The Industrial Development Corporation of South Africa (IDC) recorded a historical increase in funding support to key sectors of the economy, for the financial year ending 31 March 2023.
Against the backdrop of a domestic economy battling several global and domestic headwinds, including slowing international growth, geopolitical tensions, domestic power supply constraints and weather-induced natural disasters, the Corporation registered a record
R20.7 billion in funding approvals for the financial year ending 2022/23. This represents a 29% increase in approvals compared to the previous corresponding period - which is the highest nominal amount ever approved by the development funder.
Disbursements for the year surged by 147% to R17.8 billion from R7.2 billion recorded for the previous year. The bulk of this funding was directed towards capacity expansions, projects and startups, in line with the Corporation’s mandate of sustaining industrial capacity development and funding economic transformation objectives.
“Our performance in the reporting period typifies the role of a development funding institution. The increase in both approvals and disbursements is a reflection of a funding cycle which among other factors has been able to mitigate the impact of challenges confronting both the global and local economies. We have had to respond to these challenges while maintaining our objectives to deliver on our mandate to transform and grow our economy,” said IDC CEO TP Nchocho.
According to Nchocho, the increased levels of investments have had a positive knock-on effect on the IDC’s developmental outcomes for the Corporation. For the year under review, the IDC created or saved 34 035 jobs compared to 27 130 for the 2021/22 reporting period. Of these, about 8 500 jobs - mainly in KwaZulu Natal which was the hardest hit by floods - were saved by the development funder’s R1.25 billion in support of Flood Relief Fund interventions - created in the main to support businesses affected by last year’s devastating floods which characterised parts of KwaZulu-Natal, Eastern Cape, Northwest, Northern Cape Mpumalanga and Gauteng provinces.
Supporting black industrialists, youth and women entrepreneurs
As part of its transformation mandate, IDC’s total committed transformation investment facilitated in the year in review amounted to R11.4 billion, R7.6 billion of which went to black industrialists. Approvals for women-empowered companies were R1.1 billion, while those for youth-owned businesses were R501 million. This is an area where IDC has committed itself to improvement in the year ahead.
In addition, the IDC facilitated almost R9.6 billion towards localisation and beneficiation activities across sectors such as steel, pharmaceuticals, automotive and food products. Minister of Trade, Industry and Competition (DTIC) commented:
“The IDC’s investment in localisation initiatives, green energy, infrastructure development, transformation and helping to boost regional economic development has been commendable over the past years. Since 2011, it has invested R16 billion in green energy projects, with R1,5 billion approved in the past year. IDC-backed projects will support R40 billion in export output in the period ahead. I have challenged the Corporation to improve further and build on positive achievements. In keeping with its mandate, it must be bolder in stimulating the economy and driving sustainable and inclusive industrial capacity,” said Patel.
He called on the IDC to build on successes and set a higher ambition and to expand investment in battery manufacturing and electric vehicle financing, support green component manufacturing for local and export markets. step up job creation in key productive sectors and fast-track additional generation energy project financing.
IDC CFO Isaac Malevu was upbeat about the Corporation’s future funding prospects given this performance. Despite the persistently difficult economic and trading conditions, targeted strategic interventions introduced in the previous financial years helped to contain the Corporation’s non-performing loan ratios (NPLs) which were now trending down. Group profit rose significantly by 70% to R10.7 billion compared to R6.3 billion in 2021/22, with company profit up 119% to R5.9 billion compared to R2.7 billion for the 2021/22 reporting period. The asset base decreased 5% to R161 billion from R171 billion registered in the previous corresponding period largely a result of shifts in listed share prices.
“ For us, the strengthening of the Corporation’s balance sheet is indicative of the organisation’s financial health as shown by a 13.3% growth in total assets post 2021 and a strong capital structure with debt: equity at 29.8% - well below the prudential policy upper limit of 60%.
Our stable balance sheet places us in an adequate position to among others, support energy intervention solutions, and participate in the development and commercialisation of a new hydrogen economy”, said Malevu.
Nchocho is positive about the future pointing to recent GDP growth as not only demonstrating the resilience of the local economy but holds promise for the IDC’s future funding prospects.
“A crippling energy supply and slow growth have hamstrung growth over the years, yet our economy is still resilient. We need higher levels of GDP growth so we can effectively deal with the challenges of poverty, inequality and unemployment”, said Nchocho.