Media Room

Press Releases 2010

IDC invests through the recession and focuses on supporting a new Growth Path for South Africa

Industrial Development Corporation, financial results for the year ended March 2010.

Highlights

- Continued positive impact on the economy despite the recession:

  • 25 000 jobs created and or saved (2009: 26,700)

  • Net funding approvals of R9.4 billion, mostly for new capacity or expansions (2009: R10.8 billion)

  • Funding of R1.4 billion approved to assist companies to withstand the impact of the recession

  • Saved 8 800 jobs as a result of funding companies in distress.

- Proactive steps taken to lower the cost of funding to businesses through UIF partnership

- Momentum gained in developing green industry

- Realigned strategy towards driving and facilitating IPAP2

Overview

The Industrial Developmental Corporation (IDC) today announced that it had approved funding amounting to R9.4bn for the financial year ended March 2010.

Speaking at the development lender’s results presentation, IDC CEO Geoffrey Qhena said:” In a contractionary environment with weak demand and difficult trading conditions for companies, the IDC managed to keep its lending activities relatively stable, fulfilling our market and economic intervention role. While jobs created are down, being able to preserve jobs through our interventions is a significant achievement. I am also pleased that 15% of our funding went to assisting distressed firms, in an attempt to play a stabilising role. Importantly, in the midst of the crisis, we were still able to focus on intensifying our longer term activities of preserving and growing labour absorptive manufacturing capacity and prioritising the foundation for a competitive greener industrial base.

In a difficult year that saw South Africa enter its first recession in 17 years, the IDC’s lending activities created or saved 25 000 jobs. The group’s revenue was down 48% and profit declined by 60% to R2.2 billion. Notwithstanding this, the IDC intensified its lending activities and continued its focus on economic expansion with 65% of new funding approved allocated to start up companies or expansionary activities. The IDC also approved R1.4bn in funding for distressed companies during the year under review, despite difficult prevailing credit conditions. The IDC estimates that 8 800 jobs were saved as a result of funding activities aimed at mitigating the effects of the economic crisis.

Over the period, the IDC has begun to make headway in laying the foundations for a Greener Economy based on funding which is focussed on: alternative energy sources such as wind and solar power; improved energy management including co-generation and conversion to more efficient technologies; resource management including waste management and recycling; and the development of supporting industries.

The IDC undertook proactive efforts to reduce funding costs for companies focussed on creating and saving jobs, as evidenced by the launch of the Unemployment Insurance Fund (UIF) scheme.

Throughout the period the organisation continued to provide ongoing support for existing clients through restructuring of funding facilities for those facing financial difficulties.

Referring to the challenging economic environment Mr. Qhena said: “The take up for the distressed funding was lower than anticipated. Plans are in place to address this with industry workshops and other forums that will be implemented in the current year.”

It is important to note the ongoing support that the IDC’s Workout and Restructuring unit provides, as a matter of policy, to embattled clients."

Leadership and contribution to national objectives

The IDC is the key agency for development of South Africa’s industrial sectors and is focussed on implementation of a New Growth Path for the country.

The organisation has already realigned its strategy to enable it to drive and facilitate execution of the Industrial Policy Action Plan (IPAP2). This is part of the IDC’s commitment to a new economic Growth Path geared towards creating sustainable jobs and developing new industries, particularly green industries, with a focus on high-impact projects which have greater potential to create and sustain jobs while creating linkages to smaller projects.

Significant investment has already commenced in line with the IDC’s IPAP2 commitment to revitalise growth in the manufacturing industry, assisting South African companies to take advantage of opportunities in SOE Capex programmes to drive job creation.

Outlook

The IDC is poised to play a stronger role in helping government realign and expand the South African economy. In order to support the New Growth Path and government’s desire to revitalise the manufacturing base, the IDC will look at leveraging its strong balance sheet to drive implementation of IPAP2. In certain instances, this could see the IDC take the lead on project origination. This will require deeper resources and increased risk taking. The IDC will continue to play the role of partner, looking to attract and support private sector players. In that regard, even though the IDC may increasingly take the lead on investments to influence supply, activities will continue to be driven by private sector capacity and demand. Therefore even though the IDC is committed to leveraging the balance sheet, prudent management of it remains vital so that the lender is still able to align demand and capital requirements as projects come on stream.

Ends

Issued by Brunswick on behalf of the IDC
Itumeleng Mahabane/ Rachel Quigley/ Nthabiseng Mofokeng
Tel: +27 11 502 7300

For further information contact:

IDC

Kesebone Maema
Head: Corporate Communications
Tel: +27 11 269 3891
Cell:+27 82 560 2661

Mphilo Dlamini
Publicity Manager
Tel: +27 11 269 3293
Cell:+27 71 224 6503

Mandla Mpangase
Public Relations Manager
Tel: +2711 269 3282
Cel: +27 82 591 8274

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