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Industrial development is at the heart of our economic strategy and a key means to create jobs, expand the economy and combat poverty and inequality. The IDC is a key public institution that drives job-rich industrialisation in South Africa.

I am pleased therefore to receive this Annual Report which sets out the progress of the IDC in the past year and illustrates the bland figures with the human and enterprise stories that bring these figures to life.

It has been a tough year for industry: a global economy that grew slowly which placed pressures on our exports, a depressed commodity market that dramatically reduced demand and prices for many local minerals and the most severe drought in more than a century that impacted both on agriculture and on large industrial users of water.

wider, contextual factors affect the IDC portfolio very directly, particularly given the large exposure of the Corporation to key commodity markets: for example, the decline in mineral and oil prices accompanied by a global glut in steel, affected dividend incomes of the IDC in its mature legacy investment portfolio, an important source of funding for investment in new sectors.

In these tough conditions, the IDC is not only affected by the new market conditions, but is crucially a counter-cyclical investment force that crowds in private investment by showing a commitment to an investment-led recovery.

The prudent management of the IDC finances in better times places the institution in a position to respond to the new conditions. IDC investment included support for new enterprises, for existing companies to improve their competitiveness and productivity and for efforts to claw back parts of the domestic market lost to imports previously as well as to export more, particularly to the rest of the continent.

In the past year, the IDC approved R14.5 billion of new investment, its highest nominal level to date and an increase of 26% compared to the previous year. These investment approvals are expected to create or save 15 272 direct jobs, in sectors such as advanced manufacturing, metals fabrication and clothing and textiles.

But the volume of investment is not a sufficient metric to ensure that we meet key development goals. I am pleased therefore to note the following three developments:

  • To increase investment in youth empowered enterprises, the IDC approved projects worth R970 million for the year, a fourfold increase on last year’s R243 million. In 2013, the Youth Employment Accord was adopted at the Hector Pieterson Memorial in Soweto. We committed to do even more to stimulate youth entrepreneurship so that we can unlock the energy and enterprise of a connected, techno-savvy generation whose efforts are reshaping key parts of the global economy. The IDC was mandated to expand its efforts and it has shown it is prepared to back young people who have good business projects, passion, commitment and a preparedness to work hard.
  • To improve support for black industrialists and drive the broadening of wealth creation in the country, the IDC approved transactions involving 54 black industrialists with a capital commitment of R2.9 billion, an increase of 45%. These investments are expected to create more than 2 200 new jobs and support the evolution of empowerment programmes into a new, strongly pro-growth endeavour.
  • To improve funding for women-owned businesses, the IDC approved transactions worth R1.2 billion, an increase of 59% on the previous year and tapping the enterprise of women in the economy. The release of the IDC’s annual financial results during Women’s Month in 2016 is therefore very fitting!

The IDC provides a range of services to the state that is not fully captured in the financial reports of the Corporation, including a Unit that works on unblocking and facilitating infrastructure development, a team that provides quality economic analysis and a staff complement with significant sector industrial knowledge that can be used to improve policy-making.

Balancing these positive stories are challenges that the IDC must resolve: particularly to place key investments such as Scaw Metals (steel products) and Foskor (fertilisers) on a more commerciallysustainable path. These industrial giants play a key role in the economy and their turnaround is important both for the wider efforts to reignite economic growth and to ensure they do not drain the resources of the IDC. I have requested the IDC to place emphasis on finalising and implementing a strategy to manage these companies into sustainability.

The increase in approvals needs to be maintained in the year ahead and the rate of disbursements must be lifted significantly for the counter-cyclical effect to be realised. And to ensure that the investments are sustainable and impairment levels are maintained at prudent levels, the IDC should do this together with improving both its capacity to evaluate risk and to mitigate such risk through efforts to support businesses and the development of viable business plans.

South Africa needs to do more to export manufactured products in labour-intensive sectors and move away from the large reliance on the export of raw materials. The IDC has a role to play in driving that focus and leveraging opportunities from traditional sources of investment in Europe and the United States as well as the increasingly important BRICS partner countries. A good case in point is the agreement signed between a large Chinese auto-maker and the IDC that will see the first new light passenger vehicle assembly plant built in South Africa in more than 40 years.

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In the previous year’s annual report, I drew attention to six key “I’s” that underpin economic development, namely infrastructure expansion, industrialisation, investment, innovation, inclusion (social and economic) and integration of the continental economy.

This year, I wish to point to three critical “I’s” that should accompany these six, which are relevant to the IDC but which are also applicable to the wider economy:

  • Integrity: for the IDC to demonstrate the utmost probity and integrity in its consideration of applications, to treat all potential and current customers fairly without any improper consideration or payments and to actively combat fraud and corruption (“integrity to promote industrialisation”);
  • Institution-building: to build on the solid foundations of the institution by expanding its skilled staff base and improving performance against high economic and development targets set by the Shareholder. Institution-building includes attracting skills that go beyond the industrial banking function of the IDC to capabilities to initiate large new opportunities for the economy (“the next Sasol”);
  • Implementation: ensuring that the vision of government on deepening industrial development, expanding job creation, greening the economy and broadening the entrepreneurial base with black industrialists, youth and women – is realised (“a hundred jobs created is worth more than a thousand simply promised”).

The IDC operates in an economy shaped by many developments, global and local. We need to shape those that we can influence. It is clear that a broader agreement between social partners – business, labour and government – can help to reignite inclusive growth and creation of decent work opportunities. A stronger, more urgent national effort is required to address unemployment, poverty and inequality – solid job-rich industrialisation underpinned by social partnership can play a key role to achieve this. The IDC should encourage business and labour to work more closely at enterprise level in those companies that are in its portfolio and in this way help to strengthen inclusive growth and the fair sharing of the results of growth.

Finally, the IDC performance is driven by the IDC-family: let me thank Ms Busi Mabuza and the Board of the IDC which provides a strong governance framework for the institution, Geoffrey Qhena, who leads the IDC with deftness in challenging times and the staff who translate the goals of the IDC into practical investible projects and opportunities.

sig patel

E Patel

Minister of Economic Development

30 June 2016