It gives me pleasure to present the IDC’s 2015 Integrated Report. The report comes at a time when government, in celebrating two decades of democracy, has reaffirmed its commitment to radical transformation, building on existing - and creating new - economic opportunities needed to realise the promise of our democracy.
|Achieving these levels of growth requires the IDC to be more confident in driving a developmental agenda in investments and unlocking gamechanging industrial opportunities. Indeed, the IDC continues to take up the challenge of increasing funding levels biased towards unlocking jobs-rich industrial activities, addressing other developmental outcomes such as the development of black industrialists, whilst also remaining financially sustainable.|
We have bold goals on job creation and inclusive growth, as set out in the National Development Plan and its implementation strategies: the New Growth Path jobs drivers and the action plans on industrial policy and agriculture.
The strategies can best be summarised through six i’s:
- Infrastructure development, to lay the foundations for growth and development, building energy plants, transport and logistics systems, information and communication technologies and water infrastructure
- Industrialisation, to improve the size and strengths of the productive sectors of the economy which in turn is critical to beneficiation of the mineral and agriculture resource base and the growth of services sectors
- Investment, including attracting domestic and foreign direct investment to expand the country’s productive economy and smart industrial funding partnerships by public entities with the private sector
- Innovation, to bring new ideas and the products of research and development to economic activity and provide opportunities for, and an incentive to grow the quality of, our skills base
- Inclusion, to enable more South Africans to benefit from growth that creates decent work opportunities, that supports small business development, draws young people into the economy and promotes broad-based economic empowerment; and
- Integration, through increased trade and investment on the African continent, building a larger consumer market for our goods and services.
These six areas are connected: inclusion is not simply about ensuring a fair sharing of the fruits of growth, it is also a source of growth when millions of people are lifted out of poverty and become active economic contributors; integration provides the economic logic for deeper levels of investment into our industrial base and infrastructure.
The manufacturing sector remains key to government’s plans for economic development. It is encouraging to see that the largest portion of IDC’s funding for 2015, R5.2 billion, was destined for the manufacturing sector. Continued support for this sector will be critical if South Africa is to achieve its job creation goals. We are beginning to take advantage of the localisation opportunities afforded by South Africa’s National Infrastructure Plan to rebuild our industrial capacity. The high levels of investment in industries such as basic metals and machinery and equipment attests to IDC’s efforts in this area.
While investing in new capacity, the country also needs to ensure that jobs in established industries are not lost in the face of competition from abroad. IDC continues to play an important role in this area as well as can be seen from its continued commitment to support industries such as clothing and textiles.
Almost five years ago, the New Growth Path highlighted the green economy as one of the drivers for growth. The IDC has invested over R14 billion to date in the Renewable Energy Independent Power Producers Programme (REIPP), bringing state muscle to help create a new industry. In addition to funding for the core renewable energy infrastructure, the IDC has also supported the establishment of manufacturing enterprises to produce components for the projects. The first few of these projects, including the KaXu concentrated solar plant and the Kakamas Hydro Electric Power plant, are now operational. They are delivering electricity to the grid and sustaining economic activity at a time when the country’s generation capacity is facing severe strain.
As the private sector develops more appetite to fund these projects, I challenge the IDC to find other critical areas where infrastructure development can assist industrial development and to identify and develop the manufacturing projects that will provide the inputs into these so that the country can reap more sustainable long-term industrialisation while addressing infrastructure constraints and bottlenecks.
IDC’s funding activities over this past year are expected to create and save about 20 300 direct jobs. This is in addition to the almost 160 000 jobs that were facilitated by its activities in the previous 5 years. These numbers provide context to the significant impact that IDC already has in the economy and on addressing our unemployment challenge.
Government has been working on complementing the redistributive approach to black economic empowerment with a model where we support the emergence black industrialists who run their own factories, agro-processing plants, mines, renewable energy operations and tourist establishments. This is vital if South Africa is to tap - and strengthen - the incredible entrepreneurial resources present amongst its citizenry.
Through its policy of focussing on expansionary black economic empowerment, IDC has put itself in a position to leverage the experience that it has gained to support this initiative. I am confident that the 41 black industrialists that IDC supported through its funding activities, amounting to R2 billion, in 2015 will bring a new innovative perspective to South African business. Funding amounting to R756 million was made available to women entrepreneurs, unlocking the energy and skills that women bring to the economy. I expect IDC to match this success and, in addition, do much more on youth empowerment going forward.
Small business remains important as a source of innovation, job creation, growth, and in many instances in the local context, a necessity as the only source of income for households. Together with sefa, its wholly-owned subsidiary, IDC approved over R3 billion to support small and medium enterprises. This funding will benefit more than 1 300 SMMEs.
While the annual report documents many successes in the past year, its results reflect too the growing headwinds that the economy faces. These include the sharp decline in the global demand for commodities (and with it, a big drop in prices and earnings), slowing growth in China and sluggish European economies, domestic energy constraints and a drought that is affecting agricultural output.
It is during times like these that development finance institutions need to play a strong countercyclical role as demonstrated by the IDC in this last year when, compared to previous years, it increased its levels of funding to industries outside renewable energy. I repeat the challenge that I put to the IDC to approve R100 billion in new investments over the five years, which would lift the rate of project approvals and disbursements from the already higher base we have been able to create in the past five years. At the same time, IDC should maintain a prudent approach to its investment philosophy and continuously balance decisions that influence risk and sustainability so that development can be maximised.
This year, IDC is celebrating 75 years of existence. It is a good moment to use its experience for bold initiatives that will help grow and transform the economy, create jobs and bring young entrepreneurs into the economic mainstream.
I thank the Chairperson of the Board of Directors, Ms Busisiwe Mabuza and her Board of Directors for providing guidance to this critical entity. I appreciate the work done by the previous Chairperson, Ms Monhla Hlahla and the other directors who retired during the year under review, for their dedicated service to the Corporation. To the CEO, Mr Geoffrey Qhena, whose term as CEO was extended recently, as well as the rest of his management team and staff, I thank you for the service to the organisation and the trust that South Africa has put in you to manage this national asset in a way that supports broad-based industrialisation to the benefit of all citizens.
Minister of Economic Development