Post-recession, the global economy remains fragile. Forecasts indicate that the economic recovery continues to be burdened by the persistent Eurozone debt crisis. In turn, this has impacted significantly on the local economy.
The Eurozone remains one of South Africa’s principal trading partners and, therefore, reduced demand in this monetary union has been affecting our export-oriented sectors, particularly manufacturing. The Asian region, in turn, has been experiencing a slowdown in growth, with adverse implications for our exports of minerals as well as other value-added products.
Naturally, such prevailing conditions would impact on IDC’s business and its clients. Against the backdrop of such persistent economic uncertainty, especially in markets that are critical to South Africa’s economic growth prospects, the 2011/12 financial year proved challenging.
As a result, the period under review was characterised by immense resilience as we consolidated our efforts to implement IDC’s short- to long-term developmental goals aligned to those of the shareholder, the South African government. Our steely resolve to further strengthen investment in the economy despite persistent challenges demonstrates our commitment to growing South Africa’s industrial capacity. This report acknowledges our achievements and challenges. It also reflects on the environment in which the IDC operated in the period under review.
Implementing the Leadership in Industrial Development Strategy
The Leadership in Development strategy implemented in the period under review is beginning to impact on the Corporation’s activities. It has already led to an increased number of funding approvals with a large portion of our funding going towards green related industries. As part of our objective to establish the IDC as a driver of a thriving local green industry, our Green Industries SBU proactively sought and identified projects that required both development and growth assistance in this sector.
We remain focused on developing a pipeline of projects in this sector so that we can build on this momentum. Despite the challenging economic environment, the IDC continued to play a counter-cyclical role by further strengthening its investment in the economy as shown in the increase in funding approvals. Given the competing interest for highly specialised skills required to drive the Corporation’s development goals, the IDC recognises the need for a strong human capital base as shown in initiatives such as its talent management, succession planning, employee wellness and management skills training programmes. In addition, the Innovation Department continues to formulate ideas to improve client experience. Our relationship with the Economic Development Department (EDD) has enabled us to identify bottlenecks affecting the implementation of specific projects hampering economic and industrial growth. Consequently, we have experienced an improvement in a number of areas, notably on the issuance of water licences for projects. This has resulted in improved turnaround times for project implementation and development.
To further stimulate industrial development, our focus has been on capacitating other financial institutions. One such example is the establishment of Small Enterprise Finance Agency (sefa) – a wholly-owned subsidiary of the IDC primarily focused on developing Small, Medium and Micro Enterprises (SMMEs).
Going forward, the focus will be on ensuring that sefa remains effective, efficient and relevant to the needs of SMMEs. Through the introduction of direct lending and planned improvements in its product offering, we expect that sefa will play a critical part in supporting the small business environment – a segment that has the potential to alleviate the country’s high levels of unemployment.
Ensuring that cos-effective funding for businesses remains our priority, we continue to seek alternative, cheaper sources of funding. In the year under review, we concluded a R2 billion agreement with the Department of Labour aimed at both creating and saving jobs. We also secured R500 million low-cost funding from KfW, a German development bank, to encourage and promote investments in both energy efficiency and renewable energy in South Africa.
These funding initiatives complement our ring-fenced funds such as the Gro-e scheme, which was structured to create jobs.
To better understand our client needs, we embarked on a series of roadshows where we engaged with entrepreneurs and other stakeholders across the country. One of the major concerns that emerged out of the exercise was the need for the IDC to improve on its response times, particularly to requests for funding. We have since reviewed our processes and identified key areas where we could improve without impeding on our risk assessment capabilities. The results of our interventions are indicative of much improved efficiencies including reduced turnaround times.
We have also implemented tools such as an internet-based application tool, making it easier for businesses to access funding. Face-to-face assistance to prospective clients has been improved through the establishment of a pre-investment business centre at our head office as well as setting up additional satellite offices in the different provinces (see map on page 4).
While we affirm our commitment to improve on our service levels, we have noted with great concern a worrying trend in incidences of misrepresentation by some businesses seeking funding. Such practices only serve to stifle lending even to genuine businesses. The IDC won’t condone such practices.
Although there has been an improvement in our electricity and water consumption (see page 71), we are implementing a project that will further reduce our operation’s impact on the environment. By utilising the Green Energy Efficiency Fund (GEEF), we will assist other businesses to also reduce their impact on the environment thereby making a real difference in lowering the local economy’s carbon footprint.12