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Title: IDC%20Annual%20Report%20-%202006/07%20Accelerating%20Sustainable%20Economic%20Development


1
IDC Annual Report - 2006/07Accelerating
Sustainable Economic Development
  • Geoffrey QhenaCEO

14 November 2007
2
Mission and Vision
  • To be the primary driving force of commercially
    sustainable industrial development and
    innovation to the benefit of South Africa and
    the rest of the African continent
  • Contribute to the generation of balanced,
    sustainable economic growth in South Africa and
    Africa
  • Economically empower the South African population
  • Promote entrepreneurship through the building of
    competitive industries and enterprises based on
    sound business principles

3
IDCs Role
  • To support sustainable development, IDC invests
    in businesses showing economic merit
  • Some businesses are not often funded because of
    perceived high risks
  • IDC views this as a market failure
  • IDC does more detailed assessments and funds
    investments which would not otherwise happen
  • IDC plays a critical role in assisting industries
    to develop, in ways which meet South Africas
    needs
  • ASGISA
  • Supporting industrial policy development
  • Investments in targeted sectors
  • Cooperate with national and provincial
    government, DFIs, and other COTII institutions

4
IDCs Objectives
  • Sustainable job creation
  • Regional development
  • Rural areas
  • Provincial spread
  • Townships
  • IDZs
  • BBBEE
  • SMEs
  • Entrepreneurs
  • Enhance balance of payments position by
    encouraging exports
  • Support industrial development in the rest of
    Africa
  • Achieve these goals while remaining financially
    sustainable

5
2006/07 Annual Highlights
 
  • Facilitated the creation of a record of more than
    33 000 direct jobs in South Africa with a
    further 3 900 in the rest of Africa as a result
    of funding activities
  • R5.9 billion in funding approvals for 241
    enterprises
  • About 24 of the jobs to be created and 20 of
    approvals to three provinces with highest
    unemployment rates
  • 69 of the number of approvals relate to SMEs
  • 162 transactions totalling R3.4 billion to black
    empowered companies
  • More than 680 SMEs received training and business
    support
  • Earmarked R250 million in venture capital for the
    next five years
  • Facilitated six workers trusts and 15 community
    foundations in our investments
  • The IDC won Businessmap Foundation/Business
    Report award for Top Development Financier for
    Black Economic Empowerment for the fourth
    consecutive year, with one of our clients winning
    the Top Black Business award and another two
    clients reaching finals in this category.

Job Creation
Approval Value
9-month period
6
Provincial Involvement
  • Examples of specific investment approvals
  • Marine fabrication and construction yard catering
    for the West African offshore oil and gas
    industry Saldanha, Western Cape 700 permanent
    jobs 5 community participation
  • Mining services for the diamond mining industry
    Barkley West, Northern Cape 212 permanent jobs
    10 workers participation
  • Cement blending supplying the cement brick and
    construction industry Mabopane, North West 50
    permanent jobs 100 black owned and managed
  • Tourist lodges catering for the local and foreign
    3-star market Nkambeni, Mpumulanga 250
    permanent jobs
  • Expansion of dried fruit plant catering for the
    export market Marulaneng, Limpopo 80
    permanent jobs
  • 250 bed private hospital eThekwini,
    KwaZulu-Natal 570 permanent jobs
  • Call centre services Randburg, Gauteng 540
    permanent jobs
  • Production of fertilizers, further beneficiating
    the upstream chemicals industrys products
    Sasolburg, Free State 58 permanent jobs 44
    black ownership
  • Stainless steel strip cold rolling mill Coega,
    Eastern Cape 105 permanent jobs

Value of IDC Approvals per Province (2006/07)
Relative to Provincial GDP
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8
Regional Development
Some Development Agency Projects
  • R597 million approved for developments in
    townships, expecting to create 5 100 new jobs and
    save 1 400 existing ones
  • Over 9 100 jobs will be created in rural
    districts of South Africa
  • Development agencies enable IDC to participate
    more intensively in rural development and unlock
    economic potential of various provinces
  • The agency concept starting to bear fruit, with
    various projects identified and being implemented

Agency Inception Project Information
Nkonkobe 2003 Instrumental in reviving Kat River citrus development
Blue Crane 2004 Boschberg Mountain Development (with Tourism) estimated R800 m project Flower project 8 women own project Vegetable seed project with 28 beneficiaries Airport project accessed R5m grant and employs 53 temporary workers Fruit project 4 permanent and 32 temporary workers Pomegranates project (4000 tree pilot)
Hibiscus 2003 Beachfront plan approved project team in place, funding received from National Treasury
Mandela Bay 2003 Govan Mbeki Avenue upgrade (R 12m) Donkin Reserve (R 9m) UDZ tax incentive facilitation Cleaning and security (300 jobs)
Illembe 2003 Amatikula Fisheries (R36 m) KZN Growth Fund 3 Gijima funded projects, 5 under review
9
BEE
  • 162 transactions totaling R3.4 billion to black
    empowered companies
  • BEE accounted for 68 of the total number of
    approvals and 58 of the total value of financing
    approved
  • Specific targeting of expansions and new BEE
    companies, and reduced focus on BEE acquisitions
    financed
  • 32 of funding approved was for expansions and
    start-ups by black business
  • R1 026 million approved for acquisitions
  • Extension of the competitive financing scheme.

Value of Empowerment Approvals
Number of Empowerment Approvals
9-month period
10
SME Support
  • Financing provided to 167 SMEs
  • 70 of the number and 18 (R985m) of the value
    of IDCs approvals are to SMEs
  • To provide finance to a wider range of SMEs
    (especially new entrepreneurs), some gaps need to
    be addressed
  • Lack of skills
  • Lack of necessary support systems
  • Lack of access to financial institutions
  • Entrepreneurial development initiatives
    introduced to promote entrepreneurship and
    enhance sustainability of IDC funded businesses
  • IDC business support to clients
  • More than 680 delegates attended entrepreneurship
    courses sponsored by IDC in Gauteng, Northern
    Cape, Eastern Cape, Limpopo, and Free State.

Examples of Business Support provided
Client Support Provided
Hlumisa - Eastern Cape Assistance in selecting and setting up financial management systems, design and documentation of costing system, design of leads management system (new clients) and developing marketing strategy
ITT - East Rand Assisted in implementing QA system, capacity management
VAC Cleaning -Cape Town Assisted through development of financial management system, and in strategic decision-making while mentoring owners over long period
11
Competitive Financing for Development
  • R1 billion fund providing financing for 5 schemes
    expired December 2006
  • Pro SME Jobs Scheme
  • Pro BEE Expansionary acquisitions scheme
  • Pro Franchise Scheme
  • Pro Forestry Scheme
  • Pro Orchards Scheme
  • Loans priced at up to prime less 5
  • Assisting 115 SMEs to create 7450 direct job
    opportunities
  • Extension of Pro Orchards, Pro Forestry, Pro BEE
    Expansionary Acquisitions Schemes.

12
Some High Impact Projects
  • IDC identified the berry industry as a industry
    with potential
  • High value agricultural crop
  • High international demand healthy food
    consumption trends
  • Labour intensive
  • Export crop

Project Location Impact
Blue Mountain Berries George, Western Cape Blueberries, 70ha, 450 jobs
Amathole Berries Stutterheim, Eastern Cape Blueberries, 330ha, 2,300 jobs
Echo Berries Brits, North West Strawberries
Amajuba Berries Charlestown, KwaZulu-Natal Raspberries, 100ha, 795 jobs
13
Some High Impact Projects
  • The fish processing industry
  • IDCs current exposure (including commitments) to
    this industry R60m
  • Exports
  • The budgeted export volumes will contribute at
    least R6.7m in export earnings per annum.
  • Sub-sectors supported
  • Abalone
  • Fish Packing canning and
  • Ice production for the fish industry.
  • Regional exposure in Western, Eastern Northern
    Cape
  • BEE exposure includes
  • Bluefin
  • Mosselbay Fish Processors
  • Industry development needs
  • Shortage of processing capacity (hake and
    lobster) in Hout Bay
  • Lack of HACCP compliant facilities
  • Lack and availability of ice.

14
Some High Impact Projects
  • Eastern Cape Biomass
  • Black empowered company situated in Coega
    Industrial Development zone
  • Manufacture of fuel pellets
  • 10 000 tons per month for European markets
  • Biomass is an environmentally friendly
    alternative source of energy
  • In line with IDC strategy to invest in clean
    fuels
  • 370 full time jobs created
  • Ownership shared with workers and community
  • IDC investment R59m

15
Some Other Investment Approvals
  • Marine fabrication and construction yard catering
    for the West African offshore oil and gas
    industry Saldanha, Western Cape 700 permanent
    jobs 5 community participation
  • Mining services for the diamond mining industry
    Barkley West, Northern Cape 212 permanent jobs
    10 workers participation
  • Cement blending supplying the cement brick and
    construction industry Mabopane, North West 50
    permanent jobs 100 black owned and managed
  • Tourist lodges catering for the local and foreign
    3-star market Nkambeni, Mpumulanga 250
    permanent jobs
  • Expansion of dried fruit plant catering for the
    export market Marulaneng, Limpopo 80
    permanent jobs
  • 250 bed private hospital eThekwini,
    KwaZulu-Natal 570 permanent jobs
  • Call centre services Randburg, Gauteng 540
    permanent jobs
  • Production of fertilizers, further beneficiating
    the upstream chemicals industrys products
    Sasolburg, Free State 58 permanent jobs 44
    black ownership
  • Stainless steel strip cold rolling mill Coega,
    Eastern Cape 105 permanent jobs

16
Beyond Investment
  • Herdmans Atlantis, Western Cape
  • Herdmans is a producer of linen yarn, located in
    Atlantis in the Western Cape.
  • IDC became involved with the company in 2001,
    when it provided funding to help fund a portion
    of Herdmans Irelands operations to relocate to
    South Africa.
  • By 2005, all the Irish operations except a dye
    house and the marketing operations had been
    relocated to the premises in Atlantis.
  • At the start of 2005, quotas on Chinese exports
    in the textiles sector were lifted worldwide, and
    the company soon started facing difficult market
    conditions.
  • By 2006, the companys Irish bankers and
    shareholders withdrew support for the company and
    Herdmans ceased manufacturing.
  • In an attempt to save some of the jobs at the
    company, IDC took ownership of the company and
    started a process of restructuring.
  • With the help from the landlord, Khula, and major
    creditors such as the City of Cape Town, 95 jobs
    were saved in the company.
  • Herdmans is still facing significant challenges,
    but the IDC is positive about the companys
    future.

IDCs development focus extends beyond the
investment decision, and plays an integral part
of the investment monitoring process
17
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21
Financial Results
22
Abridged Group Income Statement for the Year
Ended 31 March 2007
R million 2007 2006
Analysis of Net Profit/Loss
Revenue 5 169 4 524 14 Cost of Sales 2 082 1
928 8
Financing Expenses 457 495 (8) GROSS PROFIT 2
630 2 101 25
Exxaro
Net Capital Gains 1 796 341 427
Other Income 133 55 142 Operating Expenses 1
914 2 119 (10) OPERATING INCOME 2 645 378 600
Share of Equity-Accounted Investments 1
673 417 301 PROFIT BEFORE TAX 4
318 795 443 Taxation (27) 42 164 PROFIT FOR
THE YEAR 4 345 753 477
9-month period
23
Abridged Group Balance Sheet as at 31 March 2007
R million 2007 2006
Strengthened Financial Base
Assets Loans, Advances and Investments 54 951 40
613 Cash and Cash Equivalents 4 466 3
558 Property, Plant Equipment Inventories 3
137 3 046 Other Assets 1 061 938 63 615 48 155
Equity and Liabilities Capital and Reserves 52
574 38 984 Long-term Loans 5 716 5 525 Deferred
Taxation 3 640 1 997 Other Liabilities 1 685 1
649 63 615 48 155
Debt/Equity Ratio 11 14
24
Summary and Prospects
25
2006/07 Summary
  • Leadership in Development entrenched in the
    organisation
  • Record levels of job creation
  • Improvement in development impact largely the
    result of increased activity
  • Financial performance exceeded budgets
  • Undertook a review of all processes in the IDC to
    determine fit with strategy and efficiency
  • Rebranding process to reflect IDC development
    role
  • Businessmap/Business Report BEE award 3rd
    consecutive year
  • 2nd year of improving customer satisfaction
  • IDC on track to exceed its 5yr job creation
    target.

26
IDCs Role in Implementing the National
Industrial Policy
  • IDCs role in supporting the policy is on two
    levels
  • Directly through the provision of finance and
    other services
  • Indirectly through the support and finance that
    it provides to specific businesses.

The three domains of South Africas industrial
policy and illustrative interventions
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27
Sector Specific Actions Supporting the
Industrial Policy Action Plan (IPAP)
  • The following initiatives related to the four
    lead sectors are already in place
  • Capital/Transport equipment and Metal Fabrication
  • SOE Public Sector Capex Programme
  • National Tooling Initiative
  • Initiatives are also underway to improve
    competition in the upstream metals sector
  • Automotives and Components
  • Supply development programme to improve component
    manufacturing capacity expertise and increase
    of local content
  • Chemicals, Plastic Fabrication and
    Pharmaceuticals
  • Direct involvement in the Fluoro-chemicals
    expansion initiative
  • Promoting the local production pharmaceuticals
  • Forestry, Pulp and Paper, and Furniture
  • Forestry
  • Pulp and Paper
  • Furniture

All Business Units Sector Development Strategies
are being reviewed to ensure maximum alignment
and impact in these sectors
28
Sector Specific Actions Supporting the
Industrial Policy Action Plan (IPAP) (continued)
  • Initiatives related to other sector actions
  • ASGI-SA
  • Business Process Outsourcing Offshoring
  • Biofuels
  • Tourism
  • Other substantive sector projects
  • Diamond beneficiation and jewellery

IDCs structure, industry knowledge and networks
makes it one of the premier organisations for the
implementation of the industrial policy
29
Prospects
  • Be leaders in the implementation of the national
    industrial policy
  • Enhancing regional presence
  • Roll-out of regional managers
  • Develop regional development strategies for IDC
  • Closer to clients
  • Improved customer service
  • Approve first investments under the internally
    managed venture capital fund
  • Enhance product development in line with client
    needs and economic development focus areas
  • Double impact on job creation in 5 years
  • Investigate feasibility of key projects to
    improve South Africas competitiveness.

30
Industrial Development Corporation 19 Fredman
Drive, Sandown PO Box 784055, Sandton, 2146 South
Africa Telephone (011) 269 3000 Facsimile (011)
269 2116 E-mail callcentre_at_idc.co.za
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