Logistics, infrastructure and cross-sector projects The green economy • Logistics • Industrial infrastructure • Green and energy saving industries • Bio fuels R22.4 billion Tourism, creative industries and high-level services • Craft and film • Biotechnology • Business process services R7.7 billion Agricultural value chain • Tourism • Agro-processing • Forestry, paper & pulp, furniture • Mining related technologies • Healthcare • ICT R14.8 billion Manufacturing activities • Automotives, components, medium and heavy commercial vehicles • Metals fabrication, capital and transport equipment The mining value chain • Mining • Downstream mineral beneficiation • Advanced manufacturing • Plastics and chemicals • Clothing, textiles, footwear, leather R22.1 billion • Pharmaceuti-cals • Oil and gas Other funding areas : Venture Capital: R500 million Funding to distressed companies: R2.5 billion • Grreen industry components R20.8 billion

  48. Prospects – Some Projects in the Pipeline • Titanium and Zirconium Beneficiation • South Africa is the world’s second largest producer of titanium minerals after Australia; • These ores are exported in basic beneficiated form of titanium slag and zirconium sand without beneficiated high-value add; • To beneficiate these mineral ores into high-value added products, very specialised and complex technologies are needed; • Two years ago, the IDC collaborated with the National Empowerment Fund, Magnesium & Metals Ltd of Russia and Rare Metals Industries of SA by jointly investing R40 million in a pre-feasibility study to develop the project to beneficiate the ores; • This mineral beneficiation project employing the proven Russian technology aims to construct and operate an unprecedented and world-first pure metals refinery complex producing titanium , zirconium and silicon with their derivative alloys and products; • It is expected that the complex will create at least 2 800 permanent jobs when fully operational and in excess of 5 000 jobs during the construction phase; • Pure titanium and zirconium metals and their derivatives creates the potential for downstream local industries such as the production of micro-chips for computers and mobile phones, lightweight alloys for the aerospace, semi-conductors, photo-voltaic panels to harvest solar power and various industrial products for the medical, leisure and power generation industries; • It is envisaged that the decision whether to proceed to a bankable feasibility study will be made later in the year.

  49. Prospects – Some Projects in the Pipeline • Bus and Green Transport Programme • A collaboration by IDC and the dti to promote local jobs in the medium and heavy commercial vehicle manufacturing industry and to promote greener public transport; • Internally generated by the IDC team, in response to the industry dynamics in the sector and in pursuit of the objectives of the NGP and IPAP2; • The local production leg focuses on restoring and building new manufacturing capacity in the sector in light of significant capacity decline over the past few decades; • The objective of the program is to capitalise on increased domestic demand resulting from the expected recapitalisation of bus fleets nationally; • IDC funding will be made available for plant establishment and expansion and a funding scheme for qualifying buses is being designed; • Similar arrangements are being put in place for trucks, taxis and yellow goods; • Mini- and midibus taxis are likely to see the largest investments in this sector, and the IDC are currently negotiations with several applicants, about their bids for setting up taxi manufacturing/ assembly plants in SA on a phase-in basis; • Co-funding agreements with the large commercial banks are being negotiated, thereby crowding in private sector funding in support of local jobs; • The green transport leg capitalises off the green economy focus of the NGP; • IDC is promoting the generation and utilization of biogas from landfill sites, sewage sludge, food wastes, agricultural wastes, and non-food portions of energy crops; • Off-takes for the gas from municipalities and other levels of government, for application in their own transport fleets is being envisaged.

  50. Prospects – Some Projects in the Pipeline • Malting House • The project envisages the design, construction and commissioning of a barley malting plant in the Northern Cape province; • A significant amount of malted barley is imported; • The project will supply local as well as regional brewers. • Gypsum Rapidwall Project • The project proposes the development of a plant to manufacture readymade building panels from waste material generated by Foskor; • The Environmental Impact Assessment has been approved to erect the Rapidwall factory at a site in Alton, Richards Bay; • National Nuclear Regulator approval is being sought for the use of gypsum in the Rapidwall panels; • Work is progressing on agreements for the supply of gypsum, the off-take of panels and technology licensing to enable the commencement of construction.

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