PRESENTATION TO THE SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS (NATIONAL COUNCIL OF PROVINCES) Lumkile Mondi Chief Economist and Head of Research and Information Industrial Development Corporation of South Africa
Corporate profile • Self-financing state-owned development finance institution(Act No 22 of 1940) • Provides financing to entrepreneurs engaged in competitive industries • Follows normal company policy and procedures in its operations • Pays income tax at corporate rates and dividends to its shareholder • Independent Board of Directors • Reports on a fully consolidated basis, with its Annual Report freely available to the public IDC’s head office in Sandton, South Africa
Vision and mission “To be the primary driving force of commercially sustainable industrial development and innovation to the benefit of South and southern Africa” • Contribute to the generation of balanced, sustainable economic growth in South Africa and Africa • Economically empower the South African and African population • Promote entrepreneurship through the building of competitiveindustries and enterprises based on sound business principles
Operational structure CEO/President Khaya Ngqula Manager in the Office of the CEO Mnathi Mcambi COO Kutoane Kutoane Corporate Secretariat Nomini Rapoo 14 strategic business units (SBUs), focussed on specific economic sectors Projects Jaco Kriek Services Sectors Gerrit van Wyk Industrial Sectors Raisibe Morathi Internal Audit Eva Sam Professional Services Geoffrey Qhena Legal Services & General Counsel Tony Tshivhase Finance and Funding Gert Gouws HR and Support Services Lesé Matlhape Marketing & Corporate Affairs Neo Sowazi Business Planning and Strategy Riaan Joubert Information Technology Joel Mpshe Project and Structured Finance Stephan Vermaak Corporate Finance Joanne Coetzee
Total Staff Complement As at 31 May 2003 470 1 9 31 93 186 150 President/CEO EVP’s/COO/CFO SBU/Dept Heads SAM/SPM/Specialists Professional Administrative & Support
Staff Composition : Male May 2002 (Total Male 240) May 2003 (Total Male 258)
Staff Composition : Female May 2002 (Total Female 194) May 2003 (Total Female 212)
Employee Age Profile (48%) (25%) Number of staff (18%) (8%) (1%) Age Average age : 38
Core strategies Provide risk capital to a wide range of industrial projects Identify and support opportunities not addressed by market Maintain financial independence Establish local and global partnerships in projects benefiting SA or Africa Build on and invest in human capital
Financial instruments • Equity • Quasi-equity • Commercial debt • Wholesale & bridging finance • Share warehousing • Guarantees • Export/import finance • Short-term trade finance • Wholesale venture capital Flexible Deal Structuring
The financing process Initial Screening Basic Assessment Term Sheet Due-diligence Decision-making Legal Agreements Disbursements Post investment management
One Finance Entity After-care Business unit investment Divestment (Debt repayment/ exit) Funding IDC Interest / Dividends • Balance sheet • Borrowings • Mature investments • Development funds Capital repayments (debt) Proceeds from exit (equity) The investment cycle
Sectoral focus Projects Division Oil, Gas & Related Products Oil, gas and upstream chemicals Food, Beverages and Agro-industries Agriculture, food, beverage and marine sectors Resources and Beneficiation Mining, minerals and metals Private and Public Partnerships Private sector participants in e-government, energy, privatisation initiatives, transportation and IT and telecommunications
Sectoral focus (continued) Industrial Services Division Chemicals and Allied Industries Chemicals, rubber and plastics, non-metallic mineral products, textiles, clothing, leather, footwear Basic iron and steel, casting/foundries, structural and other fabricated metals, machinery, motor vehicles, parts and accessories, and other transport equipment Metal Based Products Wood, Paper & Other Forestry, logging, sawmilling and articles of wood, furniture, pulp and paper, articles of paper or paperboard and other manufacturing Entrepreneurial Mining and Jewellery Junior mining, mining related activities, acquistions of mining assets by HDPs and jewellery
Sectoral focus (continued) Services Sectors Division Hotels, guest houses and lodges, cultural villages, conference and convention centres; leisure and entertainment facilities and other unique tourism projects. Tourism Publishing of books, brochures, newspapers, journals, recorded printing of published materials, reproduction of printed materials and recorded media, films and video recordings, feature films, documentaries and television series Media & Motion Pictures Techno Industries Information technology, telecommunications, electronics and electrical industries Wholesale funding to intermediaries, who manage and administer finance on behalf of the IDC, on-lending to individual entrepreneurs Wholesale & Bridging Finance Various venture capital funds focussed on technology, biotechnology, mining and empowerment Wholesale Venture Capital Facilitation and funding of health, education and empowerment Health and Education
Empowerment strategy IDC (BEE) process of support through: • The continuation, implementation and procurement of • outsourcing policies and programs that encourage • the economicempowerment of the historically • disadvantaged people (HDP), emerging businesses • and entrepreneurs; and • Encouraging the entry of black empowerment • entrepreneurs into the new sectors of the economy • as well as the traditional industries and sectors • where entry barriers are noticeably high.
Procurement from HDPs 2002/03 Target: Procure at least 55% of goods and services from companies with HDP ownership of more than 25% 2002/03 Achievement: Procured R58.3 million (58%) from empowerment companies 2003/04 Target: Procure at least 55% of goods and services from companies with HDP ownership of more than 25% and 30% from companies with HDP ownership of more than 50%
Empowerment strategy 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 procurement policies
Empowerment strategy • Financed 625 (cumulative) black entrepreneurs • Approved R 5.6 bn (cumulative) to BEE • Increased BEE approvals from 3 entrepreneurs to 191 p.a • Increased value of approvals from R 61 000
Income 2 000 1 500 1 000 R million 500 0 -500 98 99 00 01 02 Net attributable income Operating income Capital and Reserves 30 25 20 R billion 15 10 5 0 98 99 00 01 02 Capital and Reserves Financial track record • 2001/2002 produced a record net attributable income of R 1.8 billion; • Balance sheet remains strong. Capital and reserves grew at an average rate of 18% per annum over the past five years to reach R 26.4 billion at the end of the 2001/2002 financial year.
Number and Value of IDC Approvals 600 8 7 500 6 400 5 Number Value (Rbn) 300 4 3 200 2 100 1 0 0 98 99 00 01 02 Number Value Jobs Created 30 000 25 000 20 000 Number 15 000 10 000 5 000 0 98 99 00 01 02 Direct Jobs Created Developmental track record • In 2001/2002: • the IDC approved finance to the value of R 4.9 billion, representing 6.9% of private sector fixed investment in South Africa; • Assisted more than 500 entrepreneurs; • Finance to empowerment firms represented 37% of the number and 42% of the value of approvals; • IDC’s finance will create more than 23 000 new job opportunities.
Fully committed to the New Partnership for Africa’s Development (NEPAD) Identifies sound investment opportunities Assists in the financing of exports of SA capital goods & services Provides consultancy services NEPAD A catalyst & partner for investments in productive capacity throughout Africa
NEPAD • Sugar • Mining • Mining • Fishing • Energy • Pharmaceuticals • Mining • IT • Mining • Tourism • Pharmaceuticals • … • Energy • Mining • Telecoms • Petroleum • Tourism • Tourism • Tea • Coal • Tourism • Mining • Energy • Aluminium • Titanium • Cotton • Sugar • Aquaculture • … • Hotel • Mining • Horticulture • Tourism • IT • Table grapes • Mining • Food processing • Energy • Tourism • Aquaculture • Telecommunications • Wattle • Distillery • Frozen foods • Mining Includes projects implemented, under implementations and under consideration
Prospects for the future • Greater involvement in social services sectors such as healthcare and education; • Targeting poor provinces • Play a leading role in facilitating broad based empowerment; • Entrench IDC’s financial sustainability through improved internal systems; • Improved outward communication regarding IDC’s developmental role; and • Increased human resource development within the IDC to ensure continuation of the high levels of professionalism within the corporation.