IDC Africa Strategy

Presentation by : Lizeka Matshekga

Divisional Executive : Agro , Infrastructure &

New Industries

Africa Business Forum

JSE Sandton | 3rd May 2018

2

Overview of IDC

o Established: 1940

o Type of organisation: Development Finance Institution (DFI)

o Ownership: State owned company, 100% owned by the SA

government

o Total assets: R129.8 billion (31 March 2017 - group)

o Total liabilities: R41.5 billion (31 March 2017 - group)

o Funding status: Fund operations and growth from investments, pay

dividends and income tax

o Credit rating: Baa2 (Moody’s)

o Main business area: Providing funding for entrepreneurs and

projects contributing to industrialisation

o Geographic activities: South Africa and the rest of Africa

o Products: Custom financial products above R1m to suit project’s

needs including debt, equity, guarantees or a combination

o Small and Micro enterprise coverage: sefa (fully owned subsidiary)

o Stage of investment: Project identification and development, feasibility,

commercialisation, expansion, modernisation

o Number of employees: 849 (March 2018)

Operational

Footprint:

o Head Office -

Johannesburg

o 20 Regional and

Satellite offices

3

The Role of DFIs DFIs’ Positioning within the South African Financial Landscape

• Non-commercial focus

• Fiscal transfers and grants

• Development objectives (social)

Government / NGOs

• High commercial focus

• Private sector capital

• Financial objectives

• Known risks

Commercial Financiers

• Commercial and development focus

• Sharing risk

• Internally generated funds, government funds, loans

DFIs

Greater importance on financial objectives

Greater importance on social and developmental objectives

DFIs should not compete with other institutions, but should

instead encourage cooperation to achieve their goals

4

Summary of IDC’s Main Activities

Activities Customers Business

lifecycle

Sectoral

involvement

Funding

products

Regional

involvement

Provision of

development

finance

Project

development

Research and

policy inputs

Fund

management

Non-financial

forms of business

support

Capacity building

Business

Government

Other DFIs

Conceptual

Pre-feasibility

Feasibility

Product

commercialisation

Establishment

Expansion

Mature

Manufacturing

Agricultural value-

add

Mining and mineral

beneficiation

Industrial

infrastructure

Tourism, cultural

industries and other

productive services

General debt

Quasi-equity

Equity

Export/import

finance

Short-term trade

finance

Bridging finance

Guarantees

Wholesale funding

through

intermediaries

South Africa

Rest of Africa

Global imports

of South African

capital

equipment

• IDC’s main activity is the provision of industrial finance to businesses throughout the business lifecycle in

various sectors aligned with industrial policy priorities as well as developing projects in these industries.

• In addition, it is involved in other activities such as research, policy inputs and fund management for government

departments; non-financial support for business; and capacity building for other DFIs.

5

For IDC to assume Leadership in Industrial Development, it must position itself more centrally in identified sectors….

Reactive industry funder Proactive industry developer

• Before, we invested in industry players across the SA economic landscape in a predominantly reactive way

Respond to activity Drive activity

Relevant industry body

Other DFIs SOEs

Producers

Govt.

RoA

Relevant industry

body

Industry partners

Value Chains

Producers

Govt.

RoA

Enabling activity

• Now, we want to take greater ownership and leadership for developing the most important parts of the economy to drive desired outcomes

Commercial banks and

other financial institutions

6

IDC Sectorial Focus Areas

Metals Value

Chain

Chemicals Value

Chain

Agro

Value Chain

Basic Metals and Mining

Machinery and Equipment

Automotive and Transport Equipment

Basic and Specialty Chemicals

Chemical Products and Pharmaceuticals

Clothing & Textiles Media & Motion

Pictures

High Impact

Sectors

Heavy Manufacturing

Light Manufacturing & Tourism

Value Chains are earmarked for special attention including proactive project

development, whilst High Impact Sectors are exclusively reactive

Enablers

Industrial Infrastructure

New Industries

Special High

Impact Sectors

Agro-processing and Agriculture

7

• Sustainable Industrial Development

• Sustainable Localization and Industrialization

• Sustainable Job Creation

• Supporting Targeted Groups (e.g. Black Industrialists, Youth & Women)

• Supporting the development of Value-Chains and Regional Value Chains

• Supporting South African companies conducting business in Rest of Africa and

accessing new markets in the region

Developmental Outcomes

0

5 000

10 000

15 000

20 000

25 000

30 000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

R'm

Actual Estimate Base Target

Actual Estimate Base Target

2016/17 to 2020/21 Corporate Plan – Funding Approvals &

Disbursements

Capital Allocation by SBU – 2016/17 to 2020/21 Historical Approvals and Capital Allocated

• Targeting to grow funding to R100 billion over the next five years subject to improving economic conditions;

• 12% of total allocation towards investments outside of SA, in the continent;

• Highest portion of capital allocated to priority value chains i.e. metals and mining, chemicals and pharmaceuticals,

and agro-processing and agriculture;

Metals and mining32%

Chemicals and pharmaceuticals

19%Agro-processing and agriculture

8%

New industries2%

Industrial infrastructure

23%

Clothing and textiles

3%

Media and motion pictures

2%

High impact industries

11%

Approvals:

Disbursements:

9

• Support industrial development in the Rest of Africa through funding projects in line

with IDC’s core value chain mandate

• Unlock regional integration opportunities to increase intra-trade

• Focus on regional integration value chain approach vs South Africa

• Support South African companies conducting business in Rest of Africa

• Promote local/indigenous participation on projects

IDC Africa Strategy

10

• Collaboration with local/regional DFIs

• Provide funding to third party funds focusing to Rest of Africa

• Projects and transactions must demonstrate direct and indirect linkages and

benefits to South Africa

- Direct in a form of goods and services

- Indirect in a form of security of supply

IDC Africa Strategy (continued)

Summary of the Rest of Africa Score-Card

• Projects can be categorized as follows :

Industry Development Goals aligned projects The extent of investment in support of sector development goals is used to measure the development

impact of a Rest of Africa transaction which is deemed to be fully aligned to an SBUs value chains

strategy

Non-Industry Development Goals The development score card below will be used to assess the development impact. The final score is

measured out of 5 (100% of the scorecard weighting) with 2 as the hurdle score.

IDC's Rest of Africa Development Scorecard

Development score calculation

Actuals Weight Score Weighted Score

Jobs created for South Africans 1 15% 1.00 0.15

Jobs created for Host Country Nationals 3 15% 3.00 0.45

Priority Country Ghana 10% 1.00 0.10

SA Benefit USD 26.00 35% 2.00 0.70

African Ownership 49% 15% 0.00 0.00

Pollution prevention 3 5% 3.00 0.15

Emissions & Energy Consumption 3 5% 3.00 0.15

OVERALL SCORE: 100% 1.7

12

Exposure : ca R12.9 billion; in

42 projects in 16 countries.

IDC Activity in the Rest of Africa

The IDC’s rest of Africa portfolio as at 31 December 2017

Rest of Africa Strategy: Linking the IDC to the RoA

Ivory Coast 1%

Mali 1%

Malawi 2%

Ethiopia 2%

Sudan 3% DRC

3% Namibia

3%

Tanzania 4%

Zimbabwe 5%

Senegal 5%

Nigeria 7%

Zambia 8%

Ghana 11%

Uganda 11%

Kenya 13%

Mozambique 21%

IDC RoA Exposure (incl. Commitments) by country as at 31 December 2017

Outcome of this partnership

14

• Collaborate with JSE-listed companies and SMEs conducting business in RoA

• IDC to promote regional value chains by funding projects that source inputs from the RoA or

export products into the RoA that fall within the IDC’s priority value chains namely Agro-

Processing; Chemicals and Metals.

• Practical examples:

• Development of industrial parks for businesses operating in Africa in support of a value-

chain from South Africa e.g. Supplier park for mining suppliers in DRC and Zambia

• Funding Agro-processing where inputs come from South Africa (vice versa) or the end-

product is sold back to South Africa or value addition in South Africa

• Supporting mining developments and industrialisation in the ROA

• Provide industrial infrastructure (telecoms, energy, water & telecoms) funding support to

projects in the Rest of Africa

Thank you