Charlotte Mathews
5 November 2009
Johannesburg — THE state-owned Industrial Development Corporation (IDC) expects to become more focused and have a greater influence on SA's development in the next 10 to 15 years by basing its lending decisions on the government's industrial policy.
The government plans to build enterprises with high levels of productivity and job opportunities in the leading sectors in its industrial policy, which are: the manufacture of capital and transport equipment; metals fabrication; motor vehicle components; chemicals; plastics; pharmaceuticals; forestry; and paper and pulp and furniture.
The IDC's divisional executive: resources, Ufikile Khumalo, said yesterday that following the government's industrial policy priorities would enable the IDC to better leverage the limited resources at its disposal. It would not wait for applications in these key sectors but would originate and actively develop projects linked to industrial strategy outcomes.
Khumalo said the downturn in commodities prices had affected the value of the IDC's resources portfolio, which was about R21bn. This financial year the mining section has a R1,3bn lending target, of which R800m has been approved. The energy and infrastructure portfolio, with about R3,7bn to lend this year, and the food and beverage industry, with about R800m, also fall within the IDC's resources section.
The IDC originally focused on mining investments but in the past five years the growth in lending by its mining division has been gradually overtaken by other sectors, in line with its strategy, and government policy, to diversify the South African economy away from heavy dependence on unbeneficiated resources. Now, if the IDC invests in a mining project, it must be linked to a beneficiation project, Khumalo said.
Another reason for diversification was to reduce the risk in the portfolio. The IDC has been seeking to offset its aluminium exposure with investments in commodities like coal, nickel and uranium.
Still, one of the reasons that the IDC had, on the whole, been successful in its mining project investments over the years was that it had a greater appetite for risk than other financial institutions and it had built up the skills to conduct its own due diligence investigations from first principles, Khumalo said. Success was not measured purely in financial returns but in establishing viable, job-creating businesses.
The recent high-profile failure of black empowerment group Pamodzi Gold , to which the IDC had lent more than R200m, had not changed the IDC's lending policies, Khumalo said. Pamodzi was already showing signs of liquidity problems when the IDC became involved, and the IDC did so to help the company to get back on its feet. Unfortunately, Pamodzi failed to raise the other R200m it needed, and the IDC's policy was not to lend more than 50% of the funding requirement.
Be the first to Write a Comment!
Copyright © 2009 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
