industrial development corporation lumkile mondi chief economist and divisional executive for...
TRANSCRIPT
Industrial Development Corporation
Lumkile MondiChief Economist and DivisionalExecutive for Professional
Services
Thursday, 26 September 2013
Zimbabwe Mining and Infrastructure Indaba 2013
Introducing IDC
• IDC was established in 1940 with the aim of developing South African industry through the Industrial Development Corporation Act (No. 22 of 1940);
• The vision of the IDC is to be the primary source of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent;
• The IDC is a self-financing national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens.
• The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles.
• Pays income tax at corporate rates and dividends to the shareholder.
IDC’s positioning in the financial industry
• Non-commercial focus• Fiscal transfers and grants• Development objectives (social)
Government / NGOs• High commercial focus• Private sector capital• Financial objectives• Known risks
Commercial Financiers• Developmental and commercial
focus• Sharing risk• Internally generated funds,
government funds, loans
DFIs
Greater importance on financial objectives
Greater importance on social and developmental objectives
• Industrial Development Corporation (IDC)• Development Bank of Southern Africa
(DBSA)• National Empowerment Fund (NEF)• Small Enterprise Finance Agency (SEFA)• Etc.
• ABSA• Standard Bank• First National Bank• Nedbank• Etc.
IDC does not directly compete with any of these institutions, but encourages cooperation with a variety of these institutions to achieve its goals
Equity funding
Loan funding
Funding model
Capital growth
Interest repayments
IDC relies on borrowings, internal profitability, capital growth and exits from mature investments to maintain and expand its funding ability
Capital repayments
Dividend payments Exits of mature investments
IDC Funds• Borrowings• Balance sheet• Mature investments• Retained earnings
The balance between the corporation’s developmental role and financial performance is maintained by relying on proceeds from mature equity investments (both dividends and capital growth) to cross-subsidise
higher risk activities.
X-Subsidization
The IDC: Actively supporting Africa’s revival
The SA Government is committed to support economic development throughout Africa to underpin the African Renaissance vision encapsulated in NEPAD. As such, IDC’s core strategies for the continent are to:
Leverage private sector investment for economic development throughout the continent
Play a major role in the development of industrial capacity
Strengthen South Africa’s constructive role in regional economic development
Leverage foreign direct investment by bringing in foreign partners using international networks
Transfer experience and expertise to African DFIs (Capacity Building)
Promote supply of goods & services from SA
Establish credit lines for financially sustainable regionally-oriented financial intermediaries
Support NEPAD and regional spatial development initiatives (SDIs)
These are further underpinned by IDC’s quest to create and to maintain jobs for South Africans and other Africans
• IDC offers a wide array of financial and non-financial instruments, including :
Equity Quasi-equity Commercial debt Export finance Lines of credit Technical assistance (research, capacity
building, training, etc.)
• These may be provided singly or in combination
The funding is structured to suit the business’ needs; e.g.:
• Term of the funding: Short, medium and /or long-term loans;
• Payment holidays: moratorium on capital or interest based on projected cash flows.
IDC’s funding products
• Funding is provided to projects (NOT para-statals or governments)
• Finance is provided for the development of new businesses, expansions or rehabilitation of existing businesses
• Business case must exhibit economic merit (i.e. it must be profitable)
• IDC finances fixed assets and fixed portion of growth in working capital requirements
• Credible operator/ technical partner
• Reasonable contribution from promoter/s
• Minimum project size (SACU, SADC, RoA)
• Security
• Environmental compliance
Funding criteria
•Profitability & sustainability in a reasonable time frame
•Developmental impact•Fixed assets and the fixed portion of growth in
working capital requirements•Reasonable financial contribution from owners•Security•Environmental standards
Additional investment Criteria for Projects Outside SA
•Profitability & sustainability in a reasonable time frame
•Developmental impact•Fixed assets and the fixed portion of growth in
working capital requirements•Reasonable financial contribution from owners•Security•Environmental standards
• The rest of Africa, and the sub-region in particular, present several opportunities for South Africa:
– A market for South African goods and services;– A source of raw material and intermediary inputs
for SA industry;– A source of .essential imports for the South
African economy (oil, gas, water, agricultural goods and commodities, etc.); and
– An opportunity to build on opportunities to enable the development of more competitive and integrated value chains.
– An opportunity to create regionally integrated infrastructure.
SA benefit and regional industrial integration
Funding process
Applications from existing/prospective businesses
Proactive identification and development of projects
Pipeline Assessment and decision
Detailed due-diligence/feasibility study assessing development impact
and sustainability of opportunities:
• Development outcomes• Market for products/services• Technical viability and
competitiveness• Financial viability• Management
Monitoring
Structuring of funding depending on client’s needs
Approval of viable transactions at appropriate committee
Ongoing monitoring of client performance after funding is
made remaining
Interventions in businesses experiencing difficulties
• Business support• Restructuring of facilities• Etc.
More emphasis being placed on early stage
involvement and development of projects
Sectoral focus
10
Areas we would consider ….• Mining and mineral beneficiation• Agro-Processing• Tourism (new hotel construction, expansions ,
and rehabilitations)• Healthcare • Industrial infrastructure (e.g. transport – road,
rail , air, and sea/river; power; telecoms; etc.)• ICT• Forestry and wood products• Manufacturing in General
Areas we do NOT currently consider …• Property development per se (e.g. construction
of shopping centers, office blocks, housing, etc..) • Tobacco and related sectors• Gambling and related sectors
Current footprint in the rest of Africa footprint
MOZAMBIQUE• Mining• Manufacturing (Textiles)• Agro-processing• Energy
NIGERIA• Hotel
GHANA• Hotels &
Accommodation
• ICT
TOGO• Financial services• Transport
NAMIBIA• Agric. / agro-processing• Mining• Cement
BOTSWANA• Hotel &
Accommodation
MALAWI• Food and
Agriculture• Franchising (Tool
Hire)
SUDAN• Infrastructure (Water)
KENYA• Energy• Sugar
UGANDA• Hotels &
Accommodation• InfrastructureTANZANIA
• Sugar
MAURITIUS• Communications
ZAMBIA• Storage and
warehousing• Healthcare
SWAZILAND• Basic chemicals• Agro-processing• Financial services
D.R. CONGO• Mining• Franchising (Food)
LESOTHO• Energy
ANGOLA• Energy
ETHIOPIA• Agro-processing
ZIMBABWE• Mining• Hotels• Telecommunications• Financial services
Sierra Leone• Bio-Energy
SENEGAL• Airport• Port infrastructure
• Current market exposure of ca R20 billion in 21 countries
• Over USD 3 billion approved since 1998
• Rolling capital allocation of ca R14 billion over 5 years
Economicmerit ofdeals
Due-diligence processes (risk mngt.)
Portfolio diversification
Corporate governance
Skills base
Concluding remarksIDC’s successes are built on strong pillars …
Prospects
Thank you
Industrial Development Corporation19 Fredman Drive, SandownPO Box 784055, Sandton, 2146South AfricaTelephone 011 269 3000Facsimile 011 269 2116E-mail [email protected]