INDUSTRIAL DEVELOPMENT CORPORATION · INTEGRATED REPORT 2018 INTEGRATED REPORT. ... 2015. With two years remaining, ... During 2017, the IDC was in the news for its loan to Oakbay

P A R T N E R I N G F O R I N C L U S I V E I N D U S T R I A L I S A T I O N

RP: 000/2018ISBN: 000-0-000-00000-0

www.idc.co.za

IND

USTRIA

L DEVELO

PMEN

T CORPO

RATION

2018 IN

TEGRATED

REPORT

2018I N T E G R A T E D R E P O R T

I N D U S T R I A L D E V E L O P M E N T C O R P O R A T I O N O F S O U T H A F R I C A L I M I T E D

The IDC is a state-owned development finance institution primarily mandated to provide funding for the development of

industry in South Africa and the rest of Africa.

BASIC CHEMICALS AND CHEMICAL PRODUCTS AGRO-PROCESSING AND AGRICULTURE INDUSTRIAL INFRASTRUCTURE

MINING, BASIC METALS AND METAL PRODUCTS

NEW INDUSTRIES TOURISM, ICT AND MEDIA

OTHER MANUFACTURING INDUSTRIES INCLUDING CLOTHING AND TEXTILES

I N D U S T R I E S T H AT W E F U N D

www.idc.co.za

NET PROFIT AFTER TAX

R3.2 billion 47%

APPROVED FOR BUSINESSES WITH YOUTH OWNERSHIP OF MORE THAN 25%

R1.0 billion 59%

APPROVED FOR BUSINESSES WITH WOMEN OWNER-SHIP OF MORE THAN 25%

R2.2 billion* 32%

APPROVED FOR BLACK EMPOWERED COMPANIES

R9.7 billion* 4%

APPROVED FOR BLACK INDUSTRIALISTS

R7.9 billion 67%

APPROVED FOR THE MANUFACTURING SECTOR

R8.0 billion 5%

NUMBER OF JOBS EXPECTED TO BE CREATED AND SAVED (CREATED: 23 348*; SAVED: 6 537)

29 885* 43%

IMPAIRMENT RATIO

17.4% 70 basis points

12 0 1 8 I N T E G R A T E D R E P O R T

C O N T E N T SMinister’s Foreword ................................................................................. 2Chairperson’s Statement ........................................................................ 4Company Overview ................................................................................. 6Material Matters ........................................................................................ 16Performance Trends ................................................................................ 18Our Board of Directors ............................................................................ 20Chief Executive Officer’s Statement ................................................... 22Our Executive Management ................................................................. 24Leading Industrial Capacity Development ..................................... 26Transforming Marginalised Communities ....................................... 48Our B-BBEE Rating .................................................................................... 50Committed to Good Governance ....................................................... 51Ensuring Financial Sustainability ........................................................ 73About this Report ..................................................................................... 79Assurance Report ..................................................................................... 80Glossary........................................................................................................ 83Contact Information ................................................................................ 84Administration........................................................................................... 86

Denotes Limited Assurance

Denotes Reasonable Assurance

Additional information available at www.idc.co.za/ir2018

P E R F O R M A N C E O V E R V I E W202 TRANSACTIONS APPROVED

R16.7 billion* 9%

TOTAL FUNDING DISBURSED

R15.4 billion 40%

TOTAL ASSETS

R137.0 billion 5%

ADDITIONAL ONLINE INFORMATION

Group StructureStakeholder EngagementBoard and Executive Management DirectorshipsCarbon FootprintCorporate Social InvestmentHuman CapitalInformation TechnologyProcurementSpecial Funding SchemesMembershipsCustomer Relationship ManagementKing IV ChecklistGRI Table

Increase Industrial Development

Maintain Financial Sustainability

Human Capital Stakeholders

Natural Environment Utilisation of Resources

Icons referring to the IDC’s strategy

Icons denoting assurance

Icons denoting availability of additional information

LA

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* Includes an approval of R100 million for a woman-empowered construction company that is expected to create 5 298 jobs which fall outside of the IDC’s priority approved sectors.

M I N I S T E R ’ SF O R E W O R D

During April 2018, President Ramaphosa announced a $100 billion investment target to be achieved over the next five years, with a focus on investment which drives industrial expansion, inclusivity and job creation. The target is intended to galvanise efforts to draw in more domestic and foreign direct investment.

The IDC will need to play a critical role in sourcing and co-funding a significant part of this investment in line with its role to develop the nation’s industrial capacity.

There are strengths that the IDC can build on, many of which are highlighted in this Report. To achieve the target and to expand aggregate industrial output will, however, require that the Corporation step up its efforts considerably and work in new ways.

Industrial development is an important driver of economic growth and job creation, critical to South Africa’s efforts to address persistent inequality and foster transformation.

During 2017, growth and industrial expansion numbers were well below the levels required to expand living standards and create jobs for all South Africans.

Growth in South Africa’s real GDP rose by 1.3% in 2017, while investment spending by private business enterprises showed an increase of 1.2%, following two consecutive years of decline. Business confidence rebounded strongly in the first quarter of 2018, largely on the back of positive developments in the political environment.

Global developments will affect the rate of domestic growth: rising global growth rates present an opportunity particularly through demand on the rest of the African continent; though trade actions by

the United States administration may negatively impact on SA export performance.

In the more uncertain global policy environment, South Africa must increase its own ‘rain-making’ efforts rather than wait for the weather to improve. That is at the heart of the social accord efforts that Government seeks to pursue with the business community and organised labour.

To do so successfully will need a range of interventions. In the period ahead, government is advancing a new agenda of economic inclusion and faster growth across multiple fronts.

Major changes to the competition laws have been proposed, focusing on opportunities for small and medium businesses and new investors. These changes will address high levels of economic concentration that limit the growth potential and dynamism of the economy. Market Inquiries, into critical input costs such as data prices, medical costs and transport costs, will provide policy-makers with the information to enable steps that can improve competitiveness.

Reforms of state-owned corporations have commenced, with the purpose of ensuring financially sound and sustainable public enterprises that can produce energy or provide transport and other services at cost-effective prices.

A renewed focus on expanding economic infrastructure, particularly focused on transport logistics, ICT and water resources, will lay the basis for drawing in new investment. This will be pursued through the changes in state-owned corporations, new funding arrangements, partnerships with the private sector and regulatory steps (such as release of spectrum to the market).

2 I N D U S T R I A L D E V E L O P M E N T C O R P O R A T I O N O F S O U T H A F R I C A L I M I T E D

Additional support for township enterprises and small and medium businesses are being considered to draw more entrepreneurs into the economy. To support youth entry into the economy, the government is pursuing youth entrepreneurship support and the private sector launched an initiative to draw in young people as interns to provide them with work exposure.

Within this context, the target of $100 billion in new investment is one of the most significant interventions, and can support and underpin a number of the other initiatives.

IDC’s funding approvals totalled R16.7 billion for 2018, an increase of 9% on 2017. Disbursements increased from R11.0 billion for 2017 to R15.4 billion. The IDC notes that the bulk of this funding is directed towards capacity expansions, projects and start-ups (72% in 2018), in line with its mandate of creating industrial capacity development.

IDC information projects that 29 885 jobs will be created or saved as a result of this investment which includes 5 298 jobs which will be created from a R100 million funding approval outside of the IDC’s priority approved sectors.

The IDC has in the past three years, focused a significant portion of its funding approvals towards supporting Black Industrialists (2018: R7.9 billion), youth (2018: R963 million) and women empowered businesses (2018: R2.2 billion). This follows five-year approval targets for black industrialist, youth and women-empowered businesses which I set for the organisation in my Budget Vote Speech in May 2015. With two years remaining, IDC has now approved 67% of the R23 billion that I directed it to provide to Black Industrialists. Notably, the IDC has already achieved the five-year target that was set for women entrepreneurs, with R6.6 billion approved for women-empowered businesses over the last three years against the target of R4.5 billion, whilst funding approvals for youth entrepreneurs is within close reach of the R4.5 billion 5-year target at R4.4 billion.

These targets were set to begin the process of redirecting IDC funding to greater economic inclusivity. When the GDP growth rate (and the high levels of unemployment) is taken into account, more will clearly need to be done in the period ahead. The quality of investment will also need to be improved, that is to achieve a better alignment between investment approvals and the industrialisation mandate of the IDC.

I will be working with the IDC Board and management to strengthen a stimulus package of support to township enterprises and other parts of the economy, to bring the necessary funds to support South Africa’s emerging entrepreneurs.

In the last year’s Integrated Report, I highlighted the importance of technological innovation in reshaping the economy, the greater use of robotics, artificial intelligence and big data. I note the IDC’s entry into some of these industries, some of which are highlighted in this Integrated Report. The Corporation’s experience in this regard will provide valuable lessons regarding the threats and opportunities, the need for investment in education capabilities and skills development and the potential for further development in these new sectors.

At a regional level, the rest of the African continent continues to develop as one of the largest markets for South Africa’s merchandise exports, accounting for 26.5% of the entire export basket in 2017.

Exports to the rest of Africa are now greater than to the EU, US or China, and totalled R310 billion last year. In 2017, close to 39% of all locally manufactured exports were destined to countries elsewhere on the African continent.

The IDC should utilise two opportunities that flow from this: investment in South African enterprises that export to the rest of the continent; and investment in projects that help to grow neighbouring economies and in the process, leveraging opportunities to supply material and technical and other services. IDC’s investment in Alphamin Bisie Tin Mine project (in the Democratic Republic of Congo) is a practical example of an investment aligned to this approach.

The performance of IDC subsidiary Foskor remains below par and will need more attention from the Board and management in the year ahead. During 2017, the IDC was in the news for its loan to Oakbay Resources and public disquiet at perceived governance challenges. Following discussion between the shareholder and the Board, the IDC introduced a range of measures to strengthen transparency and governance. These include public disclosure of the names of IDC beneficiaries since April 2017 and changes in the IDC auditors following a request in July 2017 by the shareholder that KPMG be replaced. The IDC also instituted litigation against Oakbay Resources for the recovery of funds advanced.

Where the IDC has successful projects, it must look at scaling-up such projects. The time taken to process applications must be reduced to assist investors to meet rapidly-changing market demands. The IDC should also play a role to assist partners to complete fresh investment projects expeditiously so that the country sees the positive impact of investment approvals.

From a strategic perspective, the IDC will need to improve its capacity to proactively identify new investment opportunities and marshal the private sector resources and expertise required to drive their realisation; and increase funding levels biased towards unlocking jobs-rich industrial activities. This strategic orientation combined with the strengths of the institution, particularly remaining financially viable, will be the foundation for what the Shareholder expects of the IDC.

I look forward to the IDC using its significant strengths over the years such as its strong balance sheet, sound governance, and a capability for development financing. These strengths have contributed to the country’s development over the years.

On behalf of the Shareholder and the beneficiaries of IDC’s endeavours I wish to thank IDC Chairperson, Ms Busisiwe Mabuza and the Board of the IDC for their guidance of the Corporation and support to IDC’s management as well as their role in upholding a strong governance culture. I also wish to thank Geoffrey Qhena and his management team, who continue to lead the Corporation through challenging times.

Ebrahim PatelMinister of Economic Development



C H A I R P E R S O N ’ S S TAT E M E N T

The IDC increases its funding activity in support of the economic recovery and transformational agenda as it continues to deliver on its developmental objectives.

Global conditions remained relatively favourable and supportive during calendar year 2017, despite a trading environment beset by concerns over rising protectionist tendencies, geo-political tensions in parts of the world and the uncertainty associated with the United Kingdom’s decision to leave the European Union. World output expanded by a firmer 3.7%. However, there are emerging signs of moderating growth in several of the world’s major economies.

In South Africa, 2018 started on a hopeful note, with signs of improving confidence amongst the business and investor communities. The positive sentiment contributed to our improved funding activity as the financial year under review drew to a close, and provided some counterbalance to an otherwise unfavourable operating environment that characterised most of the year.

We remain mindful of the socio-economic challenges that continue to exist. Persistently high levels of unemployment, especially amongst the youth, as well as unacceptable levels of poverty and income inequality have made the imperative for inclusive growth and industrialisation even more critical. Cognisant of these realities, we have made a consistent effort to increase our developmental impact.

Our financing activity with respect to approvals and disbursements continued to focus on providing counter-cyclical support particularly to those business partners in distress due to unfavourable trading conditions, while also focusing on those initiatives aimed at ensuring that we sustain our objectives of transformation and economic inclusivity.

We are attentive to a global environment that is becoming increasingly uncertain and the downside risks pertaining thereto. Rising trade tensions and resultant retaliatory measures by several affected countries could have negative consequences for world trade and investment flows, global value chains, production activity and employment. Such developments would affect the performance of the South African economy. The disappointing performance of the domestic economy in the first quarter of calendar year 2018 shows the fragility of South Africa’s economic recovery and the structural challenges that still need to be overcome to sustain its momentum.

Nonetheless, prospects for the world economy are expected to remain relatively favourable. Anticipated increases in consumption

spending and investment activity in some of South Africa’s key external markets, including the Sub-Saharan African region and the Eurozone would likely benefit domestic exporters, including some of our business partners. The imposition of import tariffs on steel and aluminium products by the US is likely to adversely affect certain business partners that operate in the associated value chains.

Our funding activities in the rest of the African continent, which also include support for the integration of value chains, could be further enhanced by the ultimate implementation of the recently signed Africa Continental Free Trade Area (AfCFTA) agreement. The AfCFTA agreement has the potential to bring about opportunities for the development of new regional value chains.

Gradually improving demand conditions, along with a recovery in business confidence and investor sentiment, should pave the way for a revival in fixed investment spending by the private sector going forward. Sustained economic growth and increased investment activity globally should be supportive of the export-oriented sectors of the South African economy where trade related uncertainties can be mitigated.

The IDC will continue to support existing and new business partners in benefitting from an eventual upturn in capital spending.

COMMITTED TO INCLUSIVE AND TRANSFORMATIVE DEVELOPMENTWe remain committed to our strategic intent of increasing our development impact and promoting inclusive and transformative development. We continued to accelerate the implementation of this strategy, often with more boldness and different emphasis in order to achieve the desired developmental outcomes as envisaged, and also to respond to the changes in our operating environment and challenges faced by our business partners.

Considering the need to accelerate the pace of industrial development while advancing transformation, we focussed our strategies on those sectors that could yield positive results on production capacity and job creation, while also increasing our funding aimed at transformation.

Through our more focused and proactive approach, our efforts are realising positive outcomes. Our approvals to the manufacturing sector, which is the anchor for jobs-rich industrialisation, account for a larger proportion of our funding activity at 46%, indicating closer alignment to the priority sectors and value chains envisioned in our strategy. Furthermore, the commitment to transformation is evident in the increased quantum of funding to black industrialists as well as that directed towards women- and youth-empowered businesses over the three-year period to 2018. To date, we have approved 67%


of the R23 billion committed to funding black industrialists over the five-year period to March 2020. Funding approvals in support of women entrepreneurs reached R6.5 billion over the three-year period to March 2018 – exceeding the R4.5 billion target set for the five-year period ending in March 2020, while cumulative approvals to youth-empowered businesses increased to R4.4 billion over the same period and stood within close range of the five-year target of R4.5 billion.

While we note the progress achieved so far through the implementation of our long-term strategy, we continue to refine certain areas of our sector strategies to achieve better linkages between and within our value chains as well as improved alignment with planned projects.

ENSURING FINANCIAL SUSTAINABILITY AND GOOD CORPORATE GOVERNANCEFinancial sustainability and good governance, which is generally characterised by significant risks and constant scrutiny by various stakeholders including lenders, co-investors and rating agencies, remain key imperatives for the IDC.

The IDC continues to set ambitious investment and developmental targets, including increased levels of funding activity, that are focused on job creation, advancing transformation and inclusive growth. This is in line with our development mandate.

Nonetheless, we remain cognisant of the importance of ensuring the Corporation’s long-term financial sustainability and thus continue to assess the capacity and resilience of our balance sheet as well as to monitor any financial risks that may arise through our increased disbursements. These, in turn, have enabled the Corporation to respond in a more prudent and efficient manner.

A generally challenging operating environment has continued to impact negatively on the financial performance of our key subsidiaries. Due to the critical role that our subsidiaries play in the implementation of some of the IDC’s strategies, we continue to focus on enhancing their performance. Progress has been made in respect of the restructuring of the Scaw Group. Foskor has reported some operational improvements on the back of continued support from the IDC, which was aimed at improving efficiencies and increasing competitiveness. However, the company continued to suffer from the difficult trading conditions during the year, which adversely affected its overall performance. To further improve the performance and support our material subsidiaries, we, as the Board, have increased our oversight through the relevant IDC Board sub-committees.

We continue to ensure financial sustainability through prudent management of our balance sheet, which includes enhancing financial efficiencies and exploring various options to diversify and expand our sources of capital. We expect that a more favourable outlook on the IDC’s credit rating is likely to have a positive impact for the Corporation’s future financing activity in terms of both the sourcing and pricing of funding.

Sound corporate governance based on an ethical foundation remains the cornerstone of our efforts for a sustainable and successful organisation. We continue to strengthen our governance structures and frameworks across the IDC and its subsidiaries.

The IDC Board remains committed to finding opportunities for continuous improvement and ensuring that good governance, coupled with the principles of fairness and transparency, underpin our activities. In the year under review, we have taken further steps to strengthen our governance frameworks and to improve our oversight role in our subsidiaries and investee companies.

To this end, the IDC Board approved a Corporate Governance Framework for IDC Subsidiaries and Investee Companies. This seeks to enable effective governance oversight over our subsidiaries and investee companies, and ensures that timeous alerts are made available to us whenever new material risks and issues that have an impact on our investee companies and the industries in which they operate arise. A revised and updated Director Nominations Policy was also approved by the Board. This policy will facilitate effective governance of our subsidiaries by safeguarding the integrity of the nomination process and ensuring that the boards of our subsidiaries and investee companies are independent and fit for purpose.

In line with our policy of disclosing the business partners of IDC-funded transactions, a detailed schedule has been published quarterly on the IDC website over the year under review. We shall continue to improve the quality of our disclosure in this regard.

The IDC is cognisant of the importance of maintaining the independence of the Corporation’s Independent Auditor, both in fact and appearance. As such, each year an evaluation process aimed at determining whether to re-engage the current Independent Auditor is undertaken. Following the evaluation of the qualifications, performance and independence of the Independent Auditor, the Shareholder of the IDC assented to the retention of SizweNtsalubaGobodo Inc. and Ngubane & Company (JHB) Inc. as the Corporation’s external auditors.

ACKNOWLEDGEMENTSThe IDC continues to strive for outcomes that are reflective of the commitment and effort of its leadership and management teams as well as staff. On behalf of the Board, I therefore congratulate and thank Mr Geoffrey Qhena, his executive team as well as the entire management and staff complement of the IDC for their firm commitment to the Corporation’s critical role in helping address the developmental and transformational needs of the country.

We express our sincere appreciation to the Minister of Economic Development, Mr Ebrahim Patel, MP; Dr. Monde Tom, the acting Director-General of the Economic Development Department and his entire team at the department. Our gratitude is also extended to members of the Portfolio Committee for Economic Development and the Select Committee on Economic and Business Development for their diligent oversight, guidance and encouragement.

Finally, I record my appreciation to my fellow directors for their wisdom, diligence, commitment and continued support.

BA MabuzaBoard Chairperson27 June 2018


VISIONTo be the primary driving force of commercially sustainable industrial development and innovation for the benefit of South Africa and the rest of Africa.

MISSIONThe Industrial Development Corporation is a 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.

OUR VALUESOur day-to-day activities and business conduct are guided by our values.

PROFESSIONALISM

PASSIONINCREASE INDUSTRIAL DEVELOPMENT• Be proactive and strategic in developing

priority industries• Align our funding activities with government’s

economic, industrial and infrastructure policies• Integrate industries across the continent• Address the needs of SMMEs particularly

through sefa

MAINTAIN FINANCIAL SUSTAINABILITY• Manage concentration risk in our portfolio

• Diversify income sources in our portfolio

• Improve portfolio management

OUR FUNDING MODEL

We use these to provide funding to businessesin the form of loans and equity investments

OURSTRATEGY

LOAN FUNDING EQUITY FUNDING

Interest payments

Capital repayments

Dividend receipts

Capital growthand realisation

The IDC is funded through:

Internal profits

Divestment of mature investments

Borrowing in domestic and international markets

Proceeds from this funding are used to repay borrowings, cover our costs and grow our balance sheet to re-invest in future businesses

PARTNERSHIP

HUMAN CAPITAL• Enhance skills and capacity• Entrench a culture of performance and

development

STAKEHOLDERS• Improve customer service• Leverage other financiers• Identify industry development

opportunities through broader sectoral engagement

• Develop Black Industrialists and increase funding to women and youth entrepreneurs

• Contribute to policy development• Build strong communities around IDC-

funded projects

NATURAL ENVIRONMENT• Improve the IDC’s and industry’s

environmental sustainability

UTILISATION OF RESOURCES• Enhance efficiencies

HU

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OCI

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These investments and loans result in

C O M PA N Y O V E R V I E W


The IDC has a local presence in all of South Africa's nine provinces. Business activities in the rest of Africa are serviced

from our head office in Sandton, South Africa.

REGIONAL FOOTPRINT

Upington

Regional Offices

Vryburg

MahikengRustenburg

Thohoyandou

Mbombela

eMalahleni

Secunda

Brits

Klerksdorp

Welkom

PolokwaneTzaneen

Richards Bay

Pietermaritzburg

Durban

Phuthaditjhaba

Bloemfontein

Mthatha

East London

Port ElizabethGeorge

Cape Town

Satellite Offices

Head Office

Eastern Cape

R4 bn

6 428

8%

R4 bn

Mpumalanga

R5 bn

11 390

7%

R5 bn

Free State

R1 bn

2 929

5%

R1 bn

North West

R2 bn

14 797

6%

R7 bn

Gauteng

R18 bn

30 517

35%

R20 bn

Northern Cape

R12 bn

4 156

2%

R17 bn

KwaZulu-Natal

R6 bn

9 389

16%

R4 bn

Western Cape

R8 bn

9 163

14%

R5 bn

Limpopo

R10 bn

17 052

7%

R11 bn

Outside SA

R6 bn

17 countries

R11 bn

IDC funding approved for the five years from 2014 to 2018 (figure in brackets indicates share of total approvals in SA over the same period)

Provincial contribution to total SA GDP (2016 calendar year)

Jobs expected to be created and saved for the five years from 2014 to 2018 through IDC funding

IDC’s total financial exposure to businesses in the region valued at cost as at 31 March 2018 (figure in brackets indicates share of total SA exposure)

(6%)

(8%)

(1%)

(3%)

(27%)

(18%)

(9%)

(12%)

(16%)

(6%)

(6%)

(1%)

(10%)

(28%)

(23%)

(6%)

(6%)

(15%)

Kimberley

(9% of total

approvals)

(13% of total

portfolio)

Sandton


• Dividends and capital profits from equity investments

• Interest and capital repayments from loans provided

• Borrowings• Funds managed on behalf of

others

FINANCIAL CAPITAL

• Network of entrepreneurs, clients and project partners

• Government ties• Other funders and

development partners

SOCIAL CAPITAL

• Our employees

HUMAN CAPITAL

• Assessing funding applications

• Monitoring and managing our portfolio and all other aspects of our business

• Extending new loans• Making new equity

investments• Repaying borrowings• Covering operating

expenses• Subsidising interest rates

• Sourcing transactions• Developing and co-

investing in projects• Providing inputs to

policy formulation• Leveraging our balance

sheet to increase impact

• Industry-specific and macroeconomic research

• Knowledge gained through our industry experience

• Knowledge derived from/during due-diligence, project development, credit-granting, and post-investment processes

INTELLECTUALCAPITAL

• Crafting strategies for the development of industries

• Providing inputs to policy formulation

• Identifying and managing risk in the businesses that we fund

• IT infrastructure and systems• Country-wide infrastructure

MANUFACTUREDCAPITAL

• Improving our processes• Connecting with our

stakeholders

OUR BUSINESS MODEL

WE USE RESOURCES TO SUPPORT OUR BUSINESS MODELCAPITAL

OUR RESOURCES SUPPORT ACTIVITIES

• Assessing the viability of business plans

• Providing funding to potentially viable businesses

• Developing and funding industrial projects

• Sourcing partners for industrial projects

• Providing non-financial support to entrepreneurs

• Developing and managing specialised funding

products to address specific development outcomes

• Undertaking industry and economic research

• Participating in government and private sector industry and economic development initiatives

ACTIVITIES DIRECTLY RELATED TO PROVISIONOF FUNDING

ACTIVITIES SUPPORTING THE DEVELOPMENT IMPACT OF OUR BUSINESS

ACTIVITIES DIRECTLY SUPPORTING THE FUNDING ASPECTS OF OUR BUSINESS

CROSS-CUTTING SUPPORTING ACTIVITIES

• Sourcing and managing loans and other funds at the lowest possible cost to pass on these benefits to our clients

• Managing our portfolio of loans and investments ensuring that we collect payments, interest and dividends and exit from mature investments

• Financial management• Human capital management• Information technology• Strategy • Continuous improvement• Governance, compliance

and legal• Risk management• Corporate affairs and

marketing• Procurement

Icons represent areas of the IDC's strategy that address the specific aspect. See page 6.


OUTPUTS

TRANSACTIONS APPROVED

CUMULATIVE VALUE APPROVED5 years: 2014-2018

R72 bn

109 000 280 000 389 000

DIRECT AND INDIRECT JOBS IMPACT5 years: 2014-2018

DIRECT

INVESTMENT FACILITATED5 years: 2014-2018

NUMBER OF APPROVALS5 years: 2014-2018

965

DISBURSEMENTS5 years: 2014-2018

R60 bn

FUNDING PROVIDED

INFORM INDUSTRIAL POLICYINDUSTRIAL POLICY RELATED OUTPUTS (2018)• Industry research completed on, among

others, ceramic products, chocolate confectionery, fuel cell application potential, energy storage capacity roll-out

• Prospects for the beneficiation of South Africa’s iron ore resources

• Estimates of the potential economy-wide impacts associated with public sector infrastructure spending

• Economy-wide impact of a youth investment programme

• Support for the development of the Industrial Policy Action Plan (IPAP)

INVESTMENT GENERATED

DEVELOPMENT OUTCOMES

JOBS CREATED AND SAVED

INDIRECT TOTAL

SECTORAL DISTRIBUTION OF FUNDING APPROVALS 5 years: 2014-2018

Manufacturing 45%

Mining 21%

Electricity generation 16%

Services 16%

Agriculture 2%

See value chain reports for more detail

INDUSTRY SECTORS SUPPORTED

NUMBER OF DIRECT JOBS CREATED/SAVEDIN RURAL AREAS5 years: 2014-2018

CUMULATIVE VALUE OF FUNDING FOR BLACK ECONOMIC EMPOWERMENT 5 years: 2014-2018

CUMULATIVE VALUE OF FUNDING FOR WOMEN AND YOUTH EMPOWERMENT

DEVELOPING RURAL AREAS

ECONOMIC TRANSFORMATION

32 833

2018TOTAL ASSETS

R137 bn

5 years: 2014-2018NET PROFIT AFTER TAX

R8.9 bn

FINANCIAL OUTCOMES

R176 bn

R40 bn to black-empowered businesses, of which R21 bn to black-owned businessesR20 bn to Black Industrialists (included in the above categories)

Youth empoweredR4 bn

Women empoweredR10 bn

EMPLOYEES TRAINEDTRAINING COSTS AS A PERCENTAGE OF STAFF COSTS2018

1%

FUNDING RAISEDVALUE OFBORROWINGS RAISED5 years: 2014-2018

R52 bn


Macro-economic conditionsMacro-economic conditions or sovereign credit downgrades impacting the IDC’s business and its ability to achieve strategic objectives.

This risk is monitored through regular analysis of economic, political and legal events, potential implications assessed and interventions implemented.

Developmental finance support to fellow SOCsIn light of tight macroeconomic conditions, the possibility that the IDC may be requested to utilise its capital to support SOCs in need of funding for developmental projects.

This risk is mitigated by the IDC increasing its effectiveness as a DFI and demonstrating the value that it creates for its Shareholder.

Board representation on key subsidiaries. Subsidiaries’ performance is monitored on an ongoing basis. New department established to support subsidiaries.

Subsidiary delivery and performanceFinancial viability of material subsidiaries and their ability to deliver effectively (sefa, Scaw and Foskor).

Job creationRisk that the IDC may not be able to contribute adequately to job creation.

Incentivising job creation in transactions through concessionary rates, greater emphasis on activities in sectors that create more jobs and support for transactions in upstream industries and infrastructure that will unlock job creating activities.

Carbon Tax Management Strategy for the IDC as well as at material subsidiaries and associates.

Carbon taxes paid by the IDC, subsidiaries and associatesThe high impact of the cost of carbon taxes payable by the IDC, its subsidiaries and associates on its financial sustainability.

Sub-optimal business processesThe risk of non-alignment of processes and systems to support the delivery of the strategy.

The risk is managed through the close monitoring of operational performance and deal throughput and a process of continuous improvement focused on business processes.

Human capitalThe risk of not having adequate or appropriately skilled human capital to deliver against the IDC strategy.

The risk is mitigated by targeted recruitment, retention strategies, e.g. competitive remuneration and total reward offering. Focusing on employee education and training as well as study assistance packages for personal development.

This risk is mitigated by fraud and ethics awareness training, implementation of the Code of Ethics and Business Conduct, and thorough due diligence processes and assessment of business partners.

Ethical conduct and behaviourAll forms of internally and externally conducted theft or fraudulent activities including unethical business practices and behaviour.

Corporate governanceNon-adherence to good corporate governance standards by the IDC, subsidiaries and investee companies.

Implementation of Corporate Governance Framework.

Investment analyses and monitoring. The IDC’s diversification strategy, e.g. capital allocation to sectors with low exposure.

Sector concentration and listed share portfolio volatilityThe risk that the IDC portfolio concentration results in investment value fluctuations that impact on dividend income and balance sheet strength.

Credit and investment riskRisk of non-payment by the IDC’s business partners and non-recoverability of investments.

Risk managed through quarterly Investment Monitoring Committee meetings to ensure that appropriate intervention strategies are in place to address risk. Well-defined Credit and Investment Policy and approved Delegation of Authority Policy in place to authorise transactions. The IDC’s Post Investment Management Department monitors client performance and collections. The Workout and Restructuring Department assists with the turnaround of clients in financial distress.

RISK RISK MITIGATION


KEY RISKS


IT security and cyber riskRisk of unauthorised electronic information access could lead to compromised information.

IT security awareness and training. Daily monitoring by IT Governance and Network Teams. Risk mitigation through, inter alia, firewalls and anti-virus software. Regular systems-testing to prevent unauthorised user access.

Fines (local and foreign) for legal and regulatory non-compliance Inability of the IDC and business partners to meet legal, contractual and regulatory requirements.

Risk mitigation through key controls, including Legal Department systems, monitoring procedures, compliance manual and policies. Adequately resourced Compliance and Regulatory Affairs Department in place.

Dedicated departments in place to market the IDC and source IDC value chain-related projects.

Inadequate regional integrationInadequate regional integration between South Africa and neighbouring countries.

Winning organisational cultureRisk of the IDC’s culture and values not aligned with delivery against mandate or strategy.

Managed through culture transformation initiative, culture awareness sessions and ongoing employee engagement. Process approved to achieve desired behaviour, culture and values and implementation monitored.

Proactive industry development strategies for the IDC to develop projects. Marketing of the IDC’s products and services, especially through industry bodies active in the priority areas where the IDC is involved.

Proactive new business generationInability to source new business proactively.

Black Industrialists, women and youth entrepreneurs strategyInsufficient participation by Black Industrialists, women and youth entrepreneurs in the economy.

Black Industrialist preferential pricing schemes and business support introduced. Active participation in and representation on Black Industrialist programme through the dti. Development Impact Support Department assisting operational units to source and facilitate transactions benefiting women and young entrepreneurs.


Business continuity riskMajor business disruption that impacts the IDC’s ability to resume operations.

Implementation of business continuity plans and disaster recovery plan testing.

RISK

High Risk

RISK MITIGATION

Medium Risk Low Risk


MAKING TRADE-OFFS

Competing needs from multiple stakeholders in a capital-scarce environment require certain trade-offs to deliver on our mandate. This requires proactively tough, yet balanced, decisions to direct resources effectively towards strategic focus areas that will create the most long-term value.

Description Strategic areas impacted

Funding for capital-intensive vs. labour-intensive industriesThe IDC is targeting job creation to alleviate unemployment. We balance investment in more capital-intensive industries that do not create many direct jobs but have the potential to unlock downstream economic activity and increase competitiveness with investment in more labour-intensive downstream businesses that create jobs, often at a lower cost but without a catalytic impact on industrial or value chain development.

Leveraging more funding from the private sector vs. the IDC increasing its share of funding for projects The IDC prefers other funders, including project promoters, to participate in funding for projects to avoid crowding out investment and to permit the allocation of limited financial resources to other developmental endeavours. However, partially-funded projects that do not attract other investors and are not implemented, will not contribute to development. Such partially funded projects require an increase in IDC funding, especially where the potential impact is considerable.

Focus on project development vs. transactions with short-term outcomes The IDC aims to proactively develop industries, specifically those identified as essential elements of the prioritised value chains. We endeavour to optimise resource allocation between achieving short-term goals and investing in activities with a long-term impact.

Supporting transactions that create new jobs vs. assisting companies in distress and saving jobs The IDC provides funding predominantly for start-up businesses and the expansion of existing businesses. We also assist businesses that experience difficult trading/operating conditions with funding to build their strengths and improve their competitiveness. In addition, our countercyclical assistance to distressed companies with long-term sustainability potential, increases resource allocation and avoids negative de-industrialisation costs.

Taking more risk vs. reducing impairments The IDC provides funding to entities with viable business plans. Given its higher appetite for risk, the IDC can fund more businesses but with a potentially negative impact on impairments. Ideally, the IDC wants to increase funding while simultaneously managing impairments downward. We manage increased funding/decreased impairment conflicts by continuously strengthening post-investment processes and monitoring high-risk clients, and will continue with interventions to assist clients before they become financially stressed. Decisions that reduce the IDC’s financial risk such as not continuing support for a business that has proven not to be sustainable, can result in negative social impacts such as jobs being lost. These considerations are taken into account when such decisions are made.

Maximising short-term impact vs. ensuring long-term financial sustainability High short- and medium-term funding levels can deplete IDC’s funding capacity. This is exacerbated by funding that does not deliver returns in the short-term. IDC will continue to monitor economic conditions and assess its capacity to increase funding levels by considering the performance of its mature portfolio and new investments.

Selected performance indicators

2019 projected 2018 2017 2016

Indicator Base Target Actual Base Target Actual Actual

Development impact RA

Value of funding disbursed (R'bn)1 17.2 21.8 14.61 14.5 18.5 11.0 11.4Funding to Black Industrialists (R'bn)2 5.5 8.0 7.8 4.9 7.4 4.9 4.5Funding to women-empowered businesses (R'bn)2 1.2 1.5 2.0 1.2 1.5 3.3 3.0Funding to youth-empowered businesses (R'bn)2 0.8 1.0 1.0 0.8 1.0 1.7 0.9Funding in support of government localisation initiatives (R'bn)2 4.7 5.4 7.0 4.4 5.1 4.8 4.5Expected direct jobs created and saved (number)2 28 262 34 795 22 193 23 951 29 488 20 155 18 010

Financial and efficiency indicators

Impairments as percentage of the portfolio at cost (%) 22.6 24.6 17.4 18.4 16.4 16.7 16.9Net interest, dividends, fees and money market income as a

percentage of total assets (%) 4.5 5.0 5.3 3.9 4.4 4.1 4.8Growth in reserves (%) Yield on LT

governmentbonds

Yield on LT governmentbonds + 2%

5.5 9.2 11.2 7.5 8.2

Subsidiaries

sefa – Performance rating 3 5 3.3 3 5 3.2 3.1Scaw – Operating profits/losses (R'm) (39)3 83 (538) (216) (194) (787) (1 074)Foskor – Operating profits/losses (R'm) (392) (349) (763) (97) (87) (902) (569)

1 Disbursements to some subsidiaries are not taken into account when the indicator is measured for performance purposes.2 Measured when agreements are signed. Information elsewhere in the report are as at approval.3 Previous Scaw Grinding Media and Cast Products divisions.


OUR STRATEGY

Our strategic focus is on industrial capacity development that maximises our development impact and ensures the long-term sustainability of the Corporation. We do this by supporting jobs-rich industrialisation and competitiveness improvements, addressing issues related to our financial and human capital, stakeholders and the natural environment, as well as increasing the efficient use of resources.

Our strategy development is a continuous and formally reviewed process. These reviews consider changes in the operating environment and are guided by robust discussions between the Shareholder, Board, Executive Management and other senior managers. We develop strategies that target specific industries and functional areas with input from field- and sector-specific experts within the Corporation.

Details of the pillars of our strategy and how they address different aspects of our business model are illustrated on page 6 of this report.

PROJECT EVOLVEIDC started with the implementation of Project Evolve on 1 April 2015. The purpose of the project was to prioritise industries that increase our effectiveness and maximise our impact on the economy. The criteria for selecting priority industries were South Africa’s current and long-term growth potential, our ability to make a meaningful impact, and industry alignment with government priorities. We identified three value chains where our proactive support could impact meaningfully on direct and indirect job creation through increased competitiveness, downstream industry development and export levels – especially into markets in the rest of Africa.

In addition, we are increasingly proactive in nurturing and developing industries that, while not currently significant players in the South African economy, are deemed to have future growth potential. In this regard, new sectors imbued with innovation, science and technology are particularly important.

Another priority area is to address the negative impact of the infrastructure backlog on industry development. We specifically target infrastructure projects that can unlock industrial development.

We support projects in the rest of Africa that benefit South African industry through procurement from local businesses, or those with local ownership or that form part of a regional value chain.

Project Evolve also identified opportunities to increase our operational efficiencies and effectiveness.

FOCUS AREAS FOR THE YEAR UNDER REVIEWAligned with our long-term strategy, IDC pursued the following priorities during the 2018 financial year:

Focus Area Description

Project Evolve implementation

• Implement value chain/priority sector strategies and key initiatives/projects

• Achieve development impact

Response to operating environment

• Support companies in distress• Support sectors with immediate job

creation impact• Sector-specific interventions for

those affected significantly by operating environment

Financial sustainability

• Improve collections, manage impairments, price more appropriately, strengthen planning, optimise portfolio, optimise products and increase leverage of external funds

Subsidiaries management• Engage, monitor, report and deploy

IDC resources and services more proactively to subsidiaries

Organisational culture and capabilities

• Build an appropriate internal environment and focus more on developing IDC’s human capital, including leadership

Governance and regulatory matters

• Improve governance further by implementing Corporate Governance Framework including conflict of interest policies, strengthening fraud and corruption prevention strategies, managing risk and increasing transparency

OBJECTIVE AND DEVELOPMENT OUTCOMESIDC funding is directed at increasing investment in industrial sectors. Our investments are aimed at expanding capacity in productive sectors, enhancing value-addition to raw materials, improving the competitiveness of industries, increasing exports and import replacement, and integrating value chains across the continent. In this way, IDC investments and the resulting industry enhancements support the development outcomes that address South Africa’s socio-economic challenges.

OBJECTIVE

• Lead industrial capacity development


• Facilitation of decent sustainable direct and indirect jobs• Development of Black Industrialists and support for women and youth entrepreneurs• Increased development in poorer areas and higher integration of regional economies• Promotion of entrepreneurship and small and medium enterprise (SME) growth• Advancement of environmentally sustainable growth• Increased sector diversity and localised production• Support for the transformation of communities


OUR CONTRIBUTION TO THE NEW GROWTH PATH, NATIONAL DEVELOPMENT PLAN AND SUSTAINABLE DEVELOPMENT GOALS

IDC development outcomes Priority areas in the New Growth Path addressed

directly through development outcomes

Priority areas in the National Development Plan addressed directly

through development outcome

Sustainable Development Goals addressed directly through

development outcomes

Facilitation of decent sustainable direct and indirect jobs

• Jobs drivers • Social protection (Chapter 11)• Economy and employment (Chapter 3)• Inclusive rural economy (Chapter 6)

1. No poverty2. Zero hunger8. Decent work and economic

growth

Development of Black Industrialists and support for women and youth entrepreneurs

• Development policy – Broad-based Black Economic Empowerment

• Economy and employment (Chapter 3)• Transforming society and uniting the

country (Chapter 15)

5. Gender equality10. Reduced inequalities

Increased development in poorer areas and higher integration of regional economies

• Jobs drivers – Spatial development

• Development policy – Rural development policy

• Development policy – Policies for African development

• Economic Infrastructure (Chapter 4)• Environmental sustainability and

resilience (Chapter 5) • Integrated and inclusive rural economy

(Chapter 6)• South Africa in the world (Chapter 7)• Transforming human settlements

(Chapter 8)

7. Affordable and clean energy

Promotion of entrepreneurship and SME growth (including sefa)

• Development Policy –Enterprise development

• Economy and employment (Chapter 3)• Economic infrastructure (Chapter 4)

1. No poverty8. Decent work and economic

growth

Advancement of environmentally sustainable growth

• Jobs drivers – Green economy

• Economic infrastructure (Chapter 4)• Environmental sustainability and

resilience (Chapter 5)

3. Good health and well-being6. Clean water and sanitation12. Sustainable consumption and

production patterns13. Climate action14. Life below water15. Life on land

Increased sector diversity and localised production

• Jobs drivers • Economic infrastructure (Chapter 4)• Building a capable developmental

state (Chapter 13)

9. Industry, innovation and infrastructure

Support community transformation

• Jobs drivers – Social capital• Development policy –

Broad-based Black Economic Empowerment

• Jobs drivers – Spatial development

• Economic infrastructure (Chapter 4)• Transforming human settlements

(Chapter 8)

11. Sustainable cities and communities

OPERATIONAL STRUCTURE

The Corporation consists of 11 divisions, each headed by a Divisional Executive, who reports to the Chief Executive Officer.

Four of the 11 divisions are solely engaged in transactions and project development. These divisions consist of individual units that focus on specific value chains and industries. Each unit handles applications and projects for a specific industry to foster specialisation and industry expertise.

Four transaction support and middle office divisions assist the operational divisions in terms of:• The legal aspects of transactions• Post-investment and business turnaround• Research and strategy formulation• Support for targeted groups of entrepreneurs• Credit risk assessments.

These four divisions also perform other corporate support functions such as compliance monitoring, secretarial and IT services and operational risk management.

Finally, three divisions provide administrative support related to finance and funding, corporate affairs and human capital. The internal audit unit reports operationally to the CEO.

A Subsidiaries and Significant Investments Department was established in June 2018 to improve the monitoring and management of our subsidiaries and other large investments.


Chief Executive Officer

Operations

Transaction Support and Middle Office

Mining & Metals

Industries

Legal & Governance

Basic Metals & Mining

Corporate Funding

Machinery & Equipment

Corporate Treasury

Procurement

Automotive & Transport Equipment

Financial Management

Development Funds

Chemicals & Textiles Industries

Corporate Risk

Basic & Speciality Chemicals

HC Business Partners

Chemical Products &

Pharmaceuticals

Talent Management & Organisational Effectiveness

Clothing & Textiles Remuneration &

Benefits, Systems & Payroll

Operations Training &

Knowledge Management

Corporate Affairs

Agro, Infrastructure

& New Industries

Transaction Support

& Post Investment

Agro-processing & Agriculture

Corporate Marketing &

Communication

Industrial Infrastructure

Customer Relations

Management

New Industries Facilities Management

Corporate Social Investment

Finance & Funding

High Impact & Regions

Corporate Strategy

Media & Motion Pictures

Internal Audit

Heavy Manufacturing

Light Manufacturing &

Tourism

Rest of Africa Support

Operations Head Office

Human Capital

Support and Administration

Legal Services

Workout & Restructuring

Compliance & Regulatory

Affairs

Corporate Secretariat &

Records

Risk Management

Asset & Liability Management

Environmental Health & Safety

Fixed Asset Valuations

Post Investment Management

Developmental Impact Support

Information Technology

Corporate Strategy

Research & Information

Innovation & Continuous

Improvement

PICC Support

PICC Technical Unit


M AT E R I A L M AT T E R SWe define material issues as those with the potential to significantly affect our performance and ability to create value. We base the determination of materiality in integrated reporting on the guidelines of the International Integrated Reporting Council (IIRC), International Federation of Accountants (IFAC) and the Global Reporting Initiative (GRI).

The materiality assessment process entails the identification of matters most significant to our business and stakeholders. Social, environmental and governance issues of concern emerge through ongoing stakeholder engagement. These activities also inform our response to risks and opportunities.

Our stakeholder engagement strategy and interactions are available on-line. We rank our stakeholders in terms of mutual impact, influence and interdependence, which enables us to prioritise their requirements.

Stakeholders with the highest levels of influence and interdependence are government structures involved with industrial policy and economic development, as well as lenders, employees, clients and project partners.

Government relies on IDC to deliver against its goals, while we rely on government to create an enabling environment conducive to investment and economic growth. IDC raises capital for investment activities from lenders who depend on us to honour financial commitments. We need our human capital to mobilise the required financial capital, while our employees trust us to provide a work environment that offers meaningful work, market-related compensation and appropriate skills development. We rely on project partners to be accountable and responsible for project delivery, while they need ongoing IDC funding and support.

Stakeholder feedback and environmental scanning results inform our mandate and purpose. The resultant material issues were confirmed after considering the key risks and strategy of the organisation. The Board Audit Committee (BAC) validates all material issues.

Our Executive Management is responsible for managing the material issues in a structured way and ensures that the list remains current and relevant.

After due consideration, the seven material issues adopted for the 2017 financial year were retained for this reporting period.

Material matters and their linkages to strategic pillars

Material matter Link to strategy

Industrial development

INCREASE INDUSTRIAL DEVELOPMENT UTILISATION OF RESOURCES

Socio-economic development

INCREASE INDUSTRIAL DEVELOPMENT STAKEHOLDERS NATURAL ENVIRONMENT

Customer expectations

STAKEHOLDERS UTILISATION OF RESOURCES

Human capital

HUMAN CAPITAL UTILISATION OF RESOURCES

Partners

STAKEHOLDERS

Governance, regulation and risk management

MAINTAIN FINANCIAL SUSTAINABILITY STAKEHOLDERS

Financial sustainability

MAINTAIN FINANCIAL SUSTAINABILITY UTILISATION OF RESOURCES

Stakeholder engagement

matrixLA


Stakeholder prioritisationSt

akeh

olde

r’s in

fluen

ce o

n ID

C Hig

h

• Rating agencies • Regulators• Government departments not

mentioned elsewhere in the table with an interest in IDC-funded sectors

• National Treasury• Mature listed investments where

IDC has a low shareholding• Department of Small Business

Development (sefa)

• Existing and potential clients• Strategic project partners• Employees• Lenders (bondholders, commercial

banks, DFIs, PIC, UIF)• Portfolio Committee on Economic

Development and Select Committee on Economic and Business Development

• Economic Development Department

• Department of Trade and Industry

Med

ium

• Media • The unemployed• Organised labour• Banks and other financial services

providers• Government departments not

mentioned elsewhere in the table• Governments of African countries

other than South Africa• Business associations• SOEs

• Broader communities around IDC-funded projects

• IDC’s subsidiaries• Provincial governments

Low

• Former employees• Potential employees• Higher education institutions• Activist bodies

• Suppliers

Low Medium High

IDC’s impact on the stakeholder

CONTEXTUALISATION OF MATERIAL MATTERS Industrial developmentIDC is a key implementing agent of government policies, such as the National Development Plan, Industrial Policy Action Plan and New Growth Path. As such, we intensify investments in our selected value chains and sectors and execute our mandate of industrial development in accordance with relevant legislation and government policy.

Socio-economic developmentOur funding influences certain socio-economic development outcomes directly. As a DFI, we participate in relevant forums and platforms to contribute to achieving South Africa’s Sustainable Development Goals.

Customer expectationsWe regularly revise products and simplify processes to remain relevant and meet customer needs. Our endeavours to respond to requests timeously and improve stakeholder communication are measured through quarterly and annual customer satisfaction surveys. Survey results for the reporting period rated IDC service delivery as 7.8 on a scale of 1-10 (2017: 7.9). Customer dissatisfaction again centred mainly on turnaround times.

Human capitalTransformation and diversity are cornerstones of our human capital strategy and we endeavour to offer appropriate rewards and

recognition, work satisfaction and an enabling work environment. We strive to attract and retain appropriately qualified, skilled and experienced employees and are responsive to employee expectations, which include commitment to our mandate, a stable and predictable work environment and an engaged and supportive leadership.

PartnersThe IDC is integral to structuring projects that crowd in private capital. Our business partners depend on our financial stability, operational independence and adherence to good governance principles.

Governance, regulation and risk management We subscribe to the principles of good governance as espoused in King IV and comply with PFMA provisions and the Treasury Regulations applicable to Schedule 2 entities. We regularly update systems and processes, as well as registers that relate to conflicts of interest, risk management and fraud prevention.

Financial sustainabilityAs a financially sustainable SOE, we use our balance sheet and the ability to leverage equity to achieve our objectives. We base our business decisions on factors that include risk, as well as capital and financial structures, to give effect to achieving our development outcomes.

Customer satisfaction

survey results

LA

RA


P E R F O R M A N C E T R E N D S

R’bn Number

20 250

18

16 200

14

12 150

10

8 100

6

4 50

2

0

20142015

20162017

20180

Value Number13

.8

11.5

14.4 15

.3 16.7

Funding approvals

R’bn Number

18 450

16 400

14 350

12 300

10 250

8 200

6 150

4 100

2 50

0

20142015

20162017

20180

Value Number of clients

11.2

10.9 11

.4

11.0

15.4

Value of funding disbursed and number of clients disbursed to

‘000

20142015

20162017

20180

35

30

25

20

15

10

5

SavedCreated Created - informal jobs linkages

23.0

20.4

15.3

20.9

29.9

Number of jobs expected to be created and saved

R’bn Number

20142015

20162017

20180

12

10

8

6

4

2

Black-empoweredBlack-owned Total number

5.6 5.

9

9.2 10

.1

9.6

Value approved and number of approvals for black-empowered and black-owned companies

0

160

120

140

100

80

60

40

20

R’bn Number

20142015

20162017

20180.0

2.5

2.0

1.5

1.0

0.5

0.1 0.1

1.0

2.3

1.0

Value approved and number of approvals for youth-empowered enterprises

0

60

50

40

30

20

10

Value Number

R’bn Number

20142015

20162017

20180.0

3.5

3.0

2.0

2.5

1.0

1.5

0.5

1.2

2.6

0.3

3.2

2.2

Value approved and number of approvals for women-empowered enterprises

0

60

50

40

30

20

10

Value Number


Funding approved for SMEs*

R’bn Number

20142015

20162017

20180.0

2.5

2.0

1.5

1.0

0.5

2.2

1.0

2.2 2.

3

0

120

100

80

60

40

20

Value Number

2.0

* Excluding sefa funding to SMMEs

Value approved by sectoral focus area (2018)

R8 765m Metals and mining value chain

R980m Agro-processing and agriculture value chain

R2 187m Chemicals and pharmaceuticals value chain

R1 380m Industrial infrastructure

R595m Clothing, textiles, leather and footwear

R93m Media and motion pictures

R128m New industries

R2 589m Other manufacturing, tourism and services

Value approved by region (2018)

R428m Eastern Cape

R5 053m Gauteng

R2 004m Limpopo

R1 023m North West

R1 944m Western Cape

R219m Free State

R1 029m KwaZulu-Natal

R2 303m Mpumalanga

R270m Northern Cape

R2 442m Rest of Africa

Number of jobs expected to be created and saved by region (2018)

522 Eastern Cape

10 911 Gauteng

1 933 Limpopo

5 912 North West

1 154 Western Cape

2 139 Free State

2 139 KwaZulu-Natal

4 454 Mpumalanga

720 Northern Cape

Number of transactions approved by sectoral focus area (2018)

74 Metals and mining value chain

27 Agro-processing and agriculture value chain

29 Chemicals and pharmaceuticals value chain

13 Industrial infrastructure

19 Clothing, textiles, leather and footwear

5 Media and motion pictures

9 New industries

28 Other manufacturing, tourism and services

Utilisation of funds approved (2018)

39% Capacity expansions

33% Projects and new start-ups

8% Ownership changes

14% Distressed business

6% Expansionary ownership changes


O U R B O A R D O F D I R E C T O R S

Chairperson of the Board (Non-Executive Director)

MBA (Finance and Information Systems) (Leonard Stern School of Business, New York University, USA), BA (Mathematics and Computer Science) (Hunter College, City University of New York, USA)

Appointed to the Board on 25 November 2011 and appointed Chairperson on 29 January 2015

Committees:• Member of the Board Human Capital

and Nominations Committee• Member of Board Investment

Committee

(Non-Executive Director)

MA (Liberal Ethics) (UCT), Postgraduate studies (Sociology and Philosophy) (Leiden University, Netherlands), BA (Sociology and Philosophy) (UKZN)

Appointed to the Board on 25 November 2011


and Nominations Committee• Member of the Board Audit

Committee

Chief Executive Officer(Executive Director)

CA(SA), BCompt (Hons) (UNISA), SEP (Wits and Harvard), Advanced Tax Certificate (UNISA)

Appointed to the Board on 1 March 2005


BSoc Sci (Cape Town)

Appointed to the Board on 1 April 2016


and Nominations Committee• Member of Board Risk and

Sustainability Committee• Member of the Social and Ethics

Committee


Master of Arts (Wits), BA (Hons) (Industrial Sociology) (Wits), Certificate in Economics and Public Finance (UNISA)

Appointed to the Board on 1 October 2008

Committees:• Chairperson of the Board Risk and

Sustainability Committee


DPhil (Business Management) (UJ), MBA (Webster University, London), BA (Management Accounting and Business Administration) (Webster University, Vienna)


Committees:• Chairperson of the Board Investment

Committee• Member of the Board Audit

Committee


MBA (Samford University, USA), BSc (Hons) (UWC)


Committees:• Chairperson of the Board Human

Capital and Nominations Committee• Member of Board Risk and



CA(SA), BCompt (Hons) (UNISA)

Appointed to the Board on 29 January 2015

Committees:• Chairperson of the Board Audit

Committee• Member of the Board Risk and


BA MABUZA (54)

RM GODSELL (65)

MG QHENA (52)

AT KRIEL (55)

LI BETHLEHEM (50)

SM MAGWENTSHU-RENSBURG (58)

BA DAMES (52)

NP MNXASANA (61)


7 - Female

5 - Male

9 - Black

3 - White

Board demographics


CA (SA), CTA (UKZN), BBus Sc (Fin Hons – CA option) (UCT), B Com (Acc Hons)

Appointed to the Board on 1 April 2016

Committees:• Member of the Board Audit

Committee• Member of the Social and Ethics

Committee


MBA (Corporate Finance) (University of Sheffield, England), MSc (Economics) (University of Paris, France), BA (Economics) (University of Limpopo)


Committees:• Member of the Board Investment

Committee• Member of the Board Risk and



LLB (UNISA), BProc (UNISA), BIuris (Fort Hare), Certificate in Energy Law, Executive Management Programme (Kellogg Business School, USA)

Appointed to the Board on 29 January 2015

Committees:• Chairperson of the Social and Ethics

Committee• Member of the Board Investment

Committee• Member of the Board Human Capital

and Nominations Committee


MSc (Economics) (with merit) (School of Oriental and African Studies, London University), BA (English and Private Law) (UNISA), Postgraduate Diploma in Economics (Development) (School of Oriental and African Studies, London University),


Committees:• Member of the Board Investment

Committee• Member of the Social and Ethics

Committee

Divisional Executive: Transaction Support and Post Investment(Alternate Director to CEO)

CA(SA), BCom (Hons) (UJ), BCom (Law) (UJ), FCMA, Advanced Management Programme (Insead)

M MORE (37) PM MTHETHWA (54) ND ORLEYN (62) NE ZALK (49)

GS GOUWS (59)

Significant directorships

in other companies


22

C H I E F E X E C U T I V E O F F I C E R ’ S S TAT E M E N T

Despite difficult local trading conditions during the past year, the IDC remained steadfast in its commitment to industry development, transformation and increasing investment to facilitate inclusive economic growth for the country.

OPERATING ENVIRONMENTIn 2017, the world economy recorded its fasted most broad-based and synchronised upturn in GDP growth since 2011. The Eurozone in particular, which is a key market for South Africa’s manufactured goods, recorded the fastest rate of expansion in the past decade, with emerging markets and developing economies as a group also making visibly stronger contributions to world GDP growth, investment activity and trade flows.

The Chinese economy grew at a robust pace of 6.9% in 2017, with strong export demand as a major contributor. The Indian economy remained one of the fastest growing economies in the world, expanding by 6.7% in 2017 on the back of robust growth in fixed investment and household spending. Moderate rates of expansion were reported in Russia (1.5%) and Brazil (1%), while Sub-Saharan Africa posted a modest growth of 2.8% in 2017.

The South African economy saw a modest recovery in private sector fixed investment in the second half of the year, following a sharp drop in 2016, whilst the public sector at large recorded its second consecutive year of lower capital spending, in real terms, due to weaker than anticipated demand and, in certain cases, financial constraints. Consequently, these factors impacted negatively on the quality and volume of applications for IDC funding considered during the year under review.

DELIVERING ON OUR STRATEGYThe past three years have provided us with a solid base as we continue to deliver on our strategy. We have continued to improve our focus on the value chains in support of the country’s objectives. These value chains remain relevant in the current environment and are aligned with opportunities in the local, regional and global economies. In the same vein, we continued to optimise our operating model to increase activity levels in order to derive improved value from our industrial capacity development interventions.

As a result, in the financial year under review we improved the total value of funding approvals by 9% to R16.7 billion, from R15.3 billion in the previous year. At the same time the number of approvals also

increased by 15% from 175 to 202. We expect these approvals to have increased our impact on employment through the creation and saving of 29 885 jobs compared to 20 881 in 2017. Cumulatively since 2014, the IDC’s financing activities have facilitated the creation and saving of approximately 109 000 jobs. This has contributed, inter alia, to an inclusive economy by amongst others, funding of black-owned companies, Black Industrialists, women- and youth-owned enterprises.

Total disbursements for the year increased by 40% to R15.4 billion (2017: R11.0 billion), despite many clients holding back on their investment plans. Ensuring that funding flows into the economy is a critical measure of our success and will remain a priority going forward.

I am also pleased to report that funding for agro-industries and agriculture more than quadrupled to R991 million, compared to R203 million in 2017. Although due mainly to improved weather conditions and a significant turnaround in agricultural production, our targeted interventions had an impact.

These include an increased focus on raw material supply to industries experiencing shortages, establishing projects to replace imports of certain products and enhancing South Africa’s export competitiveness. Some funding went to Black Industrialists who operate medium-sized food processing and beverage businesses, such as our investment in Casa-Mia Biscuits, an independently-owned local biscuit manufacturer based in Johannesburg, South Africa. This enterprise uses the finest local ingredients to create consumer value.

While this improvement in funding to the agro-processing and agriculture sectors is still not at the desired level, considering the potential and impact of this sector on job creation, it remains high on our funding agenda.

We are also acutely aware of the need to develop industries of the future to optimise the game changing opportunities that will be integral to the “4th Industrial Revolution”. According to Prof Klaus Schwab at the World Economic Forum in Davos earlier this year, “The evidence of dramatic change is all around us and it’s happening at exponential speed. We are at the beginning of a revolution that is fundamentally changing the way we live, work and relate to one another.”

It is incumbent on the IDC to facilitate the adoption of emerging technologies and creation of new industries that will provide the world with clean energy solutions and natural gas products,



among others. We have already funded a Black Industrialist to establish a manufacturing facility to upscale and commercialise carbon nanotube manufacturing technology. Carbon nanotubes have a unique combination of properties that make them ideal for integration into, inter alia, next-generation electronics, advanced energy storage and fuel cells, super-strength plastics, water purification and additive manufacturing.

PARTNERING FOR INCLUSIVE GROWTH AND INDUSTRIALISATIONIn the year under review we continued to integrate the transformation agenda into our industrial development activities. We maintained our commitment to do substantially more towards increasing industrial capacity and support to the development of Black Industrialists, women and youth entrepreneurs.

I am pleased, therefore, to announce a significant increase of 67% or R7.9 billion in 113 transactions (2017: R4.7 billion in 83 transactions) in funding approved for Black Industrialists. This demonstrates our intention to deliberately advance transformation towards inclusive growth and development. Our investment in FX Group (Pty) Ltd in Lothair is a case in point. This will be the biggest industrial investment in the Lothair area creating 398 jobs.

Total number of approvals to businesses where women have at least 25% ownership increased by 15%. However, the projects were smaller which resulted in a decline in the value of approvals. Ensuring that women have access to capital remains a key strategic focus for the IDC.

High unemployment amongst South Africa’s youth population continues to persist and needs to be addressed. We are similarly committed to doubling our efforts to support youth-owned enterprises that can appreciably absorb young people, despite a decline in approvals of 25% to R1 billion (2017: R2.3 billion) over the past year.

FINANCIAL PERFORMANCE Group profits increased from R2.2 billion to R3.2 billion during the review period. The debt to equity ratio increased to 36.1% up from 34% in the previous year.

The impairment charge however increased from R2.1 billion to R4.9bn in the current year, with the ratio of accumulated impairments to the book at cost increasing from 16.7% to 17.4 %. Whilst the impairment ratio is within the appetite range set by the Board which has an upper limit of 20%, the Corporation remains concerned with the total amount of impairments. A significant portion of the impairment charge in the current year was in respect of, Foskor and Scaw. The Corporation has taken strategic actions to contain further impairments on these subsidiaries, which among others, entail finding strategic partners, with capital and extensive experience in these industries. We have also refocused our organisation and have now established a dedicated unit within the Corporation that will focus on the strategic management of our key subsidiaries and investments.

The Scaw corporatisation process has been completed with Cast South Africa (Cast SA) and Grinding Media South Africa (GMSA) divisions carved out into separate legal entities. We have successfully introduced a strategic equity partner for GMSA as well as a controlling strategic equity partner for the remainder of Scaw and are still in discussion in relation to Cast SA.

Our balance sheet continued to grow with an asset base of R137 billion from R130 billion in the previous year, on the back of stronger commodity prices and new investment approvals. Asset diversification away from commodities to mitigate concentration risk remains a key focus area for us. This will ensure that we generate a steady and predictable dividend income while at the same time mitigating against cyclical events.

LOOKING FORWARD I believe that during the 2018 financial year we demonstrated financial and performance resilience as well as our ability to adapt to rapidly changing market conditions. We are keenly aware of our responsibility to ensure that the IDC’s funding support is transformative and inclusive and draws in young people and women as we continue to implement our strategy.

The recent improvement in business confidence augurs well for increased IDC funding to further support entrepreneurial activity to create more jobs and improve localisation efforts- to leverage off the expected increase in economic growth. We will continue to prioritize our project development portfolio, as well as pursue value chain opportunities in the African continent.

We have embraced the Presidential initiative to raise USD 100 billion in additional fixed investment to bolster confidence in the economy. We will look for opportunities to support this initiative. We will also continue to differentiate ourselves from commercial financiers, deepen our transformative role while enhancing our partnerships to remain relevant as we deliver our mandate. This includes maintaining a cost-effective business, prudent and judicious capital allocations and an investment in our people to develop industrial development thought-leaders.

ACKNOWLEDGEMENTS I wish to extend my gratitude to the IDC staff for their unwavering commitment and dedication to upholding the hopes of many South Africans and their invaluable efforts to ensure that the IDC’s impact on the economy and communities at large is relevant and meaningful.

A special thanks to my management team for their continued support in striving to deliver against our commitments. To our customers who do business with us, we greatly value your continued support and partnership.

My appreciation also to the Chairperson and the Board for support during the past year that has helped to strengthen the organisation. A special word of thanks to our shareholder representative, Minister Ebrahim Patel, for continuing to push us to do more and sincere appreciation to the Honourable members of the Portfolio Committee on Economic Development led by Ms Coleman for their continued support of our activities.

MG QhenaChief Executive Officer27 June 2018


O U R E X E C U T I V E M A N A G E M E N T

Chief Executive Officer

CA(SA), BCompt (Hons) (UNISA), SEP (Wits and Harvard), Advanced Tax Certificate (UNISA)

Chief Financial Officer

CA(SA), BCom (Accounting) (Wits), Post Graduate Diploma in Accounting (UKZN )

Chief Risk Officer

CA(SA), BCom (Wits), BAcc (Wits), HDip Tax Law (RAU – UJ), Adv. Cert. Banking (UJ), IEDP (Wits), GEDP (GIBS)

Divisional Executive: Human Capital

Masters in HR Management (Golden Gate University, USA), BAdmin (Hons) (Industrial Psychology) (UNISA), Executive Development Programme (GIBS)

MG QHENA (52) N DLAMINI (44) MP MAINGANYA (45) RJ GAVENI (46)

Divisional Executive: Mining and Metals Industries

MBL (UNISA), BSc (Geology) (UCT)

Divisional Executive: Agro, Infrastructure and New Industries

Masters in Development Finance (USB), BCom Hons Financial Analysis and Portfolio Management (UCT), BCom General (UWC), Global Executive Development Programme (GIBS)

Divisional Executive: Chemicals and Textiles Industries

MBL (UNISA), BSc (Mechanical Engineering) (UKZN), Advanced Management Programme (Insead), Executive Development Programme (GIBS)

Divisional Executive: High Impact and Regions

BEng (Civil) (University of Stellenbosch), GDE (Civil) (Wits), Pr Eng

AP MALINGA (53) L MATSHEKGA (44) SAU MEER (56) WH SMITH (57)


General Counsel and Group Company Secretary

LLB (UWC), BIuris (UWC)

P MAKWANE (52)

Divisional Executive: Corporate Affairs

MBA (UNISA), BA Communications (University of Zululand)

Divisional Executive: Transaction Support and Post Investment

CA(SA), BCom (Hons) (UJ), BCom (Law) (UJ), FCMA, Advanced Management Programme (Insead)

PZ LUTHULI (41)

Divisional Executive: Corporate Strategy

MSocSci (UKZN), BSocSci (Hons), (UKZN) BSocSci (UKZN)

DA JARVIS (48)GS GOUWS (59)

8 - Male

4 - Female

9 - Black

3 - White

Executive Management demographics


in other companies


METALS AND MINING VALUE CHAIN

LEADING INDUSTRIAL CAPACITY DEVELOPMENT

OPPORTUNITIES INDUSTRY SPECIFIC RISKS AND CHALLENGES

FOCUS AREA

• Mining of ferrous and non-ferrous ores to build a competitive downstream industry

• Security of supply of energy minerals

• Development of competitive base metals industries

• Competitiveness improvement of primary steel industry

• Production of metal products such as coil, pipes, tubes, rods, wire and cables, including aluminium body sheets and aluminium rods

• Manufacture of power generation, transmission and distribution equipment (including renewable energy)

• Manufacture of mining, quarrying and construction equipment

• Manufacture of bulk handling and heavy lifting equipment

• Manufacture of oil and gas, water handling, storage and distribution equipment

• Increase of motor vehicle and medium and commercial heavy vehicle assembly capacity

• Manufacture of automotive parts and components

• Manufacture or assembly of rail and rolling stock, as well as parts and components (including forged train wheels)

• Development of new capacity for marine building and repair

• Increase the production of aerospace components for exports

INDUSTRY RESEARCH COMPLETED 2015-2018

• Strategic case for a fund to support beneficiation and competitiveness enhancements in South Africa’s aluminium value chain

• Prospects for the beneficiation of South Africa’s iron ore resources currently being exported

• The coal value chain in South Africa and assessment of coal ash utilisation routes

• Bus value chain analysis• Fuel cell application potential in South Africa’s mine vehicles value chain• Analysis of the uranium value chain• Analysis of the vanadium value chain with strategic

assessment of redox flow battery technology• Analysis of the automotive components value chain • The potential to attract yellow metal OEMs• The shipbuilding industry

• An analysis of the South African gas cylinder value chain

• The mining and construction machinery and equipment value chain

• The motor vehicles, parts and accessories value chain

• South Africa’s chrome value chain – a strategic perspective

• Global solar photo-voltaic industry, focusing on South Africa

• Export potential of South Africa’s capital goods industry

• Slow transformation due to significant entry barriers in some sectors, including economies of scale, technology, capital requirements and routes to market

• South Africa losing its position as a top mining investment destination• Legacy of environmental problems• Long regulatory approval lead-times• SOE financial challenges that result in delays in the roll-out

of infrastructure projects, which limit local equipment manufacture

INDUSTRY SPECIFIC STAKEHOLDERS AND STRATEGIC ENGAGEMENTS

• Economic Development Department• Department of Mineral Resources• Participation in Steel Industry Task Team• Eskom, Transnet, PRASA and Rand Water (as purchasers of

machinery and equipment)• Department of Trade and Industry• CSIR and other research institutions• Automotive Original Equipment Manufacturers (OEMs)• Industry bodies (e.g. SEIFSA, SAISI, NAACAM, VAMCOSA)• Organised labour (e.g. NUM, NUMSA)

HUMAN CAPITAL

MINING

MACHINERY AND EQUIPMENT

MOTOR VEHICLES, PARTS AND ACCESSORIES

BASIC METALS FABRICATED METALS

OTHER TRANSPORT EQUIPMENT

42

STAFF PROFILE OF UNITS SUPPORTING THE VALUE CHAIN

WH

ITE

FEM

ALE

TOTAL

34 8

28 14

BLA

CKM

ALE

2018


• Forged train wheels• Recapitalisation of the

fishing fleet• Iron briquettes to replace

scrap in mini-mills• New technology to smelt

platinum ore

• Steel mini-mills• Chrome smelter• Aluminium slug

manufacturing• Zinc smelter

FUNDING ACTIVITY

In addition to the above, R60.0 million was approved in 2018 (2017: R304.4 million) and R194.4 million disbursed (2017: R167.7 million), which do not form part of IDC funding but are from IDC-managed funds that consist predominantly of Manufacturing Competitiveness Enhancement Programme (MCEP) funds managed on behalf of the dti.

Machinery and equipment

Motor vehicles and parts

Other transport equipment

Mining

Basic metals

Fabricated metals

R’m

0

2 000

4 000

6 000

8 000

10 000

2016

Gross approvals Net approvals Funds disbursed


2018 2017 2016

Jobs expected to be created and saved in South Africa

13 432 9 250 7 881Jobs created and saved per R’m approved in South Africa

(before cancellations)

Created: 1.5 Created: 1.1 Created: 1.7Saved: 1.8 Saved: 1.8 Saved: 1.2

PROJECTS UNDER DEVELOPMENT

FINANCIAL OUTCOMES

2016

2017

2018

2016

2017

2018

2016

2017

2018

6 66

3

9 59

3

9 24

4

6 02

5

8 49

8

8 76

5

4 68

3

3 35

0

7 51

0

Funding to black-empowered companies

Funding to Black Industrialists

R6.2billion

R5.2billion

R2.8billion

R4.2billion

R3.3billion

R1.6billion

201620172018 201620172018

Funding to women entrepreneurs Funding to youth entrepreneurs

R0.8billion

R2.2billion

R0.3billion

R91million

R286million

R191million

201620172018 201620172018

2018 2017 2016

Impairments as a percentage of portfolio at cost

11% 14% 16%Size of the portfolio valued at cost

R40.0 BILLION R32.8 BILLION R31.7 BILLION


METALS AND MINING VALUE CHAIN

This value chain includes mining and the manufacturing of basic metals, metal products, machinery, motor vehicles and components, as well as other transport equipment.

Mining production increased overall by 4% in calendar year 2017, compared to a 4% contraction in 2016. The rebound in output growth was largely underpinned by the strong performance of the iron ore mining sub-sector, which contributed 1.7 percentage points to the mining sector’s overall growth rate, as well as the manganese mining sub-sector, which contributed one percentage point to sectoral growth. Despite the 4% increase in production, the employment in the sector showed a marginal decline of 0.1% from the fourth quarter of 2016 to the same period in 2017.

Production volumes for the basic ferrous and non-ferrous metals industries increased by 8% and 6%, respectively, in calendar year 2017, while both sectors recorded reduced employment. Production in the machinery and equipment sector also recovered with 5% higher volumes of production. Despite General Motors’ divestment from the country, production in the motor vehicle industry – the largest contributor to South Africa’s manufactured exports – remained relatively flat with growth at 1%. Production volumes in the electrical machinery and other transport equipment sectors declined by 8% and 6%, respectively.

OUR APPROACHWe aim to grow a globally competitive metals industry through direct intervention in downstream industries and developing basic metals industries that can supply price-competitive inputs to the downstream sectors.

The mining industry, as a key supplier of raw materials to the metals and other downstream industries throughout the economy, is an important consideration in our strategies for this value chain.

Mining remains a crucial employer in the economy and affects a multitude of downstream industries. As such, we also focus on the upstream segments of the value chain, particularly on thermal coal to facilitate energy supply security.

FUNDING ACTIVITYThe net value of funding approved for the value chain increased by 3% to R8.8 billion (2017: R8.5 billion). Funding increased for the mining, basic metals, machinery and other transport equipment industries, but declined for the fabricated metals and motor vehicle industries. The value of disbursed funding rose by 124% to R7.5 billion.

The increase in funding for the machinery and equipment industry was driven by approvals for several manufacturers of electricity transmission equipment. Most of the transactions supported Black Industrialists to enter the sector.

During the year, work continued on the introduction of strategic equity partners for three Scaw divisions. The approval for the

relevant transactions were also obtained from the Competition Commission of South Africa. The company will split into separate entities that focus on wire-rod and rolled products, cast products and grinding media. The finalised transaction will include new majority shareholders with industry expertise in all the companies over a number of years to enhance operations.

We continued to support the motor vehicle industry with funding for an existing Black Industrialist to supply buses to the Ekurhuleni Metropolitan Municipality’s Bus Rapid Transport system. We also supported the conversion of a semi-knocked-down taxi assembly business to one that assembles completely knocked-down kits to increase local value-add.

Following some delays, construction is progressing at the BAIC automobile plant. Funding for this project was approved in 2017 and production is expected to start in the latter part of 2018.

The largest portion of funding to the mining industry supported our strategy to develop energy minerals with several large coal mining projects aimed at securing coal supply to Eskom.

STAKEHOLDER ENGAGEMENTA successful value chain depends on beneficial outcomes for all stakeholders in different industries. IDC engages continuously with government, organised labour and the private sector to achieve this. Topics included the Mining Charter, scrap metal policies, opportunities to increase localisation through procurement from SOEs and specific engagements with stakeholders affected by large projects, such as BAIC and others.

One such engagement resulted in the introduction of the Downstream Steel Industry Competitiveness Fund, launched during the reporting period with assistance from the Economic Development Department. The fund allows companies in downstream industries to upgrade equipment and introduce other measures to enhance competitiveness.

DEVELOPMENT OUTCOMESTransactions approved during the year are expected to create 10 654 jobs (2017: 8 982) and save 2 778 jobs (2017: 268).

Black-empowered companies benefitted from R6.2 billion approved funding, 21% higher than the R5.2 billion approved in 2017. The amount included funding for Black Industrialists of R4.2 billion (2017: R3.3 billion). Although funding increased overall, approvals to companies with at least 25% women or youth ownership declined, compared to the previous year.

OUTLOOKIncreased confidence in the local economy bodes well for the value chain. We remain committed to supporting more labour-intensive value chain industries that will require lower amounts of capital, with R5.8 billion in investment allocated for 2019.


Master Drilling, established in 1986 and listed on the JSE in 2012, has grown into the world’s largest raise drilling company with 128 rigs in 18 countries.

Raise drilling is used to create circular holes between two levels in a mine. These holes are used as ventilation shafts and shafts through which mined ore can be passed.

While mining resources in South Africa are abundant, economical mining in future will be at great depths. Another trend in the mining industry is the move to underground mine operations, from the initial open pit operations.

Master Drilling identified the need for a safer, cheaper and quicker way to conventional shaft sinking to open up and make deep reserves economically viable.

Their new technology also makes project/shaft sinking operations more environmentally friendly, with shorter lead-times to access the ore body.

IDC is assisting with the development cost of the new technology. The proposed machine will have a South Africa design and local content of ca 60%, providing export opportunities as other parts of the world adopt the machine.

The new machine will be able to access mineral bodies at a much greater depth and render viable mining projects that are currently on hold.

C A S E S T U D YMASTER DRILLING

DEVELOPMENT IMPACT

• Development of new technologies• Nine new direct jobs to be created – indirect jobs will be

created through mining projects that become viable by using the new technology

As industry adopts new technologies to enhance competitiveness, a South African leader in mining services is developing new expertise that will ensure that South Africa’s mineral wealth can benefit future generations


AGRO-PROCESSING AND AGRICULTURE VALUE CHAIN


OPPORTUNITIES INDUSTRY-SPECIFIC RISKS AND CHALLENGES

FOCUS AREA

• Expanding small- to medium-scale grain processing activities, milling, etc.

• Expanding and creating new processing facilities for grains, oils and vegetables and integrating emerging farmers into the processing chain

• Industrial application of plant-based oils

• Pursuing local and regional opportunities to preserve and process vegetables (canning, bottling, etc.)

• Pursuing regional opportunities to grow grains and raw material for animal feeds

• Adding value and formulating new products (e.g. fresh-cut fruit, de-shelled nuts, oil extraction)

• Backward integrated projects• Replacing ageing orchards/

vineyards• New orchards and fruit products

in global demand e.g. berry fruit, almond nuts, persimmons

• Advanced processing capacity, e.g. nuts, adapting facilities to pack for different markets

• Utilising under-utilised community land

• Extracting high-value additives, nutraceuticals

• Improving efficiencies, e.g. hydroponics

• Developing new and upgrading existing infrastructure

• New or improved preservation and packaging technologies

• Integrating rural cattle into formal value chain

• Meat processing and packaging • Enhancing competitiveness

of red meat and poultry value chains by lowering costs, enhancing value-addition and encouraging transformation

• Adding value in dairy products industry (e.g. whey, cheese)

• Transformation through supporting Black Industrialists

• Aquaculture:• Expanding exports, building on successful abalone export industry• Developing and establishing viable finfish aquaculture operations,

replacing imports • Replacing harvesting from the wild with aquaculture production• Improving competitiveness by lowering feed costs and improving

efficiencies• Increasing utilisation of existing fish processing facilities• Increasing transformation and inclusivity in the sector

• Reducing dependency on imported timber products

• Reducing dependency on indigenous forests by establishing commercial plantations

• Supporting SA companies to establish presence in the rest of Africa

• Increasing transformation and inclusivity in the sector


• Chocolate confectionery in South Africa and investment opportunities

• An analysis of South Africa’s citrus value chain• The livestock value chain in South Africa

• The poultry value chain in South Africa

• Continued adverse climate conditions in some parts of the country affecting agricultural output with additional climate risks in the long term

• Water rights, availability, quality and infrastructure• Other infrastructure constraints• Skills, including training and developing young farmers• High entry barriers with high land and capital equipment

costs• Dominant position of large firms• Reduced employment opportunities due to increasing

mechanisation• High import penetration due to unfair trading practices• Increasing input costs, e.g. energy, animal feed• Complex process to develop rural-based projects with

various stakeholders, permits• Uncertainties regarding land reform policy direction• Outbreaks of avian flu and listeria reducing confidence in

the sector and affecting SA’s market opportunities • Low levels of transformation

INDUSTRY SPECIFIC STAKEHOLDERS AND STRATEGIC ENGAGEMENTS

• Economic Development Department• Department of Agriculture, Forestry and Fisheries• Department of Rural Development and Land Reform• the dti• Participation in Poultry Industry Task Team• Operation Phakisa – agriculture, land reform and rural

development• The Land Bank• Emerging farmers• Large agri-business• Trade unions• Industry bodies (e.g. Grain SA, Citrus Growers Association,

SA Poultry Association, Aquaculture Association of SA, Forestry SA, SA Sugar Association, Subtrop, Hortgro, SA Table Grape Industry Association, Aquaculture Association of SA)

• Research institutions (e.g. CSIR; universities; Agricultural Research Council)

• Food retailers

HUMAN CAPITAL

FIELD CROP PROCESSING

MEAT AND DAIRY PRODUCTS

HORTICULTURAL PRODUCTS

FORESTRY FISH/SEAFOOD PRODUCTS

21

STAFF PROFILE OF UNIT SUPPORTING THE VALUE CHAIN

WH

ITE

FEM

ALE

TOTAL

15 6

14 7

BLA

CKM

ALE

2018


• Dehydrated vegetables• Catfish farming and processing• Yellow kiwifruit• Community forestry• Development of agricultural

projects that can feed into the local beverage industry such

as barley, hops and malted products as well as fruit for carbonated fruit juices

• Rural cattle commercialisation project

FUNDING ACTIVITY

In addition to the above, R17 million was approved in 2018 (2017: R79.1 million) and R37.5 million disbursed (2017: R20.6 million), which do not form part of IDC funding but are from IDC-managed funds, predominantly APCF funds managed on behalf of the EDD.

Beverages

Horticulture

Agriculture, forestry and fishing

Food processing

R’m

0

200

400

600

800

1 000

2016



2018 2017 2016






FINANCIAL OUTCOMES

2016

2017

2018

2016

2017

*

2018

2016

2017

2018

632

203

991

632

55

980

442

543

488



R252 R77 R138 R109 R45 R54million million million million million million

201620172018 201620172018

2018 2017 2016





R46 R36 R51 R159 R79 R20

201620172018 201620172018

million million million million million million

* Negative values indicate cancellations of approvals made in previous years exceeding new approvals


AGRO-PROCESSING AND AGRICULTURE VALUE CHAIN

Primary industries such as agriculture, forestry and fishing, as well as the processing of agricultural products, predominantly for food, form part of this value chain.

Following the severe drought experienced throughout the country in 2016, improved weather conditions in the summer crop regions of South Africa during the 2017 calendar year, resulted in a significant turnaround in agricultural production volumes. This resulted in record maize crops, although persistent drought conditions in the southern parts of the country continued to affect crop production of, inter alia, wheat and oranges. Despite an increase in overall production, the agricultural sector reported almost 70 000 job losses, a 7.6% decline over the twelve-month period ending in the fourth quarter of 2017.

Processing industries also reported increasing levels of production, with volumes in the food processing and beverages industries growing at 2% year-on-year. Employment in both these industries declined compared to the 2016 calendar year.

OUR APPROACHOur focus on developing downstream industries that add value to primary agricultural produce remains robust. We also support projects in the primary sector that address shortages of inputs into the processing industry, or where a new, high-value crop is being introduced in the country.

FUNDING ACTIVITY

The year under review saw the value of approved sector funding more than quadruple to R991 million compared to R203 million in 2017.

An additional R17 million was approved from funds managed on behalf of other organisations, such as the Agro-Processing Competitiveness Fund (2017: R79 million). The increase in the value of approvals did not translate into increased disbursements, which typically lag behind approvals, with R488 million disbursed (2017: R543 million).

Our funding for a significant expansion of mandarin orchards in Mpumalanga and Limpopo will increase export earnings for the horticulture industry. Funding for this project is largely aimed at expanding capacity in order to increase available supply for the Northern Hemisphere’s summer season. Furthermore, some of the funding will be used to install hail netting to mitigate against climate risks.

During the year, we supported several Black Industrialists, most of whom operate medium-sized food processing or beverage businesses. The support included follow-up funding for pet food manufacturing, craft brewing, ice cream manufacturing and a small dairy that will produce pasteurised milk, yoghurt and maas, the latter being a fermented milk product.

The increase in funding levels was driven, to some extent, by project funding in the rest of the continent. We supported two sugar estates in Zambia and Tanzania. The Zambian project

will refine sugar and produce golden syrup and castor sugar. In Mozambique, we are supporting the establishment of a 6 300 ha commercial eucalyptus plantation. The project is promoted by South Africans to secure the supply of logs for the African market.

STAKEHOLDER ENGAGEMENTA key weakness in developing this industry is insufficient stakeholder collaboration. IDC made a concerted effort during the reporting period to partner with different government entities to drive projects and resolve bottlenecks. IDC, the dti, Land Bank, Jobs Fund and Department of Agriculture, Forestry and Fisheries, among others, attended a stakeholder workshop to discuss these issues. We will continue to maintain and build these close relations.

We are interacting with the Department of Rural Development and Land Reform (DRDLR) to determine how best to escalate land claims and other land-related issues that are delaying project development. Discussions with the DRDLR also focused on our participation in the Strengthening Relative Rights for People Working the Land (50/50) projects. Initial meetings have taken place and certain projects have been identified.

We continued with our participation in the Poultry Industry Task Team to identify opportunities to increase competitiveness in the industry.

DEVELOPMENT OUTCOMESThe employment impact of transactions concluded during the year improved significantly, with 1 668 direct jobs expected to be created (2017: 585 created) and 1 274 jobs saved (2017: 438 saved) in South Africa. Increased funding translated into support for Black Industrialists, as well as women-and youth-empowered businesses, with R109 million, R46 million and R159 million approved for these entrepreneurs, respectively (2017: R45 million, R36 million and R79 million, respectively).

OUTLOOKWe have made significant strides to increase our impact in this value chain over the past financial year. Given the potential of these industries to alleviate the high levels of unemployment in the country, we expect to further increase our levels of industry funding to between R1.5 billion and R1.7 billion in 2019.


Rashaad Musa and Ricardo Ferreira identified an opportunity to manufacture sauce products for the low- and middle-income market in 2008. They set up a plant in Uitenhage in the Eastern Cape and began production in the same year.

After initially producing only sauces, the company diversified their product range to include jams and fruit juice nectars under the brand names Just Jam and Just Nectar. Saucy Secrets supplies supermarkets and caterers in the Eastern Cape with products in a variety of pack sizes based on consumer preferences.

Although the company has experienced year-on-year sales growth, step-change growth has been hindered by a lack of the required food safety accreditations and process equipment to enter a wider market.

The company has identified opportunities to further diversify its product range to include squashes, soft drinks, cordials and bottled water.

IDC funding will enable the company to obtain the necessary accreditations, expand its product lines and print packaging in-house. With these improvements, Saucy Secrets expects to move beyond its Eastern Cape market to markets in the Western Cape, Gauteng, KwaZulu-Natal and the Free State.

C A S E S T U D YSAUCY SECRETS

DEVELOPMENT IMPACT

• 24 new direct jobs• Growth in a business owned by Black Industrialists and

youth

Based in the Eastern Cape, this company is an example of the success that young and entrepreneurial individuals can have in a well-established industry


CHEMICALS AND PHARMACEUTICALS VALUE CHAIN


OPPORTUNITIES INDUSTRY-SPECIFIC RISKS AND CHALLENGES

FOCUS AREA

• Replacing imported products and increasing local value-add

• Increasing the local production of green and other new chemicals

• Increasing local manufacturing of consumer goods inputs

• Developing the active pharmaceutical ingredient (API) manufacturing industry

• Producing radiopharmaceuticals for nuclear imaging

• Creating new capacity for targeted pharmaceuticals and medical devices/ equipment

• Increasing gas usage as an energy source

• Increasing liquid fuels energy security

• Developing competitive contract manufacturing platforms to local and international brand-owners

• Localising branded consumer goods manufacturing

• Developing continental-wide brands that are manufactured locally

• Enhancing competitiveness through improving productive capacities, technologies and efficiencies

• Introducing new products, materials and processes

• Reducing import penetration• Increasing recycling capacity

and value chain improvements


• Analysis of the fertilisers value chain• An analysis of South Africa’s pharmaceutical value

chain• The chemicals-based consumer products value

chain in South Africa• The global natural gas industry landscape focusing

on Africa and South Africa in particular• An investigation of localisation opportunities in the

South African crop protection chemicals industry

• An overview of the oil and gas industry in South Africa focusing on shale gas and suppliers of related inputs

• Development opportunities and challenges in South Africa’s medical devices value chain

• Need for greater clarity on gas role in energy mix and gas industrialisation as well as clarity on liquid fuels strategy

• Material dependency of the liquid fuels and petrochemicals industries on imported crude oil and gas

• Water scarcity• Low levels of youth participation in the industry, especially

in large projects• Constrained cost competitiveness in the downstream

chemicals industry due to high raw materials costs• Regulatory registration for pharmaceutical products• Lengthy process to obtain regulatory approval for pharmaceutical products• Need to access international technologies• Low levels of transformation• Small domestic market for consumer products• Large multinational institutions with established brands

dominate market• Highly technical nature of pharmaceuticals

INDUSTRY-SPECIFIC STAKEHOLDERS AND STRATEGIC ENGAGEMENTS

• Economic Development Department• Department of Energy• the dti• Department of Health• South African Nuclear Energy Corporation• National Treasury• Chemical and Allied Industries’ Association• Transnet National Ports Authority• PetroSA• Durban Chemicals Cluster• Technology Innovation Agency• Trade unions• CSIR

HUMAN CAPITAL

FERTILISERS

PLASTICS CONSUMER GOODS

ENERGY BASIC AND SPECIALITY CHEMICALS

PHARMACEUTICALS AND MEDICAL PRODUCTS

32

STAFF PROFILE OF UNITS SUPPORTING THE VALUE CHAIN

WH

ITE

FEM

ALE

TOTAL

25 7

17 15

BLA

CKM

ALE

2018


FUNDING ACTIVITY

In addition to the above, R66.3 million was approved in 2018 (2017: R304.4 million) and R121.4 million disbursed (2017: R167.7 million), which do not form part of IDC funding but are from IDC-managed funds, predominantly from MCEP funds managed on behalf of the dti.

Chemical products and pharmaceuticals

Plastics and other products

Healthcare

Basic chemicals

Oil and gas transport and storage

Fertilisers

R’m

0

1 000

2 000

3 000

4 000

2016


6 000

5 000


2016

2017

2018

2016

2017

2018

2016

2017

2018

4 79

7

2 92

1

2 31

6

4 76

4

2 05

6

2 18

7

1 59

5 1 87

7

1 64

7

• Further beneficiation of phosphate rock

• Building a manufacturing facility to produce purified phosphoric acid

• Establishing a high-purity sodium sulphate manufacturing facility

• Establishing a high-purity cobalt oxide and cobalt carbonate manufacturing facility

• Establishing a chemical complex to manufacture high-purity magnesium oxide and precipitated silica

• Establishing a pilot plant to manufacture active pharmaceutical ingredients

• Developing local natural gas resources

2018 2017 2016






FINANCIAL OUTCOMES

2018 2017 2016






R1.1 R1.1 R0.2 R1 102 R384 R218billion billion billion million million million

201620172018 201620172018


R199 R219 R107 R274 R110 R4

201620172018 201620172018



CHEMICALS AND PHARMACEUTICALS VALUE CHAIN

This value chain encompasses the manufacturing of oil products, basic chemicals, fertilisers, agro-chemicals, paints, pharmaceuticals and other medical products, soaps and detergents, plastic products and other related products. Oil and gas storage and distribution are also included in this value chain.

Production volumes for all sub-sectors in this value chain declined during calendar year 2017: 6% for petroleum products, 1% for basic chemicals, 3% for other chemical products and 1% for plastic products. Despite reduced levels of output all the sub-sectors, except the basic chemicals industry, recorded a marginal improvement in employment levels.

OUR APPROACHOur funding of these industries aims to enhance the competitiveness of downstream industries, including petroleum and oil products, pharmaceuticals and other consumer products. Upstream industries in this value chain and industries that provide inputs into other sectors, such as basic chemicals and plastic packaging, are integral to downstream sector competitiveness and developing other sectors, such as the agriculture and metals industries. We also focus on ensuring security of supply for products such as pharmaceuticals and medical devices.

FUNDING ACTIVITYFunding approvals for these industries in 2018 amounted to R2.3 billion (2017: R2.9 billion). Fewer project cancellations resulted in an increase of 6% in net approvals compared to 2017. Disbursements for the year amounted to R1.6 billion, compared to R1.9 billion in the previous year.

The storage and transportation of oil and gas again received a significant portion of funding, with R1.0 billion approved for the sector, similar to the amount in 2017. We support this sector to diversify South Africa’s energy mix and improve competitiveness by increasing energy source options for businesses. Sector support in 2018 included funding for the second phase of a black-owned crude oil storage facility at Saldanha Bay to further develop the cluster of related projects in the area.

The funding approved for basic chemicals included a project, to be located in a rural area close to Piet Retief in Mpumalanga, that will produce high-purity sodium sulphate by using a by-product generated in a nearby pulp mill as a raw material.

In line with our strategy to increase competitiveness in the plastics industry, we approved several transactions for plastic converters, mostly for Black Industrialists. We also approved funding for the sizable expansion of a manufacturer and printer of flexible polymer packing products, operating in Edenvale in Gauteng.

In support of our medical products strategy, we approved funding for a Black Industrialist to set up a latex condom manufacturing plant in Gauteng.

Our funding for the establishment of a nickel sulphate purification facility, an essential input into lithium-ion batteries, will support South Africa’s participation in the 4th Industrial Revolution.

Our subsidiary, Foskor, a manufacturer of fertilisers, continues to face tough trading conditions. The company has increased capex investment to improve efficiencies across its mining and phosphoric acid divisions to improve its competitive position. Foskor will also diversify and grow its market through new projects. The subsidiary’s poor performance was the main driver of the significant impairment increase in this portfolio.

STAKEHOLDER ENGAGEMENTWe continue to engage with private and public sector players to improve the environment for industry development and identify growth opportunities.

Due to our engagements during the year with the Department of Health, National Treasury and the dti, a portion of the public sector’s annual procurement of condoms will be allocated to South African manufacturers. This agreement has resulted in funding approval for the establishment of a factory in 2018 with the potential to fund an additional factory in the future.

DEVELOPMENT OUTCOMESThese outcomes increased significantly compared to the previous year. The number of jobs expected to be created through our funding approvals increased by 25% to 1 432 (2017: 1 148). Given the capital intensive nature of the industry, these direct jobs typically require a larger amount to be invested than in most other industries. The products in this value chain are used across various sectors and impact significantly on indirect employment and increasing competitiveness, although the job impact is not reflected in the numbers reported in this report.

Funding of Black Industrialists increased by 184% to R1.1 billion (2017: R0.4 billion). Funding for youth entrepreneurs increased by 149% to R274 million from R110 million in the previous year, while funding for women-empowered businesses declined by 9% to R199 million.

OUTLOOKWe do not foresee making significant changes to our strategies for the proactive development of this value chain. We are planning to increase funding levels to between R3.0 billion and R3.4 billion in the 2019 financial year.


Thakadu Metals Beneficiation was founded in 2015 by Ruli Diseko, a young Black Industrialist. His experience in the mining and metals industry stems from his employment at Lonmin, the Department of Mineral Resources and as a commodities trader.

Having identified business opportunities in the mushrooming growth of raw materials used in the manufacture of batteries, the company conducted a feasibility study to establish a purification plant for the crude nickel sulphate by-product at Lonmin’s platinum mining operations. The study confirmed the feasibility of such a venture and the IDC, having maintained a close partnership with the company, approved funding for the plant.

Once completed, the facility will take the crude nickel sulphate by-product and process it to 99.99% pure battery-grade material. Lithium-ion batteries used in electric vehicles and hybrid electric vehicles consist of 80% nickel. Nickel has additional applications in energy storage batteries, rechargeable battery devices and the more traditional nickel-plating market.

The project is also supported by the dti through a Black Industrialist grant.

C A S E S T U D YTHAKADU METALS BENEFICIATION/LONIX

DEVELOPMENT IMPACT

• 165 new direct jobs• Support for new technologies• Establishment of a business owned by Black Industrialists

and youth

The production of battery-grade nickel sulphate is beneficiating and incorporating South Africa’s raw materials into global value chains for new technologies


INDUSTRIAL INFRASTRUCTURE


FUNDING ACTIVITY

R’m

0

500

1 000

1 500

3 000

2 500

2 000

2016


3 500


2016

2017

2018

2016

2017

2018

*

2016

2017

2018

2 05

2

2 13

1

1 83

3

1 83

6

1 89

1

1 38

0

2 80

4 2 92

8

2 87

5

2018 2017 2016


786 2 864 1 594Jobs created and saved per R’m approved in South Africa


Created: 0.1 Created: 1.4 Created: 1.1Saved: 1.1 Saved: 1.5

HUMAN CAPITAL

FINANCIAL OUTCOMES

2018 2017 2016




Electricity generation and distribution

Telecommunications

Other infrastructure

Transport and logistics



R297 R1 966 R986 R1.0 -R9* R404million million million billion million million

201620172018 201620172018


R462 R297 R181 R163 R948 R438

201620172018 201620172018


14

STAFF PROFILE OF UNIT SUPPORTING THESE SECTORS

WH

ITE

FEM

ALE

TOTAL

12 2

7 7

BLA

CKM

ALE

2018



INDUSTRIAL INFRASTRUCTURE

We support the development of electricity, water, telecoms and logistics infrastructure projects where these unlock industrial development potential.

FUNDING ACTIVITYWe approved R1.8 billion for infrastructure development in 2018 compared to R2.1 billion in 2017. The reduction came largely as a result of no significant new approvals being made for electricity generation during the year. Funds of R2.9 billion were disbursed, similar to the amount disbursed in 2017.

The largest portion of funding was for projects in the logistics sector.

Funding was approved for the development of several projects including an industrial park in Kathu, Northern Cape, in support of government’s Infrastructure Plan, and in particular SIP 5, an intermodal terminal in Musina, Limpopo, and project development costs for a fresh produce market in Mbombela, Mpumalanga. In the water sector, we approved the development of a smart irrigation water project in the Northern Cape.

Continued delays with the signing of power purchase agreements associated with the REIPPPP until after the end of the financial year resulted in continued delays with the implementation of

renewable energy projects.

The year also saw additional funding approved for the expansion of a telecommunications company to expand its broadband services in Nigeria, Uganda, Tanzania and the Democratic Republic of the Congo.

DEVELOPMENT OUTCOMESInfrastructure projects typically only create large amounts of direct jobs during the construction phase, with the largest impact indirectly created through business activity that is unlocked. Direct jobs expected to be created associated with funding approved in 2018 are 786 compared to 2 846 in 2017.

R1.0 billion was approved for Black Industrialists in the sector. Funding to women-empowered businesses increased to R462 million compared to R297 million in the previous year, while fewer youth-empowered projects resulted in a decline in funding for this area.

OUTLOOKWe expect to provide between R2.2 billion and R3.0 billion in funding to projects in this sector in 2019.

Musina Intermodal Terminal is implementing an intermodal transport logistics terminal in Musina, Limpopo.

The terminal is strategically located within the Musina industrial area that contains existing road-rail link infrastructure and is suited for an inland logistics hub. The infrastructure requires upgrades and capacity expansion to handle the volumes of expected goods and to operate efficiently.

The first phase comprises the handling of bulk mining commodities, containerised cargo for citrus, grain and steel products, as well as a fuel depot. The terminal will also explore potential value-adding services such as cold storage, bulk materials crushing and screening as well as bagging and containerisation.

The IDC is supporting the company to upgrade the infrastructure and improve local economic growth and efficiency.

C A S E S T U D YMUSINA INTERMODAL TERMINAL

DEVELOPMENT IMPACT

• 72 new direct jobs• Upgrading industrial infrastructure to improve

competitiveness • Support for Black Industrialists

The project will increase the logistics efficiency in the Musina area and increase economic development


CLOTHING, TEXTILES, LEATHER AND FOOTWEAR


FUNDING ACTIVITY

In addition to the above, R965.0 million was approved in 2018 (2017: R1 113.0 million) and R1 104.0 million disbursed (2017: R1 003.0 million), which do not form part of IDC funding but are from IDC-managed funds, predominantly from CTCP funds managed on behalf of the dti.

0

100

200

300

400

500

600

700

800

2016


900


2016

2017

2018

2016

2017

2018

2016

2017

2018

727

440

763

554

434

595

365

238 25

7

2018 2017 2016




Created: 2.7 Created: 1.9 Created: 1.8Saved: 12.2 Saved: 5.4

HUMAN CAPITAL

FINANCIAL OUTCOMES

2018 2017 2016







201620172018 201620172018


R34 R26 R110 R54 R33 R23

201620172018 201620172018


Clothing

Leather and footwear Textiles

R’m

12


WH

ITE

FEM

ALE

TOTAL

11 1

5 7

BLA

CKM

ALE

2018


CLOTHING, TEXTILES, LEATHER AND FOOTWEAR

The clothing, textiles, leather and footwear industries remain key to creating and preserving jobs in the South African manufacturing sector. The sector has been improving its competitiveness and is increasingly focusing on fast fashion supply to the local retail industry. However, lower consumer consumption expenditure and the strengthening of the rand had a direct, negative impact, which resulted in a higher import penetration.

We provide financial support to the industry and play an important role in providing inputs to government policy aimed at improving competitiveness in these sectors.

FUNDING ACTIVITYThe value of funding approved for businesses operating in the clothing, textiles, leather and footwear industries increased by 74% to R763 million (2017: R440 million). The bulk of funding approvals in this industry is in the form of payment guarantees, as commercial funders are often cautious to fund the sector. This product allows companies to access funds from commercial funders on the back of IDC payment guarantees and is an efficient way for businesses to access working capital.

The largest portion of funding, 86%, was approved for companies involved in textile spinning and weaving as well in

the manufacturing of textile products. The bulk of this funding continued to support existing clients, some of whom are experiencing difficult trading conditions.

Clothing manufacturers received R86.4 million (2017: R90.1 million). This included funding for a CMT operator in Isithebe in KwaZulu-Natal to expand operations and distress funding for a company in Phuthaditjhaba in the Free State.

DEVELOPMENT OUTCOMESThe funding approved for these industries during the reporting period is expected to create 1 294 jobs, significantly more than the 852 jobs in 2017. In addition, we expect to save 1 315 jobs (none were saved in 2017). The sector is labour-intensive and generates larger numbers of jobs for each rand that the IDC disburses. The IDC leverages further by utilising guarantees as a product to facilitate funding by banks. Funding to Black Industrialists decreased marginally by 4% to R115 million, while funding to women and youth entrepreneurs increased by 20% and 64%, respectively.

OUTLOOKOur aim for 2019 is to maintain our levels of investment in the sector with expected approvals of between R585 million and R740 million.

Yi Li Da SA Manufacturing was established in 2015 and is the sole manufacturer of the popular polyester (mink) blanket products in South Africa. Yi Li Da SA was set up by their Chinese parent company to take advantage of the opportunity to replace imports.

The IDC is providing funding for the purchase of new machinery that will enable the business to improve their processes and reduce the cost of manufacturing. This will allow the company to continue to deliver world-class manufacturing quality to customers.

C A S E S T U D YYI LI DA SA MANUFACTURING

DEVELOPMENT IMPACT

• 230 new direct jobs

Supporting foreign direct investment to improve the competitiveness of local industry


MEDIA AND MOTION PICTURES


FUNDING ACTIVITY

R’m

0

100

50

150

200

250

300

350

2016


400


2016

2017

2018

2016

2017

2018

2016

2017

2018

266

208

116

222

161

93

55

350

94

2018 2017 2016

Jobs expected to be created in South Africa

19 126 546Jobs created per R’m approved in South Africa


Created: 0.4 Created: 1.2 Created: 2.2

HUMAN CAPITAL

FINANCIAL OUTCOMES

2018 2017 2016



R694 MILLION R729 MILLION R414 MILLION




201620172018 201620172018


R34 R59 R32 R116 R62 R215

201620172018 201620172018


Television and radio broadcasting

Film and video production

7


WH

ITE

FEM

ALE

TOTAL

7 0

4 3

BLA

CKM

ALE

2018


MEDIA AND MOTION PICTURES

The IDC funds film production, studio infrastructure, as well as radio and television broadcasting. We also support other forms of media, such as print media, and are exploring alternative media platforms, such as game development.

FUNDING ACTIVITYFunding for this industry decreased to R116 million in 2018 (2017: R208 million). All the funds approved were for film and video production. This was for the actual production of content as well as studio facilities. R94 million was disbursed in 2018 (2017: R350 million).

Most of our funding approved was for the production of new films. Black filmmakers will produce 10 new films that tell mostly South African stories with the funding made available during the year.

The IDC also approved additional funding to complete the construction of a television studio in Johannesburg.

DEVELOPMENT OUTCOMESAlthough the film industry as a whole creates numerous opportunities for individuals, a single film creates opportunities for only a short time. After taking into account cancellations of transactions approved in previous years, the total full-time equivalent jobs expected to be created through our funding activities in 2018 is 19. This highlights the importance of ensuring the production of a steady stream of films to maintain a sustainable industry.

The R116 million approved for this industry went to young Black Industrialists (2017: R80 million to Black Industrialists, R62 million to young entrepreneurs), with women entrepreneurs receiving R34 million of the total amount approved (2017: R59 million).

OUTLOOKWe are expecting higher levels of activity in this industry in 2019 and anticipate approvals of between R303 million to R325 million.

Sew The Winter To My Skin is a South African story that retells the life of John Kepe who was convicted and sentenced to death for murder in Cradock in 1952.

In the film, producer Layla Swart and writer and director Jahmil XT Qubeka tell the story of Kepe’s exploits, arrest and trial against the backdrop of apartheid in the 1950s. The film has minimal dialogue with the script primarily in isiXhosa.

This will be Layla Swart’s first solo production after working her way up in the film industry. Writer/director Jahmil XT Qubeka has won numerous awards, including a BAFTA in 2014 for Of Good Report, which was the first African film selected to compete at the London Film Festival.

C A S E S T U D YSEW THE WINTER TO MY SKIN

DEVELOPMENT IMPACT

• Supporting young, local Black filmmakers• 10 direct full-time equivalent jobs created

Supporting local filmmakers to tell South African stories develops the industry and contributes to our cultural heritage



FUNDING ACTIVITY

0

50

100

150

200

250

2016



2016

2017

2018

2016

2017

2018

*

2016

2017

2018

149

227

140 14

9

222

128

102

11

128

HUMAN CAPITAL

FINANCIAL OUTCOMES

2018 2017 2016



R979 MILLION R876 MILLION R811 MILLION

2018 2017 2016


41 482 39Jobs created and saved per R’m approved in South Africa


Created: 0.3 Created: 2.2 Created: 0.3Saved: 0.5

NEW INDUSTRIES

R’m

Other industries Gas separation

Machinery

Electronics

4th Industrial Revolution-related

Medical equipment

Clean energy solutions




R60 R31 - R63 R31 -million million million million

201620172018 201620172018

R15 -R3 R6 R36 R108 -

201620172018 201620172018

million million* million million million

STAFF PROFILE OF UNITS SUPPORTING THESE SECTORS

WH

ITE

FEM

ALE

TOTAL

11 5

11 5

BLA

CKM

ALE

2018

16



NEW INDUSTRIES

The New Industries unit promotes the proactive establishment of new or emerging industries in South Africa to ensure that the economy is ready to absorb work seekers in the future. We reviewed our strategy in the year under review and identified the following priorities:• Clean energy solutions• 4th Industrial Revolution-related technologies and business

models• Natural products• Gas separation.

FUNDING ACTIVITYDuring the year we approved R140 million in funding for new industries before cancellations. Given a greater focus on the targeted development of specific industries, the funding was lower than the R227 million approved in 2017.

Funding for companies that pursue clean energy solutions included approvals for businesses that manufacture lithium-ion battery packs for incorporation into underground mining vehicles and the development of vanadium flow battery technology.

Our support for industries related to the 4th Industrial Revolution includes funding a Black Industrialist to commercialise the technology to manufacture carbon nanotubes and continued funding for a company that developed and is commercialising a printed silicon nanotechnology.

DEVELOPMENT OUTCOMESWe support new start-ups typically still involved in the early commercialisation of a technology. As such, the number of jobs being created during this early stage of development is fairly low. Funding approved during the year will create 28 jobs (2017: 482), with an additional 13 jobs saved.

Funding to Black Industrialists more than doubled to R63 million from R31 million in 2017, while funding for women entrepreneurs also increased to R15 million.

OUTLOOKWe adopted a more focused approach during the year to increase our impact in these prioritised industries. New funding for 2019 is expected to exceed R320 million.

Carbon nanotubes (CNTs) are cylindrical carbon molecules that have extraordinary thermal, mechanical, optical and electrical properties. Due to these unique properties, CNTs are used to manufacture innovative high-tech materials.

Sabinano was founded in 2008 by Professor Sabelo Mhlanga to manufacture CNTs based on a standard production method known as catalytic chemical vapour deposition. The core of the technology was developed as part of Professor Mhlanga’s and Professor Edward Nxumalo’s doctoral studies at the University of the Witwatersrand (Wits). The team improved production efficiencies through proprietary process enhancements. Professor Nxumalo joined the company as a shareholder in 2010 when it began manufacturing CNTs in a lab at Wits.

The partners are highly accomplished professors and thought-leaders in the South African nanotechnology fraternity. Professor Nxumalo is currently the President of the South African Nanotechnology Initiative and his goal is to involve South Africa in the emerging field of nanotechnology and nanoscience.

The IDC funding is allowing the shareholders to set up a manufacturing facility, scale-up their technology and market their product.

C A S E S T U D YSABINANO

DEVELOPMENT IMPACT

• Commercialisation of a new technology by Black Industrialists

South Africa has the opportunity and potential to grow its participation in the global carbon nanotubes market, driven mainly by the need to develop new materials to sustain economic development and inclusion in the global economy



FUNDING ACTIVITY

R’m

500

1 000

1 500

2 000

2 500

3 000


3 500


2016

2016

2017

2018

2016

*

2017

2018

*

2016

2017

2018

1 31

8

2 22

9

3 31

0

284

2 12

6

2 58

9

1 17

8

1 30

5

2 29

1

HUMAN CAPITAL

FINANCIAL OUTCOMES

2018 2017 2016




2018 2017 2016





In addition to the above, R106.8 million was approved in 2018 (2017: R250.8 million) and R168.1 million disbursed (2017: R158.3 million), which do not form part of IDC funding but are from IDC-managed funds, which consist predominantly of MCEP funds managed on behalf of the dti.

OTHER MANUFACTURING INDUSTRIES, TOURISM AND OTHER SERVICES

Other Furniture and other manufacturing

Tourism Electronics

Construction Non-metallic mineral products

Recycling Wood and paper products



R1.4 R1.4 R0.4 R1.2 R796 R316billion billion billion billion million million

201620172018 201620172018


201620172018 201620172018


24

STAFF PROFILE OF UNIT SUPPORTING THE VALUE CHAIN

WH

ITE

FEM

ALE

TOTAL

18 6

12 12

BLA

CKM

ALE

2018


0


OTHER MANUFACTURING INDUSTRIES, TOURISM AND OTHER SERVICES

In addition to the support for industries covered in previous sections, we also provide funding for other manufacturing industries, tourism, construction and ICT.

FUNDING ACTIVITYThe value of new funding approved during the year before cancellations increased by 48% to R3.3 billion (2017: R2.2 billion), while R2.3 billion was disbursed compared to R1.3 billion in 2017.

The tourism industry received a large portion of funding, with R505 million approved. This included funding for the expansion of a hotel in Kempton Park, Gauteng, and the upscaling of a hotel on the shores of Lake Malawi. The hotel development in Malawi will procure goods and services from South Africa, thus indirectly benefiting the domestic economy. Other services industries that were supported through funding include a Black Industrialist that was assisted to acquire an ICT services company and a large construction company that was facing distressed trading conditions due to the economic climate.

In the manufacturing sector, funding was approved for the establishment of a Black-owned manufacturer of insulated building panels. We also approved funding for a Black Industrialist

to set up a plant to produce charcoal from invasive tree species in Wellington in the Western Cape. The wood products industry received additional support through the approval of a new particle board plant to be established in Lotair in Mpumalanga.

We are pursuing new channels to reach clients, especially smaller businesses in the rest of Africa. To enable this, we approved a R1.5 billion line of credit for a DFI to on-lend to its clients.

DEVELOPMENT OUTCOMESFunding approved during the year is expected to create 7 467 jobs and save 1 155 (2017: 3 185 created and 1 930 saved). The largest number of jobs are as a result of funding for the construction industry.

Funding for Black Industrialists increased to R1.2 billion from R800 million. Funding for women entrepreneurs also increased, with R561 million approved compared to R390 million in the previous year, while the momentum gained in funding youth entrepreneurs in 2017 could not be sustained with R70 million approved.

OUTLOOKWe expect higher levels of funding to these industries in 2019, with a target for approvals of between R2.1 billion and R2.6 billion.

The Golden Era Group of Companies, established by Bhoola Chhita in 1955 as Golden Era Printers and Stationers, started operations with two paper bag manufacturing machines.

Currently, the Group is the largest family-owned printing and packaging business in South Africa that manufactures a wide range of printing, packaging and related products. The company operates 12 manufacturing plants throughout South Africa in the North West, KwaZulu-Natal, Western Cape and Gauteng.

Golden Era’s main success factors are price competitiveness, customer satisfaction, consistent supply of quality material and strong B-BBEE credentials.

The IDC funding will enable the company to alleviate capacity constraints and provide its wide range of clients with world-class packaging.

C A S E S T U D YGOLDEN ERA PRINTERS AND STATIONERS

DEVELOPMENT IMPACT

• Support for Black Industrialists• 31 new jobs to be created

A world-class packaging industry increases competitiveness for other manufacturers of consumer goods


T R A N S F O R M I N G M A R G I N A L I S E D C O M M U N I T I E S

BACKGROUNDIn addition to funding projects and entrepreneurs which require a commercial and developmental return, the IDC remains actively involved in development activities that address specific social and regional objectives with an emphasis on maximising developmental returns. These activities, often supported by donor grants and strategic partnerships, seek to create and leverage resources proactively to support social change and improve livelihoods within marginalised and disadvantaged communities.

We engage with different government, social, private sector, and other role-players to achieve this and identify funding opportunities, either as stand-alone projects or linked to regular IDC projects, to enhance their developmental impact.

Typically, these interventions aim to increase the inclusion and participation of marginalised groups and communities in economic opportunities and, in particular, increase the impact of specific developmental outcomes. These include Black Industrialists; B-BBEE; youth empowerment; women empowerment; township economies; regional equity; community empowerment; and worker and employee empowerment/ownership.

Our Corporate Social Investment is aligned with the IDC’s broader development goals.

OVERVIEW OF ACTIVITIESWorker and employee empowerment and ownershipIn pursuit of a transformational impact on workers and communities, some of the IDC’s transactions include, where possible, workers and communities as shareholders. Where appropriate, we use trusts as legal entities for workers and communities to acquire equity in IDC-funded companies. Workers’ trust beneficiaries are mostly permanently employed, lower-level black employees of the company who receive IDC funding. Community trust beneficiaries are communities that live in close proximity to IDC-funded projects.

Since starting with this approach, we have established 72 Workers’ Trusts, 11 Community Trusts and 22 Renewable Energy Independent Power Producers Procurement Programme (REIPPPP) Trusts

We take responsibility for facilitating the proper establishment of Workers’ and Community Trusts by business partners, including the following: registration of trusts; alignment of IDC Trust deeds with IDC Trust policies and relevant government legislations; and facilitating processes for the election of boards of trustees, beneficiaries and management of the trusts. These activities help to ensure that the intended trust beneficiaries, who typically would be inexperienced about trusts and their administration, can have a meaningful influence over the trust and ensure that the intended benefits are realised.

During 2018, 10 trust transactions were approved. Eight of these were workers’ trusts and two community trusts.

Experience has taught us that the formalisation and implementation of these trusts do not automatically lead to benefits. This is because benefits, such as dividends, are dependent on factors such as the underlying business performance. We are piloting an Early Realisation of Benefits Initiative to address this. The objective is to fast-track the realisation of benefits to the intended workers and community beneficiaries by providing funding to respective trusts to establish trust-owned companies that will deliver services to the investee company to realise profits and cash flows from the outset. We approved five of these Early Realisation projects in 2018, funded from the Special Intervention Programme.

We have also embarked on a study to research the status of all workers, and community trusts in our portfolio. The research is focused on investigating how the trusts are performing and the impact generated by the trusts. The research will guide our future investments in the formation of new trusts and interventions in existing trusts, as required.

Funding within the Social EconomyDevelopment AgenciesOver a number of years, we have attempted to leverage and grow opportunities through the Development Agency concept and address economic growth through the promotion and implementation of local economic development strategies.

We have provided development agencies with resources to expand their work of developing and packaging catalytic local economic development projects, as well as continuing operations in mostly marginalised areas in South Africa.

Since the programme started in 2002, we have supported the establishment of 34 agencies and provided them with approximately R255 million in grant funding. Our funds have assisted them to leverage in excess of R2 billion to achieve their goals.

Social EnterprisesIn 2012, we introduced the Social Enterprise Programme to support private sector enterprises that focus on social outcomes rather than maximising profit. Social enterprises are businesses with social missions and trade. They tackle social and environmental problems and improve the lives of people and communities, often the most vulnerable.

We have partnered with the Government of Flanders that provided funding of €7 million over five years to support this programme.

Since the inception of the programme in 2012, approved transactions of R161 million supported 23 299 beneficiaries.

During 2018, we approved funding of R24.1 million for seven social enterprises. These enterprises operate primarily in rural areas and townships and are benefitting 1 560 people.


Spatial Intervention Programme and Inclusive Business PracticeThe Spatial Intervention Programme aims to address the socio-economic and developmental needs of targeted areas through public, private and community partnerships. This has resulted in many innovative and impactful initiatives in marginalised areas, including townships and rural areas.

Since the inception of this programme in 2012, funding of R174 million has been approved for 53 projects. These projects support 23 078 beneficiaries. During the financial year, 14 projects (inclusive of the five early realisation of benefit initiatives) to the value of R41 million were approved and are supporting 5 723 beneficiaries.

Linked to this programme is an initiative supporting inclusive business practice. The initiative aims to address poverty, inequality and unemployment by incorporating marginalised communities and individuals into normal business processes. We achieve this by supporting disadvantaged, poor and marginalised small and emerging suppliers to access, and be included in, business or sector value as consumers, producers, sellers or a combination of these as part of a sustainable business model.

Corporate Social Investment (CSI)Our CSI programme supports initiatives focused on education and entrepreneurship to improve the socio-economic conditions of people in disadvantaged communities.

In 2018, R31.8 million was approved and disbursed to support 35 initiatives. The largest portion of this funding went to education and skills development, while entrepreneurship development received the second highest portion.

Our flagship CSI initiative is our participation in the Whole School Development programme. The objective of the project is to improve school facilities, learning and teaching at schools. We have invested R91.6 million to support 30 adopted schools to date. Since the implementation of the project, the performance and results at the schools have shown some improvement, particularly at matric level,

We have been supporting the development of Technical, Vocational, Educational and Training (TVET) colleges since 2013. The focus of our support is on equipment, workshop renovations, the improvement of curricula to make them relevant to industry requirements and improve the quality of training offered to increase the employment prospects of students. To date, we have invested R11.4 million in supporting 12 TVET colleges across the provinces.

In 2018, we approved grant funding to the value of R3.5 million in support of three TVET colleges. The grant will benefit 3 534 students.

More detailed information on these and other CSI initiatives are available online.

with an increase in bachelor passes from 33% to 36%. At the end of the 2017 academic year, one of our adopted schools in Limpopo produced the overall top performing learner in mathematics and science, nationally.

Naledi Innovation Hub consists of the development of a Digital Innovation Hub with a focus on building technical ICT expertise among the youth in North West.

The intention of the Naledi Local Municipality with regards to the Hub is to enhance the employability of 50 learners by giving them experiential workplace exposure. The incubation of new and growing businesses, as well as shared services, facilities management and business support are components of the facility. The incubator assists prospective entrepreneurs to turn ideas into viable businesses.

The IDC is funding the initiative and assisting in the development of training programmes offered by the Hub.

C A S E S T U D YNALEDI INNOVATION HUB

DEVELOPMENT IMPACT

• 50 jobs being created with 150 people benefitting

Increasing ICT skills to drive entrepreneurship

Spending per CSI category

R23.2m Education and skills development

R5.8m Entrepreneurship development

R1.7m Employee volunteering and giving

R1.1m Special projects and other

Details of CSI activities


O U R B - B B E E R AT I N GBACKGROUNDAs a transformation and empowerment facilitator in the country, the IDC has undertaken to lead by example in the implementation of the Codes of Good Practice for Broad-based Black Economic Empowerment. We achieved a Level 4 contributor rating under the amended Codes that came into effect in 2015. Prior to this, we maintained a Level 2 contributor rating.

B-BBEE procurement is the one scorecard sub-element in respect of which the IDC does not score optimally. The reason for this is that the interest payable to certain domestic lenders and bondholders is regarded as discretionary procurement spend. The IDC aims to borrow at the lowest possible interest rates to on-lend cost effectively. Interest paid to domestic funders with low levels of black ownership is a substantial portion of our procurement spend, and negatively affects the IDC’s B-BBEE rating. However, we are content that our lending to black businesses benefits B-BBEE overall.

As a public entity involved in the financial sector, we are required to comply with the Financial Services Sector Codes going forward. We are currently evaluating the impact of these Codes on the IDC and will develop an appropriate strategy to ensure we contribute to the aspirations of the Codes.

In addition to our own rating, we encourage our business partners to also embrace the aims of all pillars of the Codes and applicable sector charters and transform their businesses accordingly.

We expect all clients to achieve at least a Level 4 contributor rating to expedite transformation. Where clients do not meet this level when applying for funds, we provide advice and support and expect clients to achieve the required rating within two years of approved funding.

In 2016, the IDC was granted B-BBEE Facilitator Status for use under specific circumstances. This status allows companies in which we have a shareholding to regard the IDC’s ownership portion as Black instead of excluding this from calculations as would normally be the case with organs of state. This applies to the following types of businesses only:• Early-stage projects• Venture capital investments• Distressed businesses.

Clients that fall under these categories need to apply and each client’s application is considered individually and approved in conjunction with the dti. No clients are currently benefiting from this provision although a number of clients are under consideration.

Managementcontrol

Skills development

B-BBEE procurement

spend*

Supplier development

Enterprise development


35

30

25

20

15

10

16.7

20

25

30

22.4

14.5 15.0

7.0

5.05

0

15

5 5

Weighting for element

IDC Score

Score

Score by element of the B-BBEE Codes

Full B-BBEE scorecard

and report

* See note in text


C O M M I T T E D T O G O O D G O V E R N A N C E

ETHICAL GOVERNANCEWe believe that good corporate governance is integral to a sustainable business. We have always endeavoured to implement practices based on sound governance principles. This is also a requirement for approving funding applications.

The IDC’s corporate governance structures are designed to ensure that the Board and Executive Management can exercise their

fiduciary duties effectively and efficiently in a fair and transparent manner.

KEY GOVERNANCE ENHANCEMENTSWe placed particular emphasis on the governance structures of our subsidiaries and investee companies during the reporting period. The key enhancements achieved during the past financial year are summarised in the table below.

Key governance enhancements for 2018

Minimum governance requirements for clients

A set of minimum governance standards for IDC clients, which differentiates between SMEs, family-owned businesses and large companies, was developed and incorporated into our Corporate Governance Framework.

Improved communication with nominee directors

The Director Nominations Policy, first adopted by the Board in 2014, was revised to simplify and make it more accessible to nominee directors. We anticipate that the policy will improve communication between IDC and the boards of its subsidiaries and investee companies.

Data and Information Management Policy

The Executive Committee approved a Data and Information Management Policy that replaces earlier policies that became obsolete due to advancements in technology and the enactment of legislation, such as the Protection of Personal Information Act, 4 of 2013.

CORPORATE GOVERNANCE FRAMEWORKLegislation, Codes of Best Practice and PoliciesThe IDC’s Corporate Governance Framework consists of:• The Industrial Development Corporation Act, 22 of 1940 (IDC

Act)• Public Finance Management Act, 1 of 1999 (PFMA)• Treasury Regulations• Companies Act, 71 of 2008• King Report on Corporate Governance (King IV)• Board Charter• Policies and internal systems and procedures.

BOARD OF DIRECTORSResponsibilitiesThe Board of directors provides effective, ethical leadership. The Board determines the strategic direction of the Corporation, approves policies and planning and monitors the implementation of these by Executive Management.

An annual work plan which ensures that all business of the Board is attended to in a structured and orderly manner throughout the year, is in place.

CompositionThe Board is constituted to ensure the appropriate balance of knowledge, skills, experience, diversity and independence required to objectively and effectively discharge its governance role in meeting the Corporation’s strategic objectives.

The size of the Board is determined by the IDC Act, which permits a minimum of five and a maximum of 15 directors appointed by the shareholder. A unitary board structure is applied, with the majority being non-executive members.

As at 31 March 2018, the Board comprised of one executive and 11 non-executive members, with a gender composition of seven

female and five male directors. The positions of Chairperson and Chief Executive Officer are separately held to ensure a clear separation of responsibilities.

Members of the Board assume collective responsibility for steering and setting the direction of the Corporation. The Board is responsible to the shareholder for setting strategic objectives and key policies, major plans of action, a risk policy, annual budgets and business plans. Performance monitoring systems and reporting are used to achieve the performance objectives set by the shareholder.

Directors have complete access, at any time, to senior management through the Chairperson, CEO or Company Secretary. Senior management provide regular presentations at Board meetings and directors may seek briefings from senior management on specific matters.

Induction as a continuous processAll new directors participate in a formal induction process coordinated by the Company Secretary. The induction process includes briefings on financials, strategic, operational and risk management policies and processes, the Corporate Governance Framework, culture and values and key IDC developments, as well as in the sectors and environments in which the IDC is active. In this way, new directors are provided with sufficient knowledge of the Corporation from the outset.

We regard the directors’ initial induction as the first step in a continuous process of keeping our Board members equipped for their task. Additional meetings, training and information sessions are held to ensure that the Board can deal with all the important issues facing the Corporation timeously and efficiently. Examples include macroeconomic reports presented regularly to the Board and the additional Board and Board Committee meetings (of the Board Investment Committee and Board Risk and Sustainability Committee) arranged during the reporting period to keep


in other companies


directors apprised of developments at our loss-making subsidiary, Foskor. Directors who requested more information about specific matters received the information as a matter of priority. Care is taken to ensure that directors have sufficient knowledge to exercise their duties with care, skill and diligence.

Board meetings and attendanceThe Board meets at least six times a year and holds a strategy session at least once a year. Special Board meetings are convened when necessary. During the reporting period the Board met a total of nine times. In addition, a Board strategy session was held over two days during September 2017.

Changes to the BoardAs is our normal practice, all non-executive directors retired and made themselves available for re-appointment at the Corporation’s Annual General Meeting (AGM), which was held on 31 July 2017. All board members were re-elected at the AGM.

Terms in officeOur non-executive directors have been in office for the periods indicated below:• Ms Mabuza: 6.5 years• Ms Bethlehem: 9.5 years• Mr Dames: 6.5 years• Mr Godsell: 6.5 years• Mr Kriel: 2 years• Dr Magwentshu-Rensburg: 6.5 years• Ms Mnxasana: 3.5 years• Ms More: 2 years

• Ms Mthethwa: 6.5 years• Adv Orleyn: 3.5 years• Mr Zalk: 6.5 years

Board CharterA Board Charter is in place which sets out the Board’s responsibilities. These include the adoption of strategic plans, development of a clear definition of materiality, operational performance monitoring and management, determination of policy processes to ensure the integrity of the Corporation’s risk management and internal controls, communication policy and director selection, orientation and evaluation. The Board Charter was reviewed during the previous financial year.

The Board Charter provides for Board and Board Committee members to obtain independent professional advice if considered necessary to carry out their duties. Such services are for the expense of the Corporation. Such advisors are invited to attend meetings of the Board, or the Committee in question, if required.

Detailed provisions are included in the Board Charter that relate to the process to follow when Board or Board Committee meeting documents contain price sensitive information or may lead to potential conflicts of interest.

Board structure and meeting attendanceThe Board Charter requires Board members to attend Board meetings and prepare thoroughly beforehand. The IDC Board structure and a summary of members’ meeting attendance during the reporting period are provided in the diagram on page 53.

7 - Female

5 - Male

9 - Black

3 - White

1 - < 40 years old

1 - 40-49 years old

7 - 50-59 years old

3 - > 59 years old

4 - < 4 years

0 - > 4-6 years

7 - > 6-10 years

Demographics Tenure*

* Non-executive directors

Board demographics and tenure


Board CommitteesThe Board has established five standing committees to assist it in exercising its authority. Authority has been delegated to the Board Committees to promote independent judgement and assist with the balance of power and effective discharge of the Board’s duties. This is done through Board-approved Terms of Reference, which are regularly updated to stay abreast of developments in corporate law and governance best practice.

The Chairperson of each Board Committee is a non-executive director. The members of each Board Committee are appointed by the Board of Directors with the exception of the Board Audit Committee, whose members are appointed by the shareholder at the AGM. The Board receives reports on the deliberations, conclusions and recommendations of each Board Committee at a Board meeting following the Board Committee meetings. The reports of the Chairpersons of the various Board Committees appear from page 66 of this report.

The five Board Committees are:

• Board Audit Committee The Board Audit Committee provides independent oversight of

the effectiveness of the Corporation’s assurance functions and services and the integrity of its annual financial statements.

The Committee is constituted in terms of section 94 of the Companies Act, 71 of 2008, and currently has five members. All members of the Board Audit Committee are non-executive directors of the Corporation. The CEO, Chief Financial Officer and external auditors are permanent invitees to the meetings of the Committee.

The Committee held six meetings during the reporting period. A summary of the key focus areas of the Committee during the reporting period is contained in the report of the Chairperson of the Board Audit Committee, which appears from page 68 of this report.

Board structure and composition

IDC Board Board Investment Committee

Board Human Capital and

Nominations Committee

Board Audit Committee

Board Risk and Sustainability

Committee

Social and Ethics Committee

Responsible for the performance of the corporation while retaining full and effective control

Considers

transactions

mandated to it

by the Board and

reviews related

party transactions.

Particulars

of approval

thresholds are

provided on page

56

Develops

compensation

policies, resourcing

plans and

performance goals

Monitors the

adequacy of

financial controls

and reporting

Governs risk

and ensures

responsible

stewardship of

the Corporation’s

assets and

sustainability

Promotes the

ideals of corporate

fairness and

transparency, social

and economic

development and

good corporate

citizenship, and

manages the

Corporation’s

exposure to

reputational risk

Committee membership and number of meetings attended

Number of meetings 9 11 5 6 6 5

Non-executive directors

BA Mabuza 9* 10 5

LI Bethlehem 6 6*

BA Dames 9 5* 6

RM Godsell 9 4 6

AT Kriel 8 4 5 5

SM Magwentshu-Rensburg 8 10* 6

NP Mnxasana 9 8 6* 6

M More 7 4 3

PM Mthethwa 8 10 4

ND Orleyn 8 6 3 5*

NE Zalk 7 8 5

Executive directors

MG Qhena 9

* Chairperson of the respective committee


• Board Human Capital and Nominations Committee The Human Capital and Nominations Committee was

constituted by the Board to assist it with the development of remuneration policies, plans and performance goals, and remuneration levels. The Committee manages the Board’s annual evaluation of the performance of the CEO and assists the Board in fulfilling its oversight responsibilities relating to succession planning and human resource policies for all employees.

The Committee currently has five members. All members of the Board Human Capital and Nominations Committee are non-executive directors of the Corporation. The Chairperson of the Board is a member of the Committee. The CEO and the Divisional Executive: Human Capital are permanent invitees to the meetings of the Committee.

The Committee held five meetings during the reporting period. A summary of the key focus areas of the Committee during the reporting period is contained in the report of the Chairperson of the Board Human Capital and Nominations Committee, which appears on page 67 of this report.

• Board Investment Committee The Board Investment Committee is a credit granting committee

that was constituted by the Board to consider transactions as mandated to it by the Board. Particulars of the Committee’s approval thresholds are provided in the summary of the Corporation’s Delegation of Credit Approval Authority, which appears on page 56.

The Committee currently has six members. All members of the Board Investment Committee are non-executive directors of the Corporation and the Chairperson of the Board is a member of the Committee. Permanent invitees to the meetings of the Committee consist of the CEO, Operations Divisional Executives and the Executive for Corporate Strategy, while any Board member who wishes to may attend.

The Committee held 11 meetings during the reporting period. A summary of the key focus areas of the Committee during the reporting period is contained in the report of the Chairperson of the Board Investment Committee, which appears on page 66 of this report.

• Board Risk and Sustainability Committee The Board Risk and Sustainability Committee was constituted by

the Board to assist with the oversight of risk governance.

The Committee currently has five members all of whom are non-executive directors of the Corporation, while the Chairperson of the Board Audit Committee is also a member of the Board Risk and Sustainability Committee. The CEO and the Chief Risk Officer are permanent invitees to the meetings of the Committee.

The Committee held six meetings during the reporting period. A summary of the key focus areas of the Committee during the reporting period is contained in the report of the Chairperson of

the Board Risk and Sustainability Committee, which appears on page 70 of this report.

• Social and Ethics Committee The Social and Ethics Committee assists the Board in discharging

its duties relating to the oversight of organisational ethics, responsible corporate citizenship, sustainable development and stakeholder relationships.

The Committee is a statutory committee, constituted in terms of Regulation 43 of the Companies Regulations. The current six members consist of four non-executive directors and two executive managers, namely the Corporation’s General Counsel and the Divisional Executive: Corporate Affairs. The CEO is a permanent invitee to the meetings of the Committee and other executives may be invited to join meetings when matters within their respective areas of responsibility form part of the agenda.

The Committee held five meetings during the reporting period. A summary of the key focus areas of the Committee during the reporting period is contained in the report of the Chairperson of the Social and Ethics Committee, which appears on page 71 of this report.

Managing Directors’ Conflicts of InterestAt every meeting attended by Board members, subsidiary directors and Executive Management, members are required to disclose any potential conflicts and if required, to withdraw from the proceedings. Declarations of conflict are also made to the Company Secretary as and when necessary. This is done in compliance with section 50(3) of the PFMA, section 75(4) of the Companies Act, the IDC Guidelines on Conflict of Interest and Conflict of Interest Policy. The declarations are made at each Board meeting, at meetings of the Board Committees and in particular, meetings of the Board Investment Committee and all other committees responsible for considering transactions.

High ethical standards and a sound business sense are set as qualification criteria for Board membership. The Board Charter makes it clear that members are required to act in the best interests of the Corporation at all times. The Board’s Code of Conduct requires members of the Board and Board Committees to always act in an ethical manner in carrying out their fiduciary duties, thereby ensuring ethical behaviour and compliance with relevant laws and regulations, audit and accounting principles and the Corporation’s own governing documents and codes of conduct.

Board evaluationThe effectiveness and performance of the Board of the IDC as a whole and the individual Board Committees was evaluated in 2017 by an independent service provider. The overall feedback of the Board effectiveness review was positive with respect to the work of the Board and its Committees. In general, the review found that the IDC Board is well functioning and professional. Matters that were identified as requiring attention by the review were as follows:• Succession planning: the adequacy of succession planning in

place at Board level in respect of the CEO, senior management


and other key staff• Selection and appointment process: whether the existing

selection and appointment process for Board members takes into account the views of management and existing Board members on skills and experience needed on the Board

• Ongoing training: the introduction of continuing professional development programmes in place for directors; the preparation and dissemination of regular briefings on changes in risks, laws and the environment; and the development of inexperienced Board members through mentorship programmes.

Directors’ remunerationThe Board Human Capital and Nominations Committee plays an advisory role on the remuneration of Board members. Non-executive directors are remunerated for the meetings they attend at rates approved by the shareholder. No performance-based remuneration or retainer fees are paid to directors.

Directors’ remuneration

Name of director 20183

R’0002017

R’000

BA Mabuza4 930 1 057

LI Bethlehem1 4 262 364

BA Dames4 427 416

RM Godsell5 384 206

AT Kriel1 5 422 208

SM Magwentshu-Rensburg4 498 414

NP Mnxasana4 541 546

M More1 4 282 271

PM Mthethwa5 378 365

ND Orleyn4 421 400

NE Zalk2 - -

1 These directors do not derive direct financial benefit from services rendered to the IDC. Their fees are paid directly to their employers.

2 Mr NE Zalk is employed by the dti and does not earn directors’ fees for services rendered to the IDC, nor are fees paid to his employer.

3 Remuneration paid to members of the Board for the 2018 financial year includes the following:

• an increase of 2% for the 2017 financial year approved retrospectively by the shareholder in January 2018 and effective from 01 April 2016 to 31 March 2017,

• a further increase of 5% for the 2018 financial year approved retrospectively by the shareholder in January 2018 and effective from 1 April 2017 to 31 March 2018

Prior to this, adjustments to directors’ fees were effected in the 2013 financial year.4 These directors are treated as independent contractors as contemplated in

proviso (iii)(bb) to the definition of “enterprise” in section 1(1) of the VAT Act, in respect of the non-executive directors’ activities.

5 These directors chose not to be registered for VAT and as such are still paid via the payroll.

Company SecretaryThe Company Secretary provides the Board with professional and independent guidance on corporate governance and its legal duties. In addition to coordinating the functioning of the Board and its Committees, the Company Secretary acts as a central source of information and advice to the Board on matters of ethics, adherence to good corporate governance principles and compliance with procedures and applicable statutes and regulations.

The Company Secretary is not a director of the Corporation and acts independently from the Board. In accordance with good governance practice, the appointment and removal of the Company Secretary is a matter for the Board.

The Company Secretary, Mr P Makwane, fulfils a dual role in that he is also the General Counsel of the Corporation.

The Chief Executive Officer (CEO)The CEO’s contract stipulates a notice period of three months, and his contract is due to expire in 2020. A succession plan is in place for the CEO’s position.

Delegated level of authorityWhile the Board has the authority to delegate powers to Board Committees and Executive Management, it remains accountable to the shareholder. A Board-approved Delegation of Authority framework is in place, which is reviewed and updated regularly. The last comprehensive revision of the framework was done in December 2016 and minor amendments were effected as recently as April 2018.

The Board has delegated the management of day-to-day operations to the CEO, who is assisted by the Executive Management Committee and its sub-committees. Each committee has a clearly-defined mandate set out in written Terms of Reference.

As depicted in the diagram on page 56, specific powers and authority have been delegated to the Board and Executive Committees responsible for credit approvals. Approval thresholds are in place for each credit granting committee.

AN ETHICAL CULTUREGoverning and managing ethicsThe Board is responsible for ensuring ethical behaviour within the Corporation. The establishment of an ethical culture starts with the example set by the Board and Executive Management. Ethical leadership manifests itself in the policies, systems and processes of an organisation and the way in which they are applied.

The IDC has a well-developed system of processes and controls aimed at implementing policies that deal with ethics-related risks. Our Ethics Policy Framework consists of the following:• IDC Code of Ethics and Business Conduct, which sets standards

of ethical behaviour within the Corporation and in our dealings with customers, suppliers and service providers

• Fraud Policy, which communicates a zero tolerance to fraud, theft or corruption to all stakeholders

• Procurement Policy, which maintains ethical standards through an equitable and transparent procurement system

• Gifts Policy, which regulates the receipt of gifts by employees from clients and suppliers

• Whistleblowers’ Policy, which outlines the procedures employees must follow to disclose information about unlawful or irregular conduct as referred to in the Protected Disclosures Act, 26 of 2000.


An anonymous tip-off hotline, which is administered by an external service provider, is available to employees, customers and other stakeholders to report unethical behaviour. Stakeholders are encouraged, through various awareness campaigns, to report any fraudulent, unethical or corrupt activities. During the reporting period, 22 incidents were reported through the tip-offs hotline. We are dealing with these incidents by subjecting them to a preliminary assessment to determine the veracity of the allegations, followed by a full investigation, if required. The matters reported relate to the misapplication of funds by IDC clients.

Key focus areasIn light of the ever-increasing focus on accountability, we conducted an ethics survey throughout the Corporation to gauge attitudes towards ethics at the IDC. We learned that our employees want to work for an organisation where ethics and organisational culture are aligned with their own, that suppliers depend on fair and transparent procurement practices and that clients insist on business practices that are fair, ethical and transparent when applying for IDC funding.

Monitoring of ethicsOur internal review also revealed a clear employee commitment to ethics, which is largely reliant on rules. Conflicts of interest, the temptation to accept gifts above the prescribed limit and fraudulent behaviour on the part of employees, suppliers and business partners remain ever-present threats and may not be sufficiently manageable through policies and rules.

Future focus areasIn the final evaluation, we have come to the conclusion that the IDC’s policy framework is satisfactory as a basis for ethics compliance. The challenge is to move away from a compliance-based approach to ethics, in favour of an aspirational approach. Embedding a culture of ethics within the Corporation will continue to be a focus area for the foreseeable future.

Ethics in procurementAs an entity in the financial services industry, the IDC’s procurement budget is small when compared to those of some other state-owned entities. Procurement is, however, a vital component in the process of establishing and maintaining an ethical culture.

The IDC’s Procurement Policy promotes a procurement system which is fair, equitable, transparent, competitive, cost-effective and in line with section 217 of the Constitution of the Republic of South Africa. Through our established Procurement Committee, we strive to uphold the highest ethical standards in all our procurement transactions. Members of the Procurement Committee and all other persons involved in the procurement process are required to sign a Declaration of Interests Register at every meeting of the committee, when bid evaluation and adjudication proceedings are conducted.

Procurement and the Code of Ethics and Business ConductOur Code of Ethics and Business Conduct governs business conduct and deals in particular with matters such as conflicts of interest, gifts and relationships with service providers and customers. Based on the Code, it is standard practice to conduct risk assessments for all entities recommended for IDC procurement contracts. Background checks are conducted on all bidding entities and their shareholders, which include reference to suppliers listed on the National Treasury List of Restricted Suppliers and consideration of court cases, criminal records, politically exposed persons, credit checks, media reports and potential business or reputational risk for the IDC.

Procurement complianceDuring the reporting period, we implemented rigorous compliance controls to strengthen due diligence processes with a strong focus on validating supplier information received through the procurement process. Compliance controls are aimed at

• Considers transactions where the IDC’s transaction exposure (new money plus old if within a rolling 12 month period) is less than R25 million and the counterparty exposure is below R250 million

Credit Committee

• Considers transactions where IDC’s transaction exposure (new money plus old if within a rolling 12 month period) is R25 million or more but less than R250 million and the counterparty exposure is below R1 billion

• Considers additions/changes to the Delinquent Register

Special Credit Committee

• Considers transactions where IDC’s transaction exposure (new money plus old if within a rolling 12 month period) is R250 million or more but less than R1.5 billion and the counterparty exposure is from R1 billion up to R7 billion

• Also reviews transactions where the transaction / counterparty limits are breached, but recommends to the Board for approval

• Decides on whether a finance transaction is of strategic nature, in which case the transaction will be reviewed by the BIC , but recommended to the Board for approval

• A sector and/or regional limit is breached

Board Investment Committee

Credit granting authority

Board

• Considers transactions where the transaction is R1.5 billion or more or counterparty exposure is R7 billion or above

• The investment is of a strategic nature

• Transactions where there might be a conflict of interest through an IDC director’s involvement in a transaction (after taking advice from the Social and Ethics Committee, Board Investment Committee (BIC) and/or Special Credit Committee)

• Deviation from any policy relating to a finance transaction (where Board approval is required)

• Counterparty limits of above R7 billion per counterparty at cumulative market value (including undrawn commitments)


discouraging supplier fronting practices and the misrepresentation of information. The Procurement Policy conforms to the directives of the B-BBEE Act, 53 of 2003 and its Codes of Good Practice in that the IDC reserves its right to cancel the contract and claim damages where fronting and any related offences are detected. Suspected fronting practices are reported to the Department of Trade and Industry through the office of the BEE Commissioner.

INVESTING IN HUMAN CAPITALBackgroundThe IDC’s strategy and focus emphasises people and organisational culture as key enablers in driving excellence and performance.

We strive to provide a work environment that promotes a high-performance culture and our Human Capital division supports the business in terms of its people needs. We seek to create the right environment for our employees, which includes investing in talent development, recognition and retention. Our Human Capital strategy is focused on the following overarching goals:• To attract, build and retain talent at all levels • To develop robust people management and leadership

development practices• To enhance and implement our Employee Value Proposition to

ensure an engaged workforce • To enable and drive a high-performance culture conducive to

productivity• To build our knowledge management capability • To facilitate an environment that enables a diversified workforce

at all levels.

Creating an enabling culture and environment for our peopleThe focus of the Corporation is to create a culture of high performance to drive and embed Project Evolve in the business. The approach is to transform the culture and reduce entropy, enhance employee engagement and offer a positive Employee Value Proposition to our people.

In keeping with our focus to create an environment where our people can thrive and perform we are implementing a consistent and paced culture transformation plan to achieve the following objectives:• Enabling a culture of accountability, collaboration,

responsiveness and service delivery• Creating an environment that is change-agile and applied

consistently across the business• Managing levels of employee engagement and commitment• Driving a compelling employer brand and value proposition.

During the current reporting period, the focus was on implementing the culture transformation plan. The current financial year has commenced with remeasuring our culture entropy score and levels of employee engagement. Prioritised culture action plans will be implemented based on the feedback from this process.

Managing and supporting our employeesOur objective is to capacitate and grow our business by creating a skilled and talented workforce to deliver on our mandate.

The Corporation had a diversified workforce of 849 employees as at end March 2018 (March 2017: 839), indicating a 1.2% increase in our talent pool year-on-year. A breakdown of staffing numbers overall, by race, gender and division, is detailed in the online section of this report. Of our staff complement, 68% are directly involved in delivering IDC’s operational objective (client-facing and support). This is an increase of 1% compared to the previous financial year. We have increased the capacity in our regional and satellite offices by 27% year-on-year to support our regional footprint.

A further focus area is establishing a robust succession and business continuity plan for identified critical roles and ensuring that sufficient bench-strength exists for the Corporation. During the reporting period, the voluntary turnover of individuals in critical roles from 6.7% to 8.0%. In ensuring the Corporation is continuously capacitated, a comprehensive talent review process will be undertaken in the current financial year to identify potential successors for critical roles.

As a Corporation, we have determined the coverage ratio (i.e. percentage of potential successors identified at different readiness levels for all critical roles). Our current overall coverage ratio for all critical roles, excluding executives, across all readiness levels is 73%. In the immediate readiness level, coverage ratio is 64%, in the 1-3 year readiness level it is 86% and in the 3+ years readiness level, 69% of roles are covered with identified potential successors. Going forward, we will develop a plan to fast-track talent development and review the talent management strategy to inform key talent metrics.

Investing in employee development When investing in employee development, we aim to:• Build leadership capability for the Corporation in the short-,

medium- and long-term• Support the achievement of the Corporation’s strategic

objectives by developing the required operational, technical, functional and behavioural competencies

• Build knowledge management capability that supports the retention, transfer and protection of the IDC’s intellectual property.

All of the IDC’s leaders were assessed against defined leadership requirements during the reporting period. The key leadership strengths and development areas have been identified to build future leadership capability. The focus for this financial year will be to capacitate leaders through a structured leadership development academy. Further leadership development has seen over 50% of leaders engaged in individual coaching. The majority of leaders also participated in crucial conversations training.

Particulars of training provided to employees during the reporting period are depicted in the graphs on page 58.

We have a pipeline of 15 trainees in our operational training programme to continuously build operational capacity. In addition, a customised project development programme was implemented with a strong mentorship focus that will continue in this financial year.

LA

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The total staff cost during the year under review was R1 031.6 million. The training expenditure, expressed as a percentage of staff costs, at 1% (2017: R998 million, 2%). A comparative summary of investment in staff training is available online.

The learning and development strategy is transitioning from traditional classroom-based training to a more diverse and inclusive strategy. This will see a shift from purely classroom-based training to 70% on-the-job training, while 20% will be social and online-based learning and 10% classroom-based facilitator-led training.

In addition to formal classroom training, we also focused on providing various on-line training interventions that supported 280 employees. Team-based coaching also supported teams in a drive to enable our culture of collaboration.

Due to the nature of the IDC’s professional environment, tertiary education and studies remain a key priority to equip our staff with formal qualifications. During the year reported on, 133 employees undertook tertiary studies, an investment of approximately R8 million.

The significant decrease in formal classroom-based training and reported numbers is as a result of the roll-out of corporate-wide initiatives during the previous two years, specifically customer service and culture and change management.

Youth developmentDuring the reporting period the Corporation prioritised providing practical work experience for newly-qualified graduates through our Chartered Accountant Learnership and Graduate Internship Programme. A total of 11 people enrolled in the Chartered Accountant Learnership. Over the last three years, an additional 11 trainees successfully completed the learnership programme to qualify as chartered accountants. Twenty interns were appointed to the Graduate Internship Programme for this financial year. All interns in our 2017 programme successfully secured permanent employment.

Our external bursary programme supports talented students from previously disadvantaged backgrounds who cannot afford tertiary fees. In the 2017 academic year, we supported 244 students. Further information on this support is provided in the online section.

Percentage of employees trained, by race

* For the purpose of this report, training has been defined as interventions that:• Cover internal permanent staff and CA Trainees• Have a duration of 1 day or more• Were offered by external providers (including conferences and short courses)• Included internal IDC Operations Training• Included customised programmes delivered in-house

Excluded from these statistics are:• On-boarding• Online training

Indicator 2018 2017

Total number of employees trained 375 708

Total number of days training: female 799 597

Total number of days training: male 629 493

Average number of hours training: female 15 12

Average number of hours training: male 15 13

Summary of training indicators

Training investment

Female

Male

Number

180

160

140

120

100

80

60

40

20

0

Africa

nWhite

ColouredIndian

154

17

23

12

122

26

8 13

Number of employees trained by race and gender

Female

Male

Number of hours

25

20

15

10

5

0

Exec

utiv

e

Seni

or m

anag

emen

t

Mid

dle

man

agem

ent

Juni

or m

anag

emen

t

Adm

inis

trat

or

13.5

12.7

Average training hours by band and gender

74% - African

11% - White

8% - Coloured

7% - Indian

12.0

19.0

15.4

16.4

14.0

14.0

14.9

14.0

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Talent recognition and retentionOur Remuneration and Benefits Philosophy is designed to attract and retain high-performing employees. Total remuneration consists of:• A guaranteed package based on cost-to-company and

consisting of a cash portion and compulsory benefits, such as retirement funding and medical aid

• Short-term incentives that consist of two components and are awarded on the achievement of predetermined performance objectives and targets. These are a non-pensionable allowance payable at a performance score of ‘3’ and a performance bonus at a performance score of ‘3.5’ and above. All permanent employees, irrespective of job level, are eligible to participate

• Our long-term, three-year incentive scheme supports employee

retention in critical leadership, management and professional roles. Administrative and support bands are not included in the long-term incentive scheme.

During the reporting period the focus was on extensive benchmarking and staff engagement to identify aspects for our Employee Value Proposition. A second medical aid option was introduced to provide a flexible and needs-based offering. Our future focus is to implement a suitable retention strategy and review and quantify all benefits to establish a positive Employee Value Proposition for our diverse staff profile. In continuing to recognise employee performance, we will review and introduce a comprehensive recognition programme.

African (66%)

Female 314 327 Female

African (66%)

Male 258 261 Male

White (17%)

Female 60 56 Female

White (17%)

Male 74 71 Male

Coloured (8%)Female 39 40 Female

Coloured (8%)Male 26 27 Male

Indian (8%)Female 36 34 Female

Indian (8%)Male 32 33 Male

March 2017 March 2018

Staff composition


Remuneration PolicyOur Remuneration Philosophy and Policy sets out remuneration practices and programmes, which aim to facilitate a positive employee value proposition. The Philosophy outlines the main remuneration structure of the Corporation, which includes Annual Guaranteed Pay, Variable Incentive Pay and benefits payable at the various levels. The policy sets out how total remuneration must be managed and the alignment of remuneration to performance management.

Policy objectivesThe main objectives of the Remuneration Policy are to:• Provide a transparent strategy which supports alignment of

rewards and performance• Promote and position the Corporation as an employer of choice• Facilitate and inculcate a culture of high performance through

fair and equitable remuneration and reward principles• Ensure internal equity and consistency in the remuneration

practices• Provide for recognition and reward in line with individual

performance and contribution

The Reward MixOur reward mix consists of guaranteed and non-guaranteed incentive programmes based on achievement of defined Corporate performance targets that are approved by the Board on an annual basis.

Other Remuneration ConsiderationsThe Corporation manages a Provident Fund on behalf of all employees. The total market value of the fund as at 31 March 2018 was R973.4 million. In addition, there is a post-retirement medical aid benefit for employees who were appointed before 1 March 1997. The number of beneficiaries and the liability has reduced as a result of voluntary buy out programmes. To date, there are 155 beneficiaries and the total liability to the Corporation is at R187.8 million.

To support the transition and implementation of the new Remuneration Philosophy that was implemented in 2016, the Board approved the payment of the previous long-term incentive scheme. The approved incentive amount was to be paid to participating employees over a period of three years that is, in 2016, 2017 and 2018. A total amount of R23.1 million is payable to participating employees in 2018.

Diversity, transformation and inclusionDiversity is a critical enabler for the IDC. As a proudly South African state-owned entity, we continuously strive to ensure that our employee profile is representative of the broader society. Our overall equity representation of designated groups increased by 1.9% to 91.2%.

The IDC regards gender diversity as an imperative and, as such, 54% of all employees are female and 46% are male, while the percentage/ratio of people with disabilities remained constant at 1.5%. In the financial year ahead, we will focus on implementing a transformation strategy and programme to enhance the

Corporation’s diversity and inclusivity focus. In addition, we will pursue a targeted strategy to increase the number of people with disabilities in our staff complement.

ENVIRONMENTAL AND SOCIAL GOVERNANCEOverviewWe subscribe to environmental, social and governance (ESG) practices, which are aligned with our commitment to sustainable and responsible development. The Social and Ethics Committee oversees the Corporation’s ESG activities with an emphasis on good corporate citizenship through the promotion of ethical business practices and a commitment to socio-economic development.

Environmental and Social PolicyWe apply an Environmental and Social Policy to achieve the IDC’s strategy. We strive to:• Conform to local statutory requirements and international best

practice standards as the basis for responsible environmental, health and safety management

• Assist our business partners to improve their environmental, health and safety performance

• Utilise resources in an environmentally and socially responsible manner

• Manage carbon liabilities and exposures while promoting bankable green projects that foster social responsibilities

• Promote trade and activities that do not breach ethical considerations and have minimal adverse environmental and social impacts

• Monitor the IDC’s impact on the environmental and set targets to improve environmental, health and safety performance for investments and our activities within the Corporation.

Environmental and social due diligence framework LA

Each of the IDC’s due diligence assessments include an environmental and social review framework with an internationally-accepted system that classifies projects according to type, impact and scale. The types of impact of each category are based on case histories and the likelihood of the impact occurring for certain industries, as well as the project scale and activity period.

Once projects have been classified, a sliding scale (from 1 to 4) is used to measure environmental and social performance. The performance of clients and business partners is assessed in terms of local legislative requirements. Ratings considered acceptable for funding range from 1 to 3, whilst those with scores of 4 are deemed unacceptable due to an absence of the necessary environmental and social systems and/or legal non-compliance.

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More than 70% of the business partners reviewed during the reporting period received a risk category rating of ‘good’ or ‘excellent’. This positive result is attributed to stricter controls to validate environmental and social reports and our insistence on completing assessments before considering funding requests. The overall effect has been a decrease in the number of ‘at-risk’ business partners compared to previous years.


Only one client of those assessed received an environmental and social risk rating of 4, which compares favourably to the previous reporting period, when five such cases were reported.

Carbon footprintThe IDC includes the Scope 1 and 2 emissions of major

More information

online

subsidiaries in its greenhouse gas inventory. The bulk of emissions is generated by subsidiaries’ operations. Foskor and Scaw are the most significant contributors. The volume of carbon emitted during this past year increased by 8% to 1 445 653 tCO

2e.

Scope 1 and 2 emissions (tCO2e)

2018 2017 2016

IDC offices 6 503 5 638 6 667

Major subsidiaries total* 1 439 150 1 220 663 1 425 685

Total IDC and subsidiaries 1 445 653 1 226 301 1 432 352

* Major subsidiaries include Prilla, Colibri, Sheraton Textiles, Foskor, sefa and Scaw.

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The IDC is committed to reducing the number of work-related injuries and illnesses. We enhanced our occupational health and safety programmes based on the lessons learned from a benchmarking exercise carried out among similar institutions. The Occupational Health and Safety Committee focusses on internal health and safety inspections to identify hazards related to unsafe conditions and employee behaviour. No ‘Lost Time Incidents’ were recorded in 2018.

We pay close attention to communicable and pandemic disease outbreaks and create awareness about these diseases so that employees and their families remain safe and secure. A company-wide safety awareness campaign was introduced during the risk awareness and ‘Wellness Day’ campaigns.

Engaging subsidiaries on environmental and social mattersWe held dedicated company compliance engagements at the following subsidiaries during the reporting period:• Scaw: We assisted Scaw South Africa to implement corrective

action relating to non-compliance issues identified through monitoring programmes (including non-compliance notices and directives issued by authorities) to ensure compliance with relevant statutory and regulatory requirements. Application for the splitting of authorisations, permits and licences into three different companies was successful. However, environmental authorisations for the cap and closure of the Dimbiza landfill site

remains outstanding.• African Chrome: The IDC spent a further R1.1 million on care

and maintenance activities on this legacy remediation project during the past year.

• Columbus JV: We contribute, with Samancor, toward the effective management of the Columbus landfill site in Middelburg. During the past year, an amount of R8.3 million was spent on this project.

Corporate Social InvestmentOur CSI programmes, corporate sponsorships and charitable giving are vehicles through which the IDC contributes towards socio-economic development and the improvement of quality of life in disadvantaged communities.

CSI priority areas include improving the level and quality of education and supporting income-generating projects aimed at poverty alleviation through job-creation. The IDC’s CSI strategy and Sponsorships Policy are aligned with the IDC’s overall strategy.

More information about our CSI initiatives are provided on page 49 of this report.

Development Impact Support (DIS)The DIS Department supports our operational and dealmaking units to increase the sustainable impact of specific developmental outcomes for Black Industrialists, B-BBEE, youth empowerment, women entrepreneurship, regional equity, localisation, community empowerment and environmental impact.

More information about our DIS activities are provided on page 48 of this report.

WorkplaceOur relationship with our employees is discussed in the Human Capital section, on page 57 of this report.

Fraud preventionPrevention, detection and response to fraud and corruption is integral to being a responsible corporate citizen. The ways in which we deal with these matters are discussed in the Combined Assurance section, on page 63 of this report.

RESPONSIBLE INVESTMENTThe IDC as an institutional investorWe believe that businesses must take responsibility for the impact of their activities on people and the environment. Ethical investment combines the ethical, social and environmental

Environmental and social risk categories and risk ratings

E&S Risk Category – industry risk perspective E&S Risk Rating (ESRR) – performance perspective

Category A – high risk industry ESRR 1 – excellent performance

Category B – medium risk industry ESRR 2 – good performance

Category C – low risk industry ESSR 3 – poor performance

ESRR 4 – unacceptable performance1 The IDC’s Executive Committee approved the ESRR4 Rule as part of the Corporation’s Environmental and Social Policy during the 2017 financial year. In terms of this rule, companies rated ESRR4

cannot be funded.


considerations of investors with their financial objectives. As an institutional investor, we follow an ethical investment approach in using monetary power to bring about positive social and environmental change, while enabling businesses to enjoy competitive returns.

Responsible Investment PolicyOur Board has approved a Responsible Investment Policy as part of the global movement towards incorporating sustainable financing into conventional business agendas. The policy reflects the IDC values and identifies activities, listed in an exclusions list, for which the IDC will not provide funding due to ethical considerations. Matters listed in the exclusions list include the production or trade in arms, gambling, tobacco and transactions with incomplete environmental impact assessments or unavailable geological reports.

Implementation of the policy contributes to the prevention of long-term financial, social and reputational risks to the Corporation.

Subsidiaries and investee companiesWe regard the governance of subsidiaries and investee companies as a critical element of the value creation process. We accordingly seek to promote good governance practices in all the entities in which we invest.

The extent of our influence on subsidiaries and other companies, in which we have an ownership share, is determined by the size of our shareholding in each entity. We have a large measure of influence over wholly-owned subsidiaries and less influence over companies where our investment is limited to a minority shareholding. Our influence in companies where our support is in the form of a loan is minimal. We endeavour to ensure that all our clients have effective and fit-for-purpose governance structures in place.

Corporate Governance FrameworksThe Board has approved a corporate governance framework for the IDC’s subsidiaries and investee companies to establish a uniform governance structure that enables effective IDC governance oversight and, where applicable, ownership control.

The framework is a tool with which to exercise adequate oversight over our subsidiaries and investee companies. It enables the IDC, as an institutional investor, to be aware of the material risks and issues that have an impact on our investee companies and the industries in which they operate.

The Board also approved an additional framework for our financing subsidiaries. Currently, the IDC has one financing subsidiary, the Small Enterprise Finance Agency SOC Limited (sefa). This framework provides guidance on governance in the context of credit approvals by entities which are subject to the PFMA.

Shared servicesWe support subsidiaries, where possible. For example, during the past year our Internal Audit Department continued to support Foskor in respect of some of its key operational and Information Technology audits. Fraud awareness training was also extended

to sefa. IT support services were extended to subsidiaries in the following areas:• Strengthening IT governance controls through the use of

Control Objectives for Information and Related Technologies (COBIT) or ISO/IEC 38500 IT governance frameworks, including standards, policy and procedure formulations

• Technology and business alignment to realise value from IT investments

• Implementation of IT security controls to protect client, employee and business information against unauthorised access.

Future focus areasWe are exploring the possibility of implementing a group audit function to oversee the IDC’s and key subsidiary audit activities. The main objective of the proposal is to consolidate processes, ensure that consistent methodologies are applied, promote efficient management and resources sharing and ensure effective risk management at group level. We have agreed with some of our key subsidiaries to establish a forum during the current year, to agree on or formulate an ideal Group Internal Audit Model.

TECHNOLOGY AND INFORMATION GOVERNANCETechnology and information managementOur Board discharges its responsibility for the governance of technology and information within the Corporation by ensuring an enterprise-wide strategic IT approach. The aim is to:• Integrate and leverage our IT strategy with overall business

processes to improve company performance and sustainability• Delegate the execution of the IT Governance Framework to

management• Comply with IT laws, rules, codes and standards and manage our

information assets effectively.

The Board Risk and Sustainability Committee assists the Board by ensuring and obtaining assurance that IT risks are adequately addressed and the Board Audit Committee has been tasked to consider IT risks as they relate to financial reporting and going concern status and ensure that technology is used to improve audit coverage and efficiency.

Key focus areasDuring the past year, the Corporation’s technology based strategic approach and compliance to COBIT framework for IT governance continued to yield positive business outcomes in the areas of stringent budget controls, technology project implementation, effective monitoring of cyber security controls and improved IT operations.

We achieved key technology and information management strategic initiatives during the reporting period, including:• Business process automation, regional server and storage

infrastructure and IP telephony upgrades to improve client experience, organisational efficiencies, high service availability, scalability and cost containment

• Automation of IT system controls for continuous alignment with best IT governance and security practices and processes in ensuring confidentiality and integrity of information.


Future focus areasDuring the next few years, the Board will oversee the IDC’s efforts to exploit 4th Industrial Revolution (4IR) technologies and strengthen cyber security and governance controls, high service availability and continuous business process improvements, as well as re-engineer the implementation of the Corporation’s business strategy to gain competitive advantage.

The Board and Board Committees promote a common approach to governance and risk management, based on an Integrated Risk Management Framework to support the IDC’s strategy.

The Integrated Risk Management Framework sets the standards to manage strategic risks. A Combined Assurance Model, based on the framework, has been adopted to provide assurance about managing the Corporation’s key strategic risks. The model is based on the notion of three lines of defence, as depicted in the diagram below. The principles upon which the three lines of defence are based are summarised in the above table.

Governance oversightThe primary objective of the Board Committees tasked with oversight of assurance-related matters (the Board Audit and Board Risk and Sustainability Committees) is to evaluate the effectiveness of the Corporation’s Combined Assurance Model and activities,

against the identified key risks. The Committees also review the combined assurance results to satisfy themselves that appropriate assurance activities are conducted as far as controls operating over key risks are concerned.

RISK MANAGEMENTGoverning and managing riskThe Risk Management Department plays a critical role in ensuring that the key risks facing the Corporation are identified, managed and reported to the relevant oversight governance structures. The department also monitors Key Risk Indicators against identified risks and reports on exceptions to Executive Management and the Board Risk and Sustainability Committee as well as the Board.

Enterprise Risk Management (ERM)The diagram on page 64 illustrates the components of the IDC’s risk assessment process.

Annual risk assessmentAn assessment of risks faced by the Corporation is undertaken annually, during the strategic planning process. Through this process key risks are identified, measured and mitigating strategies or action plans are formulated.

COMBINED ASSURANCEOur Combined Assurance Model

COMBINED RISK MANAGEMENT AND ASSURANCE MODEL

GOVERNANCE OVERSIGHT

MANAGEMENTFirst line of defence

INTERNAL ASSURANCESecond line of defence

EXTERNAL ASSURANCEThird line of defence

• Ownership of risk and executive review

• Policies and procedures (including critical reviews)

• Management review

• Periodic self-assessments

• Ongoing monitoring and oversight

• Assessment of efficiency of operating model

• Reporting on exceptions and improvements

• Internal audit

• External assurance

• Independent reporting to those charged with governance

1

2

3

Risk management: Three lines of defence

FIRST LINE OF DEFENCE SECOND LINE OF DEFENCE THIRD LINE OF DEFENCE

Involves operational management processes that include the development of systems and procedures, management review, ownership of risk and, in some instances, risk and control self-assessments.

Although this line of defence generally lacks independence and objectivity, its value comes from those who are close to the business and the day-to-day operations (i.e. line management).

Responsible for the oversight of management activities.

Separate from those responsible for delivery but not independent of the organisation’s management chain, e.g. the risk management and compliance function.

Relates to independent and more objective assurance on the adequate design and effectiveness of IDC’s systems and controls, governance and risk management processes.

Focuses on the role of the Internal Audit function and other external assurance providers (such as regulatory and supervisory bodies).


Enterprise risk management process

Establishing the context

Risk treatment

Process for managing risk

Risk identification

Risk Assessment

Risk analysis

Risk evaluation

Monitor and ReviewReporting, communication

and consultation

Establishing the risks assessment contextThis aspect provides perspective and assists with understanding the nature of the impact on the business. The different contexts include credit and investment, development impact and compliance, reputational and operational risks.

Risk assessmentThe risk assessment process enables management to understand the probability of a risk that may materialise and its potential impact on the IDC. The risk assessment methodology provides management with a risk profile. The assessment process consists of risk identification and risk analysis.

Risk treatmentThe objective of risk treatment is to determine how we respond to events and associated risks. Our risk response strategies focus on terminate, transfer, treat and tolerate.

Risk reporting and escalationThe Board, the Board Risk and Sustainability and the Board Audit Committees are kept abreast of key risks and risk management activities according to a process that ensures that risk management information is reported consistently and timeously to Executive Management and the Board.

Monitoring and reviewMonitoring ensures that the ERM framework, policies and procedures are applied consistently and effectively across the Corporation and identifies weaknesses that demand corrective action.

Communication and consultationEffective communication and consultation increase employee awareness about risk management through awareness campaigns, training and education sessions and newsletters.

Major risksSeveral major risks that could have a material impact on achieving the IDC’s objectives have been identified and are shown on page 10.

Operational risk and business continuity management assessmentsGiven the changing risk landscape, we review the Risk and Control Self-Assessments (RCSAs) of all IDC departments and business units annually. RCSAs are a key component of the Operational Risk Management framework and enables a dynamic and iterative process for identifying and assessing key operational risks and controls. Mitigating actions were put in place to proactively address control-identified deficiencies.

Focus areasWe embarked on a risk awareness campaign to raise employee awareness about the risks that they are exposed to, encourage them to own the risks in their respective areas and embed a sound risk culture. The business continuity functionality was also tested to determine employee responsiveness.

We conducted a high-level maturity assessment of our ERM and operational risk function, assisted by an external service provider, to determine the current level of maturity and interventions required to improve the effectiveness of these functions. The risk maturity assessment is a benchmarking tool that measures the extent to which an organisation has implemented ERM in accordance with


prevailing best practice and guidelines. IDC obtained an overall score of 76%, which indicates that the IDC’s risk maturity is at a mature level and that the current risk management practices are effective.

Credit Risk ManagementCredit risk processesOur credit and investment risk management process is well-entrenched and considered robust. The process involves various internal business units and other stakeholders and comprises of:• A multi-disciplinary due diligence team• An independent credit and investment risk assessment process

by the Risk Management Department• Credit approval committees that include the Executive

Management team, external members and independent directors

• Our Post Investment Management Department, which is responsible for managing the portfolio from after first disbursement until final settlement

• A Workout and Restructuring team, which manages the accounts of clients under restructuring and supervision.

The risk team, under the leadership of the Chief Risk Officer, reports to the Executive Committee and Board Risk and Sustainability Committee on a quarterly basis on the overall performance of IDC’s portfolio. This includes key risk metrics such as concentration risk, breaches of prudential risk limits, impairments, non-performing loans and arrears. The key drivers of the movements are highlighted and remedial action proposed where appropriate. The credit risk metrics are monitored as part of the key risk indicators in the strategic risk register.

ImpairmentsThe 2018 financial year was a challenging period for many of our clients, who were negatively impacted by macroeconomic conditions. These conditions included the weakening of the rand during a large part of the year, weak consumer demand and the protracted drought in parts of the country. Our performance was also impacted, with an increase in some key risk metrics to above the Corporation’s risk appetite level.

The level of impairments increased to R14.2 billion in 2018, raising the impairment ratio from 16.7% to 17.4%. The impairment charge to the income statement increased to R4.9 billion in 2018 (2017: R2.1 billion).

FoskorThe increased impairment can be attributed largely to our subsidiary Foskor. An impairment of R1.8 billion had to be raised. We are actively involved in the monitoring of Foskor and regular reports are provided to the Board and in particular, the Board Risk and Sustainability Committee, to assist the Board in its oversight role in respect of Foskor.

Non-performing loansThe non-performing loans (NPL) ratio increased from 18% in 2017 to 24% in 2018, with a similar trend noted in the level of total arrears. Non-performing loans are loans with repayments of more

than 90 days in arrears. The level of NPLs is a concern and we are attending to it to curb the rising trend.

High-risk exposuresOur high-risk exposures are managed through a watch list process that includes our material investments. The renewed focus on collections is expected to have a positive impact on arrears and impairment levels.

Future focus areasIn the light of our risk appetite and mandate, as well as the Shareholder’s expectation of the Corporation to create a stimulus for economic growth and development, we will continue to act as a catalyst for economic development.

We introduced well defined, Basel aligned risk rating models in 2016 to ensure risk transparency and adequate returns. Given our unique role in the economy, we have an obligation to ensure that the pricing policy supports the Corporation’s development drive. Appropriate risk pricing for the unique characteristics of our risk profile, where the right balance between risk, return and development is achieved is a major focus area.

COMPLIANCEGoverning and managing complianceThe Board Charter requires of the Board to ensure ethical behaviour and compliance with all relevant laws and regulations, audit and accounting principles and the Corporation’s governing documents and codes of conduct. While the implementation of compliance management within the Corporation has been delegated to management, the Board monitors and reviews compliance processes with key regulatory and legal requirements through regular reports to the Social and Ethics, Board Audit and Board Risk and Sustainability Committees.

The Compliance and Regulatory Affairs Department performs the day-to-day compliance tasks and assists the Board in providing an enabling environment for establishing an ethics-based compliance culture.

The Risk Management Department assists the business units to identify and assess the regulatory risks applicable to the various operations and develop compliance risk management plans to mitigate and control risks. Regulatory risks are continually monitored and reported to the relevant stakeholders.

Key focus areasDuring the year under review, the Board has overseen the implementation of processes and controls to meet the requirements of the newly promulgated Financial Intelligence Centre Amendment Act, 1 of 2017. This is in accordance with the primary objective of the Act to establish a stronger anti-money laundering and combating of terrorist financing regulatory framework by enhancing the customer due diligence requirements of accountable institutions.

IDC adopted a risk-based approach to customer due diligence in accordance with the requirement that accountable institutions


should identify, assess and understand their anti-money laundering and combating of terrorist financing risks to create a more efficient client classification in terms of high-, medium- and low-risk.

Other initiatives undertaken during the year include PFMA and Promotion of Access to Information Act, 2 of 2000 (PAIA) awareness sessions among IDC employees and theme-based regulatory compliance reviews, which were conducted to enhance the internal control environment.

Monitoring of compliance managementThe Internal Audit Department conducts annual reviews to monitor the effectiveness of compliance management and reviewed the anti-money laundering and sanctions framework during the reporting period. The Compliance Department is currently implementing the Internal Audit Department’s recommendations in this regard.

Future focus areasThe implementation of the anti-money laundering control and sanctions programme is a particular current and future focus area. This has prompted a consideration to partially automate the client on-boarding process.

INTERNAL AUDITGoverning and managing Internal Audit The Internal Audit Department provides independent, objective assurance to the Board that the governance processes, management of risk and systems of internal control are adequate and effective in mitigating the most significant risks that threaten the achievement of IDC objectives.

Internal audit forms part of the Corporation’s Enterprise Risk Management Framework, as a third line of defence. The purpose, authority and responsibilities of our Internal Audit Department are formally set out in a charter approved by the Board Audit Committee.

Key focus areasDuring the year under review, the Internal Audit Department provided fraud awareness training and education to 20 IDC business units and departments and at six regional offices. In total, 300 employees received training. Approximately 60% of our employees were trained on the Prevention and Combating of Corrupt Activities Act, 12 of 2004 and a number of financial crime awareness initiatives were undertaken internally and extended to clients.

Despite of our extensive crime awareness campaigns, we have seen an increase in the number of cases reported during the reporting period compared to the previous year. A total of 30 cases were reported for investigation, of which seven were internal matters and 23 related to business partners.

The status of previously-raised issues is reported to the Board Audit Committee on a quarterly basis. As at the date of the Board Audit Committee meeting in February 2018, 99 audit findings had been resolved and 22 remained open, of which nine were overdue. A

concerted effort is being made to ensure the timeous resolution of all previously-reported audit findings

Key operational areas are investigated for corruption risks. Eight out of 16 (50%) high risk areas were assessed during the year. High risk areas include all operational units (12 SBUs), and the Financial Management, Procurement, Human Capital and Post-Investment Management departments.

DisclosuresThe Board of directors is responsible for ensuring that internal audit arrangements provide objective and relevant assurance that contributes to the effectiveness of the relevant governance and risk management processes. The Board has delegated oversight of internal audit to the Board Audit Committee. The Board Audit Committee’s disclosures concerning internal audit arrangements and the internal control environment are contained in the report of the Chairperson of the Board Audit Committee on page 68 of this report.

BOARD COMMITTEE REPORTS

BOARD INVESTMENT COMMITTEE (BIC)The Board Investment Committee is a credit granting committee which considers transactions which would, prior to the establishment of the Committee, have vested with the Board. As set out in the IDC’s Delegation of Credit Approval Authority, the BIC considers transactions where the IDC’s transaction exposure (taking into account new approvals plus all approvals granted in a particular transaction during a rolling 12 month period) is R250 million or more, but less than R1.5 billion, and the counterparty exposure is from R1 billion to R7 billion. Transactions exceeding these limits are submitted to the Board for approval.

The Committee also reviews transactions where the transaction or counterparty limits are breached, and considers transactions which are regarded as strategic in nature, for recommendation to the Board. Transactions where sector or regional limits are breached are also referred to the Committee.

ActivityDuring the past year we challenged management to ensure that transactions under consideration are both transformative and contribute towards deepening economic inclusion. This requires meaningful participation by local small, medium and micro-sized enterprises as the catalyst to achieving economic growth and development, increasing localisation opportunities that support South African jobs, and support to Black Industrialists, youth and women entrepreneurs.

The Committee made a significant contribution to the Corporations’ overall funding approvals during the period under review, with total funding of more than R9 billion approved by the Committee in 12 transactions. These transactions are expected to create 3 255 jobs, with another 135 saved. The committee is heartened that it is seeing an increase in the number of transactions that involve Black Industrialists. Unfortunately, the

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same trend is not apparent for companies with a large ownership by women.

I would like to thank management and employees for their continued commitment and hard work in making these larger transactions a reality in a tough economic climate.

ConclusionAs a Committee we are satisfied that we have fulfilled our responsibilities in accordance with the Terms of Reference of the Board Investment Committee for the reporting period.

Dr SM Magwentshu-RensburgChairperson of the Board Investment Committee27 June 2018

HUMAN CAPITAL AND NOMINATIONS COMMITTEE (HCNC)The HCNC assists the Board in the development of the Corporation’s compensation policies, plans, performance goals, and specific compensation levels. The Committee annually manages the Board’s evaluation of the performance of the Chief Executive Officer and assists the Board in fulfilling its oversight responsibilities relating to leadership bench strength, leadership succession planning, as well as overall compensation and human resource policies for all IDC employees.

Terms of ReferenceThe Committee is guided by its Terms of Reference, which are reviewed regularly. The most important responsibilities of the Committee are the following:• Recommending the key performance indicators, and evaluating

and recommending the Corporation’s performance to the Board• Recommending the appointment of Non-Executive directors,

including independent Non-Executive directors to the Board for consideration by the shareholder

• Recommending the appointment of directors to the boards of key subsidiaries and investee companies for consideration by the Board

• Recommending the appointment of the Chief Executive Officer to the Board and set the criteria necessary to evaluate the performance of the Chief Executive Officer

• Assisting the Chief Executive Officer in setting the criteria necessary to evaluate the performance of the individual Executive members in the discharge of their functions and responsibilities, and evaluating performance in relation to the corporate goals

• Reviewing the performance of the CEO and determining his salary based on the evaluation of his performance taking into account market related imperatives

• Overseeing the setting and administering of remuneration at all levels of the Corporation

• Overseeing the establishment of remuneration strategies

and policies that will promote the achievement of strategic objectives of the Corporation and encourage individual performance

• Reviewing the outcomes of the implementation of the remuneration policy to ensure that the set objectives are being achieved

• Ensuring that the mix of fixed and variable pay, in cash and other elements, meet the Corporation’s strategic objectives.

• Overseeing the succession planning for the Chief Executive Officer and for all Executive roles

• Support the Board to ensure leadership bench strength in the Corporation

• Support the Board and the Chief Executive Officer to monitor human resources policies and programmes such as organisational culture transformation and diversity.

ActivityDuring the year under review the Committee supported the Board in reviewing and approving the corporate short-term and long-term performance targets. This process was strengthened through the appointment of an Independent Assurance Committee consisting of internal members and an external member, tasked with the responsibility to provide assurance on targets and performance. We also ensured that the performance objectives of the Corporation, the CEO and Executive are aligned to achieve the required strategic outcomes.

The Committee provided continued oversight over implementation of the Corporation’s Remuneration Philosophy and Policy, particulars of which are provided in the Human Capital section of this report.

We also considered reports on the IDC’s Employment Equity, Skills Development and Leadership Assessment. The focus was also on driving culture transformation and alignment in the business.

The assessment of leaders against the approved leadership competencies was concluded for Executives and for heads of units. This has allowed the Corporation to have a comprehensive view on the leadership bench-strength to drive the strategic intent of the business both now and into the future. A needs driven leadership development academy will develop our leaders with the requisite capabilities to enhance effectiveness. Transformation remains a critical focus area for the Corporation and the IDC overall black representation is at 84.9% of the staffing population (an increase of almost 3% compared to the previous financial year). Our overall female representation is at 54%, having increased by 0.5% since March 2017. The priority will be to focus on both continuing to enhance female representation at management levels and people with disabilities.

Future focusOur efforts to enable a high performance culture and to facilitate and entrench leadership capacitation and development is an ongoing priority, and as a Committee, we remain ever mindful of the need to retain our talent through the enhancement of the employee value proposition.


With the line of sight on leadership capabilities and current bench strength, we will intensify our effort towards talent reviews and succession planning for leadership and critical positions.

ConclusionAs a Committee we are satisfied that we have fulfilled our responsibilities in accordance with the Terms of Reference of the Board Human Capital and Nominations Committee.

Mr BA DamesChairperson of the Board Human Capital and Nominations Committee27 June 2018

BOARD AUDIT COMMITTEE (BAC)Report of the Board Audit Committee in terms of Regulations 27(1)(10)(b) and (c) of the Public Finance Management Act of 1999 (as amended) and requirements of King IV Code of Governance

BackgroundThe Board Audit Committee (BAC) oversees the Corporation’s financial reporting process on behalf of the Board of Directors, in particular with regard to evaluation of the adequacy and efficiency of accounting policies, internal controls, risk management and financial reporting processes. In addition, the BAC assesses the effectiveness of the Internal Auditors and the independence and effectiveness of the External Auditors.

The Corporation’s management has the primary responsibility for the financial statements, maintaining effective internal control over financial reporting and assessing the effectiveness of internal control over financial reporting.

Responsibilities, composition and functions of the CommitteeThe Committee’s role and responsibilities include its statutory duties as per the Public Finance Management Act, 1 of 1999 (as amended), the requirements of the King IV Code of Governance, Companies Act, 71 of 2008 (as amended) and the responsibilities assigned to it by the Board.

As a Committee, we therefore report that we have adopted appropriate formal terms of reference as approved by the Board and are satisfied that we have discharged our responsibilities as per the Companies Act, King IV and PFMA.

The Committee has carried out its functions through the attendance at Audit Committee meetings and discussions with Executive Management, Internal Audit, External Auditors and external advisers where appropriate.

We meet at least four times per annum, with authority to convene additional meetings as circumstances require.

To execute the key functions and discharge the Committee’s responsibilities as outlined in its Terms of Reference during the period under review, we:• Assisted the Board of directors in its evaluation of the adequacy

and efficiency of the internal control systems, accounting practices, information systems, risk management and auditing processes applied within the Corporation in the day-to-day management of its business

• Facilitated and promoted communication between the Board, management, the external auditors and Internal Audit Department on matters that are the responsibility of the Committee

• Introduced measures that, in the opinion of the Committee, may enhance the credibility and objectivity of the financial statements and reports prepared with reference to the affairs of the Corporation (and IDC Group)

• Nominated and recommended for appointment as the Corporation’s external auditors the firms of registered auditors, SizweNtsalubaGobodo Inc. and Ngubane & Company (JHB) Inc., who, in the opinion of the Committee, are independent of IDC

• Determined the fees to be paid to the external auditors and the auditors’ terms of engagement

• Ensured that the appointment of the external auditors comply with the Companies Act and any other legislation relating to the appointment of auditors.

Internal ControlWe monitored the effectiveness of IDC’s internal controls and compliance with the Enterprise-Wide Risk Management Framework (ERMF). The emphasis on risk governance is based on three lines of defence and the BAC uses the regular reports received from the three lines of defence (process owners/department heads; Risk and Compliance Department management; and Internal Audit Department) to evaluate the effectiveness of the internal controls. The ERMF places weight on accountability, responsibility, independence, reporting, communication and transparency, both internally and with all IDC’s key external stakeholders.

No findings have come to the attention of the Committee to indicate that any material breakdown in internal controls has occurred during the financial year under review. The Committee is of the opinion that the internal accounting controls are adequate to ensure that the financial records may be relied upon for preparing the consolidated Annual Financial Statements, that accountability for assets and liabilities is maintained and that this is based on sound accounting policies, supported by reasonable and prudent judgements and estimates. The BAC is further of the opinion that the internal controls of the Corporation have been effective in all material aspects throughout the year under review.

This opinion is based on the information and explanations given by management regarding various processes and initiatives aimed at improving the internal control environment and the integrity of information, discussions with Internal Audit, as well as the independent external auditors on the results of their audits.


To formulate its opinion, the Committee:• Monitored the identification and correction of weaknesses and

breakdowns of systems and internal controls• Monitored the adequacy and reliability of management

information and efficiency of management information systems

• Reviewed quarterly, interim and final financial results and statements and reporting for proper and complete disclosure of timely, reliable and consistent information

• Evaluated on an ongoing basis the appropriateness, adequacy and efficiency of accounting policies and procedures, compliance with generally accepted accounting practice and overall accounting standards, as well as any changes

• Discussed and resolved any significant or unusual accounting issues

• Reviewed reports supplied by management regarding the effectiveness and efficiency of the credit monitoring process, exposures and related impairments and adequacy of impairment provisions to discharge its obligations satisfactorily

• Reviewed and monitored all key financial performance indicators to ensure that they are appropriate and that decision-making capabilities are maintained at high levels

• Reported to the Board on the effectiveness of the Corporation’s internal reporting controls.

External auditorsAs a Committee, we recognise the importance of maintaining the independence of the Corporation’s Independent Auditor, both in fact and appearance. Each year, the Committee evaluates the qualifications, performance and independence of the Corporation’s Independent Auditor and determines whether to re-engage the current Independent Auditor. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the auditors, the auditors’ capabilities and the auditors’ technical expertise and knowledge of the Corporation’s operations and industry. Based on this evaluation, the Audit Committee has retained both SizweNtsalubaGobodo Inc. and Ngubane & Company (JHB) Inc. as the auditors.

The Committee, in consultation with Executive Management, agreed to the engagement letter, terms, audit plan and audit fees for the financial year ended 31 March 2018.

The Committee:• Approved the external auditors’ annual plan and related scope of

work• Monitored the effectiveness of the external auditors in terms of

their skills, independence, execution of the audit plan, reporting and overall performance

• Considered whether the extent of reliance placed on internal audit by the external auditors was appropriate and whether there were any significant gaps between the internal and external audits

• The BAC has also approved the Non-audit Services Policy that specifies that the external auditors are precluded from engaging in non-audit related services.

Financial StatementsWe have reviewed the financial statements of the Corporation and IDC Group and are satisfied that they comply in all material respects with IFRS and the requirements of the Companies Act and PFMA. During the period under review the Committee:• Reviewed and discussed the audited Annual Financial

Statements included in this Integrated Report with the external auditors, the Chief Executive and the Chief Financial Officer

• Reviewed the external auditors’ report and management’s response

• Reviewed any significant adjustments resulting from external audit queries and accepted unadjusted audit differences

• Reviewed areas of significant judgements and estimates in the Annual Financial Statements

• Received and considered reports from the Internal Auditors.

Expertise and experience of Finance FunctionWe have considered and have satisfied ourselves of the overall appropriateness of the expertise and adequacy of resources of IDC’s finance function and experience of the senior members of management responsible for the financial function.

Duties assigned by the BoardIntegrated and Sustainability ReportingThe BAC fulfils an oversight role regarding the Corporation’s Integrated Report and the reporting process and considers the level of assurance coverage obtained from management, and internal and external assurance providers in making its recommendation to the Board.

We considered the Corporation’s information as disclosed in the Integrated Report and have assessed its consistency with operational and other information known to Committee members and for consistency with the Annual Financial Statements. We have discussed the information with management and have considered the conclusions of the external assurance provider.

The Committee is satisfied that the sustainability information is, in all material respects, reliable and consistent with the financial results. Nothing has come to the attention of the Committee to indicate any material deficiencies in this regard.

Combined assuranceThe Committee is responsible for monitoring the combined assurance model detailing significant processes, line management monitoring, Internal Audit and external assurances. This model is used to assess the appropriateness of assurance over risks/controls provided to the Board.

Engagement regarding the extent to which the various assurance providers rely on each other’s work takes place continuously and we are of the view that a better coordination between External and Internal Audit has been achieved.

A Combined Assurance Plan integrating Internal Audit, Compliance and Risk Management Plans have been drafted for use in the next financial year to monitor the activities that relate to the Combined Assurance Process.


Going concernThe Committee concurs that the adoption of the going concern assumption in the preparation of the consolidated Annual Financial Statements is appropriate and sound. This is after the Committee reviewed a documented assessment by management of the going concern premise of the Corporation and IDC Group.

Governance of riskThe Board has assigned oversight of the Corporation’s risk management function to a separate Board Risk and Sustainability Committee. The Chairperson of the BAC attends the Board Risk Committee meetings as an ex-officio member to ensure that information relevant to these committees is shared regularly.

The Committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk and information technology risks as they relate to financial reporting. We are satisfied that the appropriate and effective risk management processes are in place.

Internal AuditInternal audit forms part of the third line of defence as set out in the ERMF and engages with the first and second lines of defence to facilitate the escalation of key control breakdowns. The Internal Audit Department has a functional reporting line to the Committee Chairperson and an operational reporting line to the CEO. The BAC, with respect to its evaluation of the adequacy and effectiveness of the internal controls, receives reports from Internal Audit on a quarterly basis, assesses the effectiveness of internal audit function and reviews and approves the Internal Audit plan.

The Audit Committee is responsible for ensuring that the Corporation’s internal audit function is independent and has the necessary resources, standing and authority within the Corporation to discharge its duties. We approved the internal audit function’s annual audit plan, and as a Committee, we monitored and challenged, where appropriate, action taken by management with regard to adverse internal audit findings.

The Committee has overseen a process by which internal audit has performed audits according to a risk-based audit plan where the effectiveness of risk management and internal controls were evaluated. These evaluations were the main inputs considered by the Board in reporting on the effectiveness of internal controls. The Committee is satisfied with the independence and effectiveness of the internal audit function.

ConclusionHaving considered, analysed, reviewed and debated information provided by management, Internal Audit and External Audit, the Committee confirmed that:• The internal controls of the group were effective in all material

aspects throughout the year under review• These controls ensured that the Group’s assets had been

safeguarded• Proper accounting records had been maintained• Resources had been utilised efficiently• The skills, independence, audit plan, reporting and overall

performance of the external auditors were acceptable.

Following our review of the financial statements for the year ended 31 March 2018, we are of the opinion that they comply with the relevant provisions of the PFMA, as amended, and IFRS and that they fairly present the results of the operations, cash flow and financial position of the Corporation.

We have complied with all the King IV principles, with the inclusion of integrated reporting, evidenced by this issue of the Corporation’s Integrated Report for the financial year ended March 2018. The Committee is satisfied that it has complied in all material respects, with its legal, regulatory and other responsibilities.

This Integrated Report was recommended by the BAC to the Board for approval.

Ms NP MnxasanaChairperson of the Board Audit Committee27 June 2018

BOARD RISK AND SUSTAINABILITY COMMITTEE (BR&SC)The Board Risk and Sustainability Committee assists the Board in carrying out its responsibilities relating to the management and governance of risks. The Committee ensures that the Corporation has an appropriate risk management strategy and that it is implemented by the Corporation. The Committee, through Executive Management, has a responsibility to ensure that the Risk Management Department is adequately resourced as to be effective.

Below is a summary of the key matters that were deliberated by the Committee during the reporting period.

Annual risk assessmentThe Committee reviewed the Corporation’s entire risk assessment process. The annual review assists the Corporation to identify, quantify and prioritise material risks, which tend to have a significant impact on the achievement of IDC objectives. Opportunities and risk mitigating factors are also identified during this process.

Credit and Investment Risk Profile of the IDC’s portfolioWith credit and investment risk being the main risks that the Corporation undertakes, the Committee is at all times seized with ensuring that the risk profile of the portfolio is maintained within the Board approved risk appetite range.

The impairment ratio was impacted negatively as a result of adverse macroeconomic factors, increasing from 16.7% at 31 March 2017, to 17.4% in March 2018. The impairment charge for the year was R4.9 billion, and it was higher than expected due to some of our exposures that were negatively affected by poor commodity prices. The Committee monitors plans to ensure that


the impairment expense is reduced through active management of the key exposure and subsidiaries.

The implementation of IFRS 9 may trigger a breach of the impairment limit of 20%. A review of the limit will be undertaken in parallel with the IFRS 9 review, during the ensuing financial year.

The non-performing loans increased from R5.7 billion in the previous financial year, to R7.5 billion as at the end of 2018. The main reason for the significant increase is one investment outside of South Africa, where IDC is currently involved in litigation to recover the amounts due. The Corporation has the necessary collateral in place to mitigate its losses in this case.

The IDC continues to play a counter-cyclical role to stimulate the economy. As a consequence, the rates of potential default and increased impairments are heightened, however, the Corporation has forums and monitoring committees in place to manage the associated risks.

We have established a dedicated department to monitor the performance of material investments and attend, as required, to IDC subsidiaries and material investments. An experienced and diversely skilled team will be responsible for the implementation of the necessary enhanced monitoring process.In addition, the Committee periodically conducts “risk dives” on some of the material investments and exposures. During these risk dives, detailed analyses of each investment or exposures are conducted and management plans interrogated extensively so as to ensure that identified weaknesses are remedied.

Review of Risk Rating and Pricing ModelsThe SME/Middle Market and Project Finance rating and pricing models implemented by the Corporation have provided us with an accurate and transparent client-specific view of the risk profile of our business partners. The models have set a good base for the implementation of IFRS 9, for which a process is currently underway. The models are monitored on a continuous basis and refined as necessary. Independent validation of the models has been planned for the current financial year.

Risk Models ValidationDuring the year under review, a models validation process was established by the Corporation within the Risk Management Department. Through this process, an inventory of key models utilised by the Corporation has been established. The process of validating these models has commenced. Through this process, it will be ensured that all models that are utilised for risk management are robust, adequately documented and back-tested.

Ongoing oversight of technology and information managementThe Committee carried out its responsibilities in relation to the management of Information Technology risk by reviewing the IT Policy, and ensuring that IT risk management and information governance practices is aligned to King IV principles. The Committee also ensures that the IT function is adequately capacitated by continuously reviewing its capital budgets and human resources.

ConclusionThe BR&SC is closely monitoring the interventions introduced to manage the risk profile of the Corporation. As a Committee we are satisfied that we have fulfilled our responsibilities in accordance with the Terms of Reference of the Board Risk and Sustainability Committee.

Ms LI BethlehemChairperson of the Board Risk and Sustainability Committee27 June 2018

SOCIAL AND ETHICS COMMITTEE (SEC)The Social and Ethics Committee assists the Board in discharging its duties relating to oversight of social and ethical matters in the Corporation and in setting strategies to integrate sustainability into the daily business activities of the IDC. It plays an important role in managing the Corporation’s exposure to reputational risk and promotes the ideals of corporate fairness and transparency, social and economic development and good corporate citizenship.

Ethical LeadershipAs a committee, we aim to champion and foster a culture of good governance and ensure that the Corporation’s Code of Ethics and Business Conduct is applied at all levels of the organisation.

We monitor IDC activities, having regard for all relevant legal requirements in matters relating to social and economic development, good corporate citizenship, stakeholder relationships and the impact of the Corporation’s activities on the environment, health and public safety.

Potential Conflicts of InterestDuring the past year, we considered reports relating to two matters in which IDC directors had potential conflicts of interest, as summarised below.

In the Goapele Property transaction, we considered the relationship between the promoter of the business, Ms N Magwentshu, and two IDC directors, Dr S Magwentshu-Rensburg and Ms M More, who are both sisters-in-law of Ms Magwentshu. Ms Magwentshu is also a Politically Exposed Person (PEP) by virtue of being a cousin to Major General B Holomisa and Mr P Holomisa and having held positions at various State-Owned Entities.

In another transaction, the Committee considered Adv Orleyn’s interest as an indirect shareholder in Le-Sel through Peotona, of which she is an executive director. Peotona is a 0.75% investor in the Trinitas Private Equity Fund. At the time, Trinitas held an indirect interest of 0.21% in Le-Sel, which is an IDC subsidiary. Adv Orleyn recused herself and left the meeting when this matter was considered by the Committee.

In both of the abovementioned cases, it was found that the IDC teams had assessed the applications purely on merit and that there had been no special treatment afforded or undue influence exercised during the approval process.


Subsidiaries and Investee CompaniesWe considered and approved a number of frameworks and policies aimed at improving corporate governance of IDC subsidiaries and investee companies. Most notably, the Committee recommended a Corporate Governance Framework for Subsidiaries and Investee Companies to the Board for approval, which sets certain minimum governance requirements for all such entities, taking into account the size and nature of each business.

A revised IDC Director Nominations Policy, which seeks to promote ongoing dialogue between IDC and the boards of subsidiaries and investee companies, was also recommended to the Board for approval. Our approach is that IDC experts are engaged by the boards of subsidiaries and investee companies on a regular basis, not only at Annual General Meetings.

The IDC Board adopted both the framework and policy. The SEC will oversee their implementation during the next year.

Reputational RiskThe Committee oversees the administration of IDC’s Politically Exposed Persons Policy and reviews the list of transactions involving PEPs. These continue to be published on IDC’s website. During the past year, we considered reports on IDC’s compliance with international recommendations by the Financial Action Task Force (FATF), and legislative requirements in terms of the Prevention of Organised Crime Act, 121 of 1998 (POCA), Financial Intelligence Centre Act, 38 of 2001 (FICA), and Protection of Constitutional Democracy Against Terrorist and Related Activities Act, 33 of 2004 (POCDATARA).

We also commented on the IDC’s Enhanced Due Diligence and Politically Exposed Persons Guidelines, which form the basis of an enhanced due diligence process followed in all transactions involving persons classified as high risk, mainly PEPs and their close family members and associates. The Committee is satisfied that the initiatives undertaken by IDC’s Compliance and Regulatory Affairs Department are adequate and compliant with the changes to due diligence and other processes brought about by the Financial Intelligence Centre Amendment Act, 1 of 2017.

The Board has delegated the task of overseeing collections and other legal processes instituted by IDC against Oakbay Resources, to the SEC. The media has reported extensively on this matter and it is a standing item on the agenda of every meeting of the Committee. Our goal is to ensure that IDC’s reputation is maintained and protected and we do our utmost to ensure that the matter is pursued to its fullest extent, as provided for in law.

Social DevelopmentWe received reports on sponsorships and IDC’s Corporate Social Investment (CSI) activities, approved a CSI strategy for the Corporation and commented on a draft Sponsorship policy. As a Committee, we discussed the work of IDC’s Development Impact Support Department, which provides funds, inter alia, for community projects. We requested the team to engage with institutions of higher learning in order to explore the possibility of developing targeted training programmes for Black Industrialists.

ComplianceNo material non-compliance with legislation and regulations, or non-adherence to codes of best practice, relevant to the areas within the committee’s mandate, was brought to the SEC’s attention.

ConclusionAs a Committee we are satisfied that we have fulfilled our responsibilities in accordance with the Terms of Reference of the Social and Ethics Committee for the reporting period.

Adv ND OrleynChairperson of the Social and Ethics Committee27 June 2018


E N S U R I N G F I N A N C I A L S U S TA I N A B I L I T YThe IDC is a going concern. Due to the current state of the economy we expect profitability to be under pressure in the short- to medium-term. Our efforts to ensure the sustainable development of the South African economy require that the Corporation remains financially sustainable.

We have sufficient liquidity to meet our current obligations and are confident that, for the foreseeable future, we can raise enough funding through a combination of new debt and internally generated funds (profits, repayments on existing facilities or equity divestments) to make new advances into the economy.

Managing impairments is key to ensuring our financial sustainability. We have and will continue to implement initiatives to ensure that impairments remain within acceptable levels.

REVIEW OF FINANCIAL PERFORMANCE The 2018 financial year was a challenging one for the South African economy and the IDC Group. Most of our subsidiaries and certain associated companies felt the strain of the unfavourable economic environment. The Group made a consolidated profit of R3 224 million compared to a profit of R2 200 million in 2017.

Group revenueGroup revenue for the year decreased by 18% to R14 223 million from R17 372 million in 2017. Interest income for the Group of R3 374 million was 22% below the previous year. In 2017 interest income included R1 billion for Kalagadi Manganese. The interest rate environment was slightly higher than in 2017.

Dividends received were 65% higher compared to the previous financial year. In 2018, the IDC received a dividend from Kumba of R1.3 billion. Kumba did not declare a dividend in the 2017 year. Sasol and Mozal paid R682 million and R492 million respectively.

Scaw’s performance improved slightly during the year. Full year revenue, including that of the Discontinued Operations, amounting to R6 355 million, was 17% higher than in the previous financial year (R5 463 million). Since being acquired, Scaw has incurred significant losses of more than R3.3 billion. To ensure sustainable growth of Scaw, IDC decided to introduce Strategic Equity Partners (SEPs) who will provide necessary financial and focused technical support and assist in turning around their financial performance. The result anticipated is that IDC will not retain control in the three Scaw businesses, namely Grinding Media, Cast and Remainco.

Magotteaux International S.A. and Amsted Rail Company Inc. are the SEPs in Grinding Media and Cast Products respectively.

Five-year overview extract from the Company's annual financial statements

Figures in Rand million 2018 2017 2016 2015 2014

Statement of financial position Cash and cash equivalents 5 726 6 660 6 183 7 714 7 250 Loans and advances 28 564 25 802 23 451 21 760 20 298 Investments 105 959 100 175 91 430 94 198 108 943 Property, plant and equipment 54 54 166 129 120 Other assets 1 671 1 236 1 195 1 348 994

Total assets 141 974 133 927 122 425 125 149 137 605

Capital and reserves 87 785 83 814 78 000 84 860 99 869 Other financial liabilities 46 723 42 553 38 987 33 566 29 017 Other liabilities 7 466 7 560 5 438 6 723 8 719

Total equity and liabilities 141 974 133 927 122 425 125 149 137 605

Statement of comprehensive incomeOperating profit/(loss) 1 892 1 601 152 1 718 1 953 Income from equity-accounted investments - - – 3 2

Profit before taxation 1 892 1 601 152 1 721 1 955 Taxation 201 194 25 (54) (551)

Profit/(loss) for the year 2 093 1 795 177 1 667 1 404

20142015

20162017

20180

25

20

15

10

5

Manufacturing, mining and other income Fee income

Interest received Dividends received

20.0

19.6

19.4

10.3

14.3

Group revenue

R’bn


The remaining operations (Remainco) will constitute Rolled, Wire Rod Products and the main property assets of Scaw. The Barnes Southern Palace Consortium, led by a local steel company Barnes Group, is the SEP in Remainco. The Barnes Consortium transaction was approved by the Competition Tribunal on 16 February 2018. The Barnes Consortium took over the operations of Remainco on the 1 May 2018 with the transaction fully implemented by 30 May 2018. The Grinding Media transaction was approved by the Competition Commission on 20 February 2018, with Magotteaux taking over management of Grinding Media on 1 June 2018. The Cast Products transaction was approved on 29 March 2018 and Amstead took over management of Cast Products on 1 June 2018.

Revenue from Foskor was up 5% from the previous year to R5 892 million, having been impacted by a weaker market, a strong exchange rate, high cost of production and plant inefficiencies. The lower commodity price and the stronger than expected Rand continue to have a significant impact on the revenue of Foskor. The company will continue to implement cost savings and production enhancing interventions.

Group operating profitThe operating profit for the year was R 2 424 million (2017: R616 million), mainly due to increased dividends received, as well as a day-one-gain on the unwinding of Main Street 333 (Exxaro).

Impairments for the Group increased by a significant R1 635 million, from R954 million to R2 653 million, mainly driven by the difficult trading conditions persisting in the South African economy. In response to the higher risk to the IDC book, the Corporation has embarked on various initiatives to contain further increases in impairments. The Corporation is confident that these interventions will be effective in curbing growth in impairments, whilst continuing to play its counter-cyclical role in the economy. The impairments in the current financial year (R2 653 million) were attributed to the adverse macroeconomic environment and

protracted commodity prices. The impact of currency volatility and the drought also had a negative impact on some exposures.

Financing costs for the Group decreased to R2 433 million (2017: R2 607 million), mainly due to lower exchange rate losses during the year.

The Group made a capital profit of R2 383 billion from the disposal of certain listed and unlisted investments during the year, compared to R1 688 million in the previous year. Partial divestment from the IDC’s shareholding in BHP Billiton was the main contributor to the capital gain.

During the 2018 financial year, we received R223 million from the South African Government to fund sefa (2017: R213 million).

Income from equity-accounted investmentsThe equity-accounted investments recorded a decrease in performance during the reporting period, with their contribution

Five-year overview extract from the Group's annual financial statements

Figures in Rand million 2018 2017 2016 2015 2014

Statement of financial position Cash and cash equivalents 6 156 7 699 6 865 8 257 7 877Loans and advances 30 660 26 673 23 928 22 412 20 818Investments 81 488 77 996 71 586 73 114 92 337Property, plant and equipment 7 683 9 613 10 816 9 921 9 012Other assets 10 971 7 855 8 153 8 585 8 549

Total assets 136 958 129 836 121 348 122 289 138 593

Capital and reserves 92 023 88 097 84 717 89 797 106 769Non-controlling interest 84 193 102 125 215Other financial liabilities 33 217 30 367 27 984 24 005 21 350Other liabilities 11 634 11 179 8 545 8 362 10 259

Total equity and liabilities 136 958 129 836 121 348 122 289 138 593

Statement of comprehensive incomeOperating profit/(loss) 2 424 616 (494) 1 011 2 513Income from equity-accounted investments 419 963 557 656 (310)

Profit before taxation 2 843 1 579 63 1 667 2 203Taxation 381 621 160 (14) (560)

Profit/(loss) for the year 3 224 2 200 223 1 653 1 643

20142015

20162017

2018-1.0

-0.5

0.5

1.5

2.5

3.5

3.0

2.0

1.0

0.0

2.5

1.0

(0.5

)

0.6

2.4

Group operating profit/(loss)

R’bn


to the Group profits at R419 million compared to a profit of R963 million in 2017. The impact is being monitored, given the protracted pressure on commodity prices.

Loans, advances and investments The IDC advanced R15.4 billion in new loans, advances and investments during the year, up from R11 billion in 2017. This resulted in loans and advances growing to R30.7 billion (net of repayments), from R26.7 billion, and investments increasing from R38.3 billion to R50.8 billion (net of disposals and preference share redemptions).

The revaluation of investments to fair value increased from R40 billion to R41 billion, mainly due to the increase in the value of listed equities following some improvement in the oil, platinum, manganese, steel and iron ore prices.

The IDC is committed to diversifying its portfolio over the medium term in order to minimise the concentration risk towards commodities by investing in a diverse portfolio with more stable growth prospects.

Group borrowingsThe growth in our borrowings portfolio was aligned with our strategy to fund growth in the loans and advances book, predominantly from borrowings. Borrowings for the year grew to R33.2 billion from R30.4 billion in 2017.

Borrowing activity during the year amounted to R8.8 billion, with repayments of R4.4 billion. A large portion of the borrowing was raised from local lenders, while foreign commercial banks showed great appetite for IDC credit by providing more funding support. These were offered in both short and long tenure through bilateral arrangements. We continued to utilise the IDC Domestic Medium-Term Note (DMTN) programme to issue public bonds.

The demand and pricing of the bond issuances reflected investors’ confidence in the IDC’s creditworthiness and financial standing.

We will continue our bond issuance programme as part of our funding sources diversification strategy. This strategy will also be informed by local and international market conditions, pricing and available liquidity in financial markets. Traditional sources, namely commercial banks (both local and international) and development financial institutions (DFIs) will remain sources of funding. The DFIs that we have bilateral agreements with are Kreditanstalt für Wiederaufbau (KfW), African Development Bank (ADB), Agence Française de Développement (AfD)/Proparco, European Investment Bank (EIB), China Development Bank (CDB) and China Construction Bank (CCB).

The Public Investment Corporation (PIC), acting on behalf of the Government Employee Pension Fund, supported the green efficiency strategy by providing a longer tenor private placement bond.

The Unemployment Insurance Fund (UIF), in their quest to reduce unemployment, partnered with the IDC to provide funding to assist companies which would save and create new jobs. This was facilitated by the PIC.

This diversified pool of funding provides the IDC flexibility to raise borrowings as and when required, depending on market volatility at the time. IDC continues to meet its financial obligations emanating from these funding sources whilst maintaining excellent relationships with our lenders and investors.

Total assets, capital and reserves and debt/equityTotal assets increased from R129.8 billion in 2017 to R136.9 billion during the review period mainly as a result of the increase in the fair value of BHP Billiton and Kumba Iron Ore Limited (mainly due to higher iron ore prices). Our borrowings grew in line with the growth in loans and advances, resulting in the debt/equity ratio remaining at an average of 36.1%.

20142015

20162017

20180

140

100

120

60

80

40

20

Loans and advances Investment at cost

Revaluation of investments to fair value

Group loans, advances and investments

R’bn

64.2

28.1

20.8

44.9

28.2

22.4

38.6

33.0

23.9

36.0

38.3

25.8

41.0

50.8

30.7

20142015

20162017

20180

160

140

100

120

60

80

40

20

Total assets Debt/equity

Capital and reserves

Group assets, capital and reserves and the debt/equity ratio

R’bn %

64.2

138.

610

6.8 12

2.3

89.8

121.

384

.7

129.

888

.1

137.

092

.-

0

60

50

30

40

10

2020.1

26.8

33.034.3 36.1


Impairments (IDC Company)Impairments levels increased steadily over the past five years in value terms, from R9.8 billion in 2014 to R14.2 billion in 2018. A 15% increase occurred in cumulative impairments between the 2017 and 2018 financial years. As a ratio of the total outstanding financing book at cost, impairment levels increased from 16.7% 2017 to 17.4% during the period under review. The impairment level remains within the threshold of 20% as set by the Board.

The current impairment levels are aligned with our risk appetite and role in supporting high-risk sectors and businesses that are largely unattractive to commercial financiers. The trend also reflects our focus on funding early-stage projects and start-up operations. The impairment charge to the income statement of R4 930 million for the year ended 31 March 2018 was 136% higher than the charge reported at financial year-end in 2017.

The IDC Executive Management and Board Risk and Sustainability Committee receive quarterly reports on impairments and credit risk measures.

Write-offs (IDC Company)The IDC writes off non-performing investments only after, inter alia, viable turnaround and restructuring options have been exhausted fully and the exposure is regarded as unrecoverable.

During the year under review, R3.1 billion was written off (2017: R1.3 billion), an increase of 131% compared to the previous year.

The Basic Metals and Mining SBU accounted for 69% of the write-offs. The reasons related mainly to poor market conditions that affected our subsidiary Scaw South Africa. Written-off businesses have a low probability of recovery, while in some instances we recoup amounts that had already been written off. The trend in write-offs over the past five years is illustrated in the accompanying chart.

ASSET AND LIABILITY MANAGEMENTLiquidity riskLiquidity risk refers to an inability by the Group to meet its obligations promptly for all maturing liabilities, for increases in financing activity, including commitments and any other financial obligations (funding liquidity risk), or to do so at materially disadvantageous terms (market liquidity risk).

Liquidity risk is governed by the Asset and Liability Management Policy. The Asset and Liability Committee (ALCO) provides oversight and makes delegated decisions related to liquidity risk exposures.

Sources of liquidity risk include:• Unpredicted accelerated draw-downs on approved financing or

call-ups of guarantee obligations• Inability to roll and/or access new funding• Unforeseen inability to collect what is contractually due to the

Group• Liquidity stress at subsidiaries and/or other SOEs• A recall without due notice of on-balance sheet funds managed

by the Group on behalf of third-parties• A breach of covenants, resulting in the forced maturity of

borrowings• Inability to liquidate assets in a timely manner with minimal risk

of capital losses.

The Corporate Treasury manages liquidity on a day-to-day basis within Board-approved treasury limits to ensure that:• Sufficient, readily-available liquidity to meet probable

operational cash flow requirements for a rolling three-month period is available at all times

• Excess liquidity is minimised to limit the consequential drag on profitability.

Liquidity coverage ratios aim to ensure that suitable levels of unencumbered high-quality liquid assets are held to protect against unexpected, yet plausible, liquidity stress events. Two separate liquidity stresses are considered: firstly, an acute three-month liquidity stress that impacts strongly on both funding and market liquidity; and, secondly, a protracted twelve-month liquidity stress with a moderate effect on both funding and market liquidity.

20142015

20162017

20180

160

140

100

120

60

80

40

20

Cost of investments Impairments as a % of cost

Impairments as a % of market valueFair value adjustment

Impairments

R’bn %

0

30

25

15

20

5

10

7.6

18.2

8.8

16.7

10.1

16.9

9.7

16.7

10.4

17.4

20142015

20162017

2018

0.5

1.5

2.5

3.5

3.0

2.0

1.0

0.0

0.5

1.4

2.0

1.3

3.0

Write-offs

R’bn


Approved high-quality liquid assets include cash, near-cash, committed facilities, as well as a portion of the Group’s listed equity investments after applying forced-sale discounts.

Structural liquidity mismatch ratios aim to ensure adequate medium- to long-term liquidity mismatch capacity by maintaining a stable funding profile. This is done by restricting, within reasonable levels, potential future borrowing requirements as a percentage of total funding-related liabilities. A robust funding structure reduces the likelihood of deterioration in the Group’s liquidity position should sources of funding be disrupted. The structural liquidity mismatch is based on conservative cash flow profiling with the added assumption that liquidity, in the form of high-quality liquid assets, are treated as readily available.

Market risk Market risk is the risk that the value of a financial position or portfolio will decline due to adverse movements in market rates. In respect of market risk, the Group is exposed to interest rate risk, exchange rate risk and equity price risk. Market risk is governed by the Asset and Liability Management Policy and ALCO provides the objective oversight and makes delegated decisions related to market risk exposures.

Interest rate riskInterest rate risk is the risk that adverse changes in market interest rates may cause a reduction in the IDC’s future net interest income and/or in the economic value of its shareholders’ equity. The IDC’s interest rate risk is a function of its interest-bearing assets and liabilities. The primary sources of interest rate risk include: • Repricing risk: as a result of interest-bearing assets and

liabilities that reprice within different periods. This includes the endowment effect due to an overall quantum difference between interest-bearing assets and liabilities

• Basis risk: as a result of the imperfect correlation between

interest rate changes (spread volatility) on interest-bearing assets and liabilities that reprice within the same period

• Yield curve risk: as a result of unanticipated yield curve shifts (i.e. twists and pivots)

• Optionality: as a result of embedded options in assets (i.e. prepayment) and liabilities (i.e. early settlement), which may be exercised based on interest rate considerations.

The sensitivity to interest rate shocks and/or changes in interest-bearing balances is measured by means of earnings and economic value approaches. The former quantifies the impact on net interest income over the next twelve months and the latter gauges the impact on the fair market value of assets, liabilities and equity.

Exchange rate riskExchange rate risk is the risk that adverse changes in exchange rates may cause a reduction in the IDC’s future earnings and/or its shareholders’ equity.

In the normal course of business, the IDC is exposed to exchange rate risk through its trade finance book and exposure to investments in and outside Africa. The risk is divided into:• Translation risk, which refers to the exchange rate risk associated

with the consolidation of offshore assets and liabilities or the financial statements of foreign subsidiaries for financial reporting purposes

• Transaction risk, which arises where the IDC has cash flows/transactions (i.e. a monetary asset or liability, off-balance sheet commitment or forecasted exposure) denominated in foreign currencies whose values are subject to unanticipated changes in exchange rates.

Any open (unhedged) position in a particular currency gives rise to exchange rate risk. Open positions can be short (we need to buy foreign currency to close the position) or long (we need to sell foreign currency to close the position) with the net open foreign

Value added statement (IDC Company)

Figures in Rand million 2018 2017

Value created Net interest income 935 2 143Impairment losses on loans, advances and investments (4 930) (2 086)Other income from lending activities 1 784 578Other investment income 5 215 2 960Operating expenditure and project feasibility expenses (334) (480)

2 688 3 115

Value allocatedBenefits to employees 1 032 998Social spending in communities 121 124To government as taxation and dividends (529) 214

Taxation (including deferred tax) (579) 194Dividends to shareholders 50 20

Value reinvested in operations 2 064 1 779

Transfer to/(from) reserves (retained earnings) 2 043 1 765Depreciation and amortisation 21 14

2 688 3 115


currency position referring to the sum of all open positions (spot and forward) in a particular currency. For purposes of hedging, net open foreign currency positions are segmented into the following components:• All exposures related to foreign currency denominated lending

and borrowing.• All foreign currency denominated payables in the form of

operating and capital expenditure, as well as foreign currency denominated receivables in the form of dividends and fees.

Equity price riskEquity price risk is the risk that adverse movements in equity prices may cause a reduction in the value of the Group’s investments in listed and/or unlisted equity investments and therefore includes future earnings and/or value of shareholders’ equity.

Sources of equity price risk include:• Systematic risk or volatility in relation to the market as a whole• Unsystematic risk or company-specific risk factors.

The investment portfolio’s beta is used as an indication of systematic, non-diversifiable risk. Due to the long-term nature of

the Group’s investments, unsystematic risk is managed through diversification.

Sensitivity analyses were performed on the Group’s equity portfolio to determine the possible effect on the fair value should a range of variables change, such as cash flow, earnings and net asset values. These assumptions were built into the applicable valuation models.

FUTURE PERFORMANCEWe expect 2019 to be another challenging year as a result of a difficult set of conditions in the South African economy and modest growth globally.

Profitability could be impacted significantly in the year ahead mainly due to lower dividend income forecasts. Our balance sheet remains strong and we intend growing it further during the next five years, with advances of between R96 billion and R123 billion in total over that period. This will be funded from borrowings of between R58 billion and R62 billion, with the balance funded through internally generated funds. Gearing levels are expected to increase over the next few years, in line with the strategy to utilise more debt funding.


A B O U T T H I S R E P O R TThis Integrated Report covers our performance and strategies for the period 1 April 2017 to 31 March 2018.

There have been no significant changes to the scope, boundary or measurement methods applied in this report and there have been no restatements unless otherwise indicated in the relevant section.

In this report, we have focused on our means of adding value and we have been guided by the Integrated Reporting Framework issued by the International Integrated Reporting Council (IIRC). The report is aligned with selected principles and Standard Disclosures from the Global Reporting Initiative (GRI) G4 Reporting Guidelines, which are referenced in the GRI G4 Content Index and can be found online at www.idc.co.za. The principles of the International Federation of Accountants (IFAC) have also been taken into account.

The report is further informed by the following legislation and standards:• The Public Finance Management Act, 1 of 1999 (PFMA)• The King IV Report on Governance for South Africa (King IV)• The Companies Act, 71 of 2008, as amended• The International Financial Reporting Standards (IFRS)• The Industrial Development Corporation Act, 22 of 1940, as

amended• The internally developed guidelines and policies.

MATERIALITYWe define the materiality of matters for reporting purposes as those that support our strategic goals as a state-owned development finance institution and those that have the potential to substantially affect our ability to create and sustain value in the short-, medium- and long-term. We have used issues arising from our stakeholder engagement processes to determine materiality (for more information on the process followed and our material issues, refer to page 16).

SCOPE AND BOUNDARYThe IDC Integrated Report is compiled and produced annually. This report includes IDC performance and activities across all the geographies in which we operate and contains our outlook, targets and objectives for the short-, medium- and long-term. When referring to “IDC”, “we” or “our”, we mean the Industrial Development Corporation and our subsidiaries Findevco, Impofin and Konoil. When referring to the Group, we mean IDC and all of its subsidiaries. The Group structure is shown in the online section of the report.

The boundary of the report includes financial reporting, determined in accordance with the IFRS and our non-financial performance, opportunities, risks and outcomes that have a significant influence on our ability to create value. It excludes detailed information on subsidiaries.

The report focuses on matters which are material to IDC within the boundary discussed above. Internal and external factors which

substantially influence our business have been considered and where material, their real and potential impacts are covered.

Details of our investments in subsidiaries, joint ventures, jointly controlled assets and associates appear in our annual financial statements. Detailed information on our separately listed and managed interests in associates and listed investments, which account for the bulk of our other property assets, is provided in their annual reports, which are available on their websites.

REPORTING PRINCIPLES, ASSURANCE AND APPROVALOur combined assurance framework brings together all assurance activities, identifies internal and external assurance providers and ensures that actual assurance takes place and is reported within our governance structures.

A combined assurance team from SizweNtsalubaGobodo Inc. and Ngubane & Company (JHB) Inc., supported by our internal audit team, assured the financial section of the report. The IDC Board Audit Committee verified the independence of the external assurance providers. The IDC Board approved the report as recommended by the Board Audit Committee. Selected performance information was assured at a limited assurance level according to the International Standards for Assurance Engagements (ISAE 3000), assurance engagements other than audits and reviews of historical information.

FORWARD LOOKING STATEMENTSThis report contains forward looking statements about the performance and position of IDC. In line with the requirements of the PFMA, our annual Corporate Plan contains outlooks for a three-year period. These projections are based on the views of the directors and assumptions about economic, political and global conditions. As such, these forward-looking statements are subject to risk and uncertainty and have not been reviewed or audited by our external auditors.

We appreciate your feedback. Kindly submit queries and comments to [email protected].


I N D E P E N D E N T A S S U R A N C E P R O V I D E R ’ S L I M I T E D A S S U R A N C E R E P O R T O N S E L E C T E D K E Y P E R F O R M A N C E I N D I C AT O R ST O T H E D I R E C T O R S O F I N D U S T R I A L D E V E LO P M E N T C O R P O R AT I O N O F S O U T H A F R I C A

REPORT ON SELECTED KEY PERFORMANCE INDICATORSWe have undertaken a limited assurance engagement on selected key performance indicators (KPIs), as described below, and presented in the 2018 Integrated Report of the Industrial Development Corporation (IDC) for the year ended 31 March 2018 (the Report). This engagement was conducted by a multidisciplinary team including specialists with relevant experience in sustainability reporting.

SUBJECT MATTERWe are required to provide limited assurance on the following selected KPIs. The selected KPIs described below have been prepared in accordance with IDC’s reporting criteria that accompanies the performance information on the relevant pages of the Report (the accompanying IDC reporting criteria) and the reporting boundary is IDC’s operations only.

DIRECTORS’ RESPONSIBILITIES The Directors are responsible for the selection, preparation and presentation of the selected KPIs in accordance with the accompanying IDC’s reporting criteria. This responsibility includes the identification of stakeholders and stakeholder requirements, material issues, commitments with respect to sustainability performance and design, implementation and maintenance of internal control relevant to the preparation of the Report that is free from material misstatement, whether due to fraud or error.

INHERENT LIMITATIONS

We draw your attention to inherent limitations that should be recognised in considering the potential effectiveness of any such system. Such limitations include the following: • The requirement that the cost of an internal control does not

exceed the expected benefits to be derived; • Most internal controls tend to be directed at routine events

rather than non-routine events. The potential for human error

due to carelessness, distraction, mistakes of judgment and the misunderstanding of instructions;

• The possibility of circumvention of internal controls through the collusion of a member of management or an employee with parties inside or outside the entity;

• The possibility that a person responsible for exercising an internal control could abuse that responsibility, for example, a member of management overriding an internal control; and

• The possibility that procedures may become inadequate due to changes in conditions, and compliance with procedures may deteriorate.

Our assurance of the KPIs in the Report for the year ended 31 March 2018 would not necessarily disclose all weaknesses in the system because it is based on selective tests of records. However, the attached report summarises certain observations and recommendations which resulted from our assurance process.

Material Issue Key Performance Indicators Unit of Measurement

Guideline/Criteria Boundary Reference page number

Industrial development • Value of funding approved Rand Value (ZAR) IDC Internal Criteria IDC only 1


• Expected direct jobs created/saved (approved)• Value of funding to Black Industrialists

(approved)

Number (#)

Rand Value (ZAR)

IDC Internal Criteria


IDC only

IDC only

1

1

Human Capital • Retention - % turnover of employees occupying critical roles

• Succession - % critical roles that have identified potential successors for immediate and/or 1-3 years

• Average number of hours training

Percentage (%)

Percentage (%)Number (#)


IDC Internal CriteriaGRI G4

IDC only

IDC onlyIDC only

57

5758

Governance, Regulation and Risk Management

• Total number and percentage of operations assessed for risks related to corruption and the significant risks identified

• Communication and training on anti-corruption policies and procedures

• Monitoring portfolio-high risk

Number (#) and Percentage (%)

Text claimText claim

GRI G4

GRI G4IDC Internal Criteria

IDC only

IDC onlyIDC only

66

6661

Partners • Stakeholder engagement strategy and process Text claim IDC Internal Criteria IDC only 16


OUR INDEPENDENCE AND QUALITY CONTROLWe have complied with the independence and all other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

SizweNtsalubaGobodo Inc. and Ngubane and Company (JHB) Inc apply the International Standard on Quality Control 1 and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

OUR RESPONSIBILITYOur responsibility is to express a limited assurance conclusion on the selected KPIs based on the procedures we have performed and the evidence we have obtained. We conducted our limited assurance engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the International

Auditing and Assurance Standards Board. That Standard requires that we plan and perform our engagement to obtain limited assurance about whether the selected KPIs are free from material misstatement.

A limited assurance engagement undertaken in accordance with ISAE 3000 (Revised) involves assessing the suitability in the circumstances of IDC’s use of its reporting criteria as the basis of preparation for the selected KPIs, assessing the risks of material misstatement of the selected KPIs whether due to fraud or error, responding to the assessed risks as necessary in the circumstances, and evaluating the overall presentation of the selected KPIs. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. The procedures we performed were based on our professional judgement and included inquiries, observation of processes followed, inspection of documents, analytical procedures, evaluating the appropriateness of quantification methods and reporting policies, and agreeing or reconciling with underlying records.

Given the circumstances of the engagement, in performing the procedures listed above we:• Interviewed management and senior executives to obtain

an understanding of the internal control environment, risk assessment process and information systems relevant to the sustainability reporting process;

• Inspected documentation to corroborate the statements of management and senior executives in our interviews;

• Tested the processes and systems to generate, collate, aggregate, monitor and report the selected KPIs;

• Performed a controls walkthrough of identified key controls;• Inspected supporting documentation on a sample basis and

performed analytical procedures to evaluate the data generation and reporting processes against the reporting criteria;

• Evaluated the reasonableness and appropriateness of significant estimates and judgments made by the directors in the preparation of the selected KPIs; and

• Evaluated whether the selected KPIs presented in the Report is consistent with our overall knowledge and experience of sustainability management and performance at IDC.

The procedures performed in a limited assurance engagement vary in nature and form, and are less in extent than for a reasonable assurance engagement. As a result the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about whether IDC’s selected KPIs have been prepared, in all material respects, in accordance with the accompanying IDC reporting criteria.

LIMITED ASSURANCE CONCLUSIONBased on the procedures we have performed and the evidence we have obtained [and subject to the inherent limitations outlined elsewhere in this report], nothing has come to our attention that causes us to believe that the selected KPIs as set out in the subject matter paragraph for the year ended 31 March 2018 are not prepared, in all material respects, in accordance with the accompanying IDC reporting criteria.

OTHER MATTERSThe maintenance and integrity of the IDC’s Website (www.idc.co.za) is the responsibility of IDC management. Our procedures did not involve consideration of these matters and, accordingly we accept no responsibility for any changes to either the information in the Report or our independent limited assurance report that may have occurred since the initial date of its presentation on IDC website.Restriction of Liability


Our work has been undertaken to enable us to express a limited assurance conclusion on the selected KPIs to the Directors of IDC in accordance with the terms of our engagement, and for no other purpose. We do not accept or assume liability to any party other than IDC, for our work, for this report, or for the conclusion we have reached.

I N D E P E N D E N T A S S U R A N C E P R O V I D E R ’ S L I M I T E D A S S U R A N C E R E P O R T O N S E L E C T E D K E Y P E R F O R M A N C E I N D I C AT O R S c o n t i n u e dT O T H E D I R E C T O R S O F I N D U S T R I A L D E V E LO P M E N T C O R P O R AT I O N O F S O U T H A F R I C A

SizweNtsalubaGobodo Inc.

Registered Auditor

Per Fikile ZwaneDirector Chartered Accountant (SA)Registered Auditor

31 July 2018

SizweNtsalubaGobodo Inc.20 Morris Street EastWoodmead2191

Ngubane and Company (JHB) Inc.

Registered Auditor

Per Nqabisa RaveleDirector Chartered Accountant (SA)Registered Auditor

31 July 2018

Ngubane and Company (JHB) Inc.1 Superior Close, Off 16th RoadMidrand1685


4IR 4th Industrial Revolution

ADB African Development Bank

AfCFTA Africa Continental Free Trade Area

AfD Agence Française de Développement

AGM Annual General Meeting

AGP Annual Guaranteed Package

ALCO Asset and Liability Committee

APCF Agro-Processing Competitiveness Fund

BAC Board Audit Committee

BAIC Beijing Automobile International Corporation

B-BBEE Broad-Based Black Economic Empowerment

BEE Black Economic Empowerment

BIC Board Investment Committee

BR&SC Board Risk and Sustainability Committee

CCB China Construction Bank

CDB China Development Bank

CEO Chief Executive Officer

CMT Cut, make and trim

CNT Carbon nanotube

COBIT Control Objectives for Information and Related

Technologies

CSI Corporate Social Investment

CSIR Council for Scientific and Industrial Research

CTCP Clothing and Textiles Competitiveness Programme

DIS Development Impact Support

DFI Development Finance Institution

DMTN Domestic Medium-Term Note

EIB European Investment Bank

EDD Economic Development Department

ERM Enterprise Risk Management

ERMF Enterprise-Wide Risk Management Framework

ESG Environmental, Social and Governance

Exco Executive Committee

FATF Financial Action Task Force

FICA Financial Intelligence Centre Act

GDP Gross Domestic Product

GRI Global Reporting Initiative

HC Human Capital

HCNC Human Capital and Nominations Committee

ICT Information and Communication Technology

IDC Industrial Development Corporation

IFAC International Federation of Accountants

IFRS International Financial Reporting Standards

IIRC International Integrated Reporting Council

IPAP Industrial Policy Action Plan

IR Integrated Reporting/Report

IT Information Technology

JSE Johannesburg Stock Exchange

KfW Kreditanstalt für Wiederaufbau

LTI Long-term Incentive

MCEP Manufacturing Competitiveness Enhancement

Programme

NPA Non-pensionable Allowance

NPL Non-performing Loan

NAACAAM National Association of Automotive Component

and Allied Manufacturers

NUM National Union of Mineworkers

NUMSA National Union of Metalworkers of South Africa

OEM Original Equipment Manufacturer

PAIA Promotion of Access to Information Act

PEP Politically Exposed Person

PFMA Public Finance Management Act

PIC Public Investment Corporation

PICC Presidential Infrastructure Coordinating Commission

POCA Prevention of Organised Crime Act

POCDATARA Protection of Constitutional Democracy Against

Terrorist and Related Activities Act

PRASA Passenger Rail Agency of South Africa

RCSA Risk and Control Self Assessment

REIPPPP Renewable Energy Independent Power Producer

Procurement Programme

SAISI South African Iron and Steel Institute

SBU Strategic Business Unit

SEC Social and Ethics Committee

sefa Small Enterprise Finance Agency

SEIFSA Steel and Engineering Industries Federation of

South Africa

SEP Strategic Equity Partner

SIP Strategic Integrated Projects

SME Small and Medium Enterprise

SMME Small, Medium and Micro-sized Enterprise

SOC State-owned Company

SOE State-owned Enterprise

STI Short-term Incentive

the dti Department of Trade and Industry

TVET Technical Vocational Education and Training

UIF Unemployment Insurance Fund

VAMCOSA Valve and Actuators Manufacturers Cluster of South

Africa

G LO S S A R Y


C O N TA C T I N F O R M AT I O N

HEAD OFFICEGAUTENG 19 Fredman Drive, Sandown 2196 PO Box 784055, Sandton 2146 Tel: 011 269 3000 | Fax: 011 269 3116 | Email: [email protected]

REGIONAL OFFICESEASTERN CAPE East London: 2nd Floor Block B, Chesswood Office Park, Winkley Street, Berea, East London PO Box 19048, Tecoma 5214 Tel: 043 721 0733/4 | Fax: 043 721 0735 | Email: [email protected] Elizabeth: Southern Life Gardens, Block A (Ground) 70 2nd Avenue, Newton Park, PE PO Box 27848, Greenacres, Port Elizabeth 6057 Tel 041 363 1640 | Fax: 041 363 2349 | Email: [email protected]/[email protected]: Ground Floor, ECDC House, 7 Sisson Street, Fort Gale, Mthatha 5201 Tel: 047 504 2200 | Fax: 047 531 1587 | Email: [email protected]

FREE STATE Bloemfontein: Mazars Building, 46 1st Avenue, Westdene, Bloemfontein Private Bag X 11, Suite 25, B hof 9324 Tel: 051 411 1450 | Fax: 051 447 4895

KWAZULU-NATAL Durban: Suite 2101, 21st Floor, The Embassy Building, 199 Anton Lembede Street, Durban PO Box 2411, Durban 4000 Tel: 031 337 4455 | Fax: 031 337 4790 | Email: [email protected]: 1st Floor, ABSA Building 15 Chatterton Road, Pietermaritzburg PO Box 2411, Durban 4000 Tel: 033 328 2560 | Fax: 033 342 5341 | Email: [email protected]

LIMPOPO Polokwane: Suite 18, Biccard Office Park, 43 Biccard Street Postnet Suite 422, Private Bag X9307, Polokwane 0699 Tel: 015 299 4080 4099 | Fax: 015 295 4521 | Email: [email protected]

MPUMALANGA Nelspruit: Maxsa Building, 15 Ferreira Street, Suite 702, 7th Floor, Mbombela PO Box 3724, Mbombela 1200 Tel: 013 752 7724 | Fax: 013 752 8139 | Email: [email protected]: Smokey Mountain Office Park, Route N4 Business Park, Third Floor, Room 304, Ben Fleur X11, eMalahleni 1035 Tel: 013 658 2960 | Fax: 013 656 1043NORTHERN CAPE Kimberley: Sanlam Business Complex, 13 Bishops Avenue, Kimberley 8301 PO Box 808, Kimberley 8300 Tel: 053 807 1050 | Fax: 053 832 7395 | Email: [email protected]: De Drift Plaza, Block 6, Olyvenhoutsdrift Settlement, Louisvale Avenue, Upington 8800 Tel: 054 337 8600 | Fax: 054 334 0835 | Email: [email protected]


NORTH WEST Rustenburg: 1st Floor, Sunetco Building, 32B Heystek Street, Rustenburg Postnet Suite 290, Private Bag X 82245, Rustenburg 0030 Tel: 014 591 9660 /1 | Fax: 014 592 4485Brits: Suite 108, Safari Centre, 28 Van Velden Street, Brits 0250 Tel: 012 252 0008 | Fax: 012 252 4657Mahikeng: Postnet Suite 89, Private Bag X2230, Mahikeng 2791 Tel: 018 397 9942

WESTERN CAPE Cape Town: 2817, 28th Floor ABSA Centre, 2 Riebeeck Street Cape Town PO Box 6905, Roggebaai 8012 Tel: 021 421 4794 | Fax: 021 419 3570 | Email: [email protected]

SATELLITE OFFICES

FREE STATE Phuthaditjhaba: Mapoi Road, Phuthaditjaba 9869 Tel: 051 411 1450Welkom: 1 Reinet Street, Welkom 9460 Tel: 051 411 1450

KWAZULU-NATAL Richards Bay: Suite 17, Partidge Place, cnr Lira and Tasselberry Road, Richards Bay 3900 Tel: 031 337 4455

LIMPOPO Thohoyandou: Seda office: Old Mutual Building, Old Group Scheme Offices, Mphephu Road, Thohoyandou 7950 Tel: 015 299 4080Tzaneen: 1st Floor Prosperitas Building, 27 Peace Street, Tzaneen (Seda) 0850 Tel: 015 299 4080 MPUMALANGA Secunda: South Wing, Municipal Building Lurgi Square, Secunda 2302 Tel: 013 752 7724

NORTH WEST Klerksdorp: Office 35, West Ebd Building, 51 Leask Street, Klerksdorp 2571 Tel: 018 462 6586 | Fax: 018 462 5061Vryburg: SEDA Office: No. 8 Moffat Street, Vryburg, 8601 Tel: 053 928 8800 | Fax: 053 927 0590

WESTERN CAPE George: Beacon Place, 125 Meade Street, George 6529 Tel: 021 421 4794


A D M I N I S T R AT I O N

DIRECTORSExecutiveMG Qhena (CEO)

GS Gouws (alternate)Non-ExecutiveBA Mabuza (Chairperson)

LI Bethlehem

BA Dames

RM Godsell

AT Kriel

SM Magwentshu-Rensburg

NP Mnxasana

M More

PM Mthethwa

ND Orleyn

NE Zalk

AUDITORSSizweNtsalubaGobodo Inc. (Johannesburg)

Ngubane & Company (Johannesburg) Inc.

REGISTERED OFFICEIDC

19 Fredman Drive

Sandown 2196

PO Box 784055

Sandton 2146

Telephone +27 (11) 269 3000

Fax: +27 (11) 269 3116

Email: [email protected]

Email: [email protected]

Call centre contact number: 0860 693 888

Website: www.idc.co.za

COMPANY SECRETARYP Makwane

Registration number:

1940/014201/06


N O T E S


N O T E S

I N D U S T R I A L D E V E L O P M E N T C O R P O R A T I O N O F S O U T H A F R I C A L I M I T E D

The IDC is a state-owned development finance institution primarily mandated to provide funding for the development of

industry in South Africa and the rest of Africa.

BASIC CHEMICALS AND CHEMICAL PRODUCTS AGRO-PROCESSING AND AGRICULTURE INDUSTRIAL INFRASTRUCTURE

MINING, BASIC METALS AND METAL PRODUCTS

NEW INDUSTRIES TOURISM, ICT AND MEDIA

OTHER MANUFACTURING INDUSTRIES INCLUDING CLOTHING AND TEXTILES

I N D U S T R I E S T H AT W E F U N D

www.idc.co.za


RP: 000/2018ISBN: 000-0-000-00000-0

www.idc.co.za

IND

USTRIA

L DEVELO

PMEN

T CORPO

RATION

2018 IN

TEGRATED

REPORT

2018I N T E G R A T E D R E P O R T

2018A N N U A L F I N A N C I A LS T A T E M E N T S


RP324/2018ISBN: 978-0-621-46655-3

www.idc.co.za

IND

USTRIA

L DEVELO

PMEN

T CORPO

RATION

2018 AN

NU

AL FIN

AN

CIAL STATEM

ENTS

www.idc.co.za

C O N T E N T SConfirmation of Accuracy and Fair Presentation .......................... 1Accounting Officer’s Statement of Responsibility for Annual Financial Statements ............................................................................... 2Independent Assurance Providers’ Limited Assurance Report on Selected Performance Information .............................. 3Independent Auditor’s Report to Parliament ................................. 6Report of the Board Audit Committee ............................................. 13Directors’ Report ....................................................................................... 16Statement of Financial Position .......................................................... 24Statement of Profit or Loss and Other ComprehensiveIncome ......................................................................................................... 25Statement of Changes in Equity ......................................................... 26Statement of Cash Flows ....................................................................... 27Reportable Segments ............................................................................. 28Geographical Segments ........................................................................ 30IDC Accounting Policies ......................................................................... 31Notes to the Financial Statements ..................................................... 48




12 0 1 8 A N N U A L F I N A N C I A L S T A T E M E N T S 12 0 1 8 A N N U A L F I N A N C I A L S T A T E M E N T S

C O N F I R M A T I O N O F A C C U R A C Y A N D F A I R P R E S E N T A T I O N

INTEGRATED REPORT AND ANNUAL FINANCIAL STATEMENTS FOR THE 2018 FINANCIAL YEAR-END

I hereby acknowledge that the Integrated Report and the Annual Financial Statements of the Industrial Development Corporation of South Africa Limited (the IDC) has been submitted to the Auditor-General for auditing in terms section 55(1)(c) of the PFMA.

I acknowledge my responsibility for the accuracy of the accounting records and the fair presentation of the financial statements and confirm, to the best of my knowledge, the following:

ANNUAL FINANCIAL STATEMENTSThe financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). All amounts and information in the Integrated Report and Annual Financial Statements are consistent with the financial statements submitted to the auditors for audit purposes.

PERFORMANCE INFORMATIONThe performance information fairly reflects the operations, and actual output against planned targets for performance indicators

as per the Corporate Plan of the IDC and approved amendments for the financial year ended 31 March 2018. The performance information has been reported on in accordance with the requirements of the guidelines on annual reports as issued by National Treasury. A system of internal control has been designed to provide reasonable assurance as to the integrity and reliability of performance information.

HUMAN RESOURCE MANAGEMENTThe human resource information contained in the respective tables in the integrated report, fairly reflects the information of the IDC for the financial year ended 31 March 2018.

IN RESPECT OF MATERIAL ISSUESThe Integrated Report is complete, accurate and free from any omissions.

PREPARATION OF THE FINANCIAL STATEMENTSThe financial results have been prepared under the supervision of Nonkululeko Dlamini CA(SA), the Group’s Chief Financial Officer.


BA MabuzaChairperson of the Board27 June 2018


A C C O U N T I N G O F F I C E R ’ S S T A T E M E N T O F R E S P O N S I B I L I T Y F O R A N N U A L F I N A N C I A L S T A T E M E N T S F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 1 8

The Accounting Authority is responsible for the preparation of the IDC’s annual financial statements and for the judgements made in this information.

The Accounting Authority is responsible for establishing, and implementing a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the annual financial statements.

In my opinion, the annual financial statements fairly reflect the operations of the IDC for the financial year ended 31 March 2018.

The external auditors are engaged to express an independent opinion on the annual financial statements of the IDC.

The IDC’s annual financial statements for the year ended 31 March 2018 have been audited by the external auditors and their report is presented on page 6.

The annual financial statements of the IDC set out on page 24 to page 100 have been approved.


32 0 1 8 A N N U A L F I N A N C I A L S T A T E M E N T S

I N D E P E N D E N T A S S U R A N C E P R O V I D E R ’ S L I M I T E D A S S U R A N C E R E P O R T O N S E L E C T E D K E Y P E R F O R M A N C E I N D I C AT O R ST O T H E D I R E C T O R S O F I N D U S T R I A L D E V E LO P M E N T C O R P O R AT I O N O F S O U T H A F R I C A

REPORT ON SELECTED KEY PERFORMANCE INDICATORSWe have undertaken a limited assurance engagement on selected key performance indicators (KPIs), as described below, and presented in the 2018 Integrated Report of the Industrial Development Corporation (IDC) for the year ended 31 March 2018 (the Report). This engagement was conducted by a multidisciplinary team including specialists with relevant experience in sustainability reporting.

SUBJECT MATTERWe are required to provide limited assurance on the following selected KPIs. The selected KPIs described below have been prepared in accordance with IDC’s reporting criteria that accompanies the performance information on the relevant pages of the Report (the accompanying IDC reporting criteria) and the reporting boundary is IDC’s operations only.

DIRECTORS’ RESPONSIBILITIES The Directors are responsible for the selection, preparation and presentation of the selected KPIs in accordance with the accompanying IDC’s reporting criteria. This responsibility includes the identification of stakeholders and stakeholder requirements, material issues, commitments with respect to sustainability performance and design, implementation and maintenance of internal control relevant to the preparation of the Report that is free from material misstatement, whether due to fraud or error.

INHERENT LIMITATIONS

We draw your attention to inherent limitations that should be recognised in considering the potential effectiveness of any such

system. Such limitations include the following: • The requirement that the cost of an internal control does not

exceed the expected benefits to be derived; • Most internal controls tend to be directed at routine events

rather than non-routine events. The potential for human error due to carelessness, distraction, mistakes of judgment and the misunderstanding of instructions;

• The possibility of circumvention of internal controls through the collusion of a member of management or an employee with parties inside or outside the entity;

• The possibility that a person responsible for exercising an in-ternal control could abuse that responsibility, for example, a member of management overriding an internal control; and

Material Issue Key Performance Indicators Unit of Measurement

Guideline/Criteria Boundary Reference page number

Industrial development • Value of funding approved Rand Value (ZAR) IDC Internal Criteria IDC only IDC IR 2018

Page 1

Socio-economic

development

• Expected direct jobs created/saved (approved)

• Value of funding to Black Industrialists (approved)

Number (#)

Rand Value (ZAR)



IDC only

IDC only

IDC IR 2018

Page 1

IDC IR 2018

Page 1

Human Capital • Retention - % turnover of employees occupying

critical roles

• Succession - % critical roles that have identified

potential successors for immediate and/or 1-3

years

• Average number of hours training

Percentage (%)

Percentage (%)

Number (#)



GRI G4

IDC only

IDC only

IDC only

IDC IR 2018

Page 57

IDC IR 2018

Page 57

IDC IR 2018

Page 58

Governance, Regulation

and Risk Management

• Total number and percentage of operations

assessed for risks related to corruption and the

significant risks identified

• Communication and training on anti-corruption

policies and procedures

• Monitoring portfolio-high risk

Number (#) and

Percentage (%)

Text claim

Text claim

GRI G4

GRI G4


IDC only

IDC only

IDC only

IDC IR 2018

Page 66

IDC IR 2018

Page 66

IDC IR 2018

Page 61

Partners • Stakeholder engagement strategy and process Text claim IDC Internal Criteria IDC only IDC IR 2018

Page 16


• The possibility that procedures may become inadequate due to changes in conditions, and compliance with procedures may deteriorate.

Our assurance of the KPIs in the Report for the year ended 31 March 2018 would not necessarily disclose all weaknesses in the system because it is based on selective tests of records. However, the attached report summarises certain observations and recom-mendations which resulted from our assurance process.

OUR INDEPENDENCE AND QUALITY CONTROLWe have complied with the independence and all other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objec-tivity, professional competence and due care, confidentiality and professional behaviour.

SizweNtsalubaGobodo Inc and Ngubane and Company (JHB) Inc apply the International Standard on Quality Control 1 and accord-ingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

OUR RESPONSIBILITYOur responsibility is to express a limited assurance conclusion on the selected KPIs based on the procedures we have performed and the evidence we have obtained. We conducted our limited assurance engagement in accordance with the International Stan-dard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the International

Auditing and Assurance Standards Board. That Standard requires that we plan and perform our engagement to obtain limited as-surance about whether the selected KPIs are free from material misstatement.

A limited assurance engagement undertaken in accordance with ISAE 3000 (Revised) involves assessing the suitability in the circumstances of IDC’s use of its reporting criteria as the basis of preparation for the selected KPIs, assessing the risks of material misstatement of the selected KPIs whether due to fraud or error, responding to the assessed risks as necessary in the circumstances, and evaluating the overall presentation of the selected KPIs. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both risk assessment procedures, including an understanding

of internal control, and the procedures performed in response to the assessed risks. The procedures we performed were based on our professional judgement and included inquiries, observation of processes followed, inspection of documents, analytical procedures, evaluating the appropriateness of quantification methods and reporting policies, and agreeing or reconciling with underlying records.

Given the circumstances of the engagement, in performing the procedures listed above we:• Interviewed management and senior executives to obtain an

understanding of the internal control environment, risk assess-ment process and information systems relevant to the sustain-ability reporting process;

• Inspected documentation to corroborate the statements of management and senior executives in our interviews;

• Tested the processes and systems to generate, collate, aggre-gate, monitor and report the selected KPIs;

• Performed a controls walkthrough of identified key controls;• Inspected supporting documentation on a sample basis and

performed analytical procedures to evaluate the data genera-tion and reporting processes against the reporting criteria;

• Evaluated the reasonableness and appropriateness of signif-icant estimates and judgments made by the directors in the preparation of the selected KPIs; and

• Evaluated whether the selected KPIs presented in the Report is consistent with our overall knowledge and experience of sus-tainability management and performance at IDC.

The procedures performed in a limited assurance engagement vary in nature and form, and are less in extent than for a reasonable assurance engagement. As a result the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not ex-press a reasonable assurance opinion about whether IDC’s selected KPIs have been prepared, in all material respects, in accordance with the accompanying IDC reporting criteria.

LIMITED ASSURANCE CONCLUSIONBased on the procedures we have performed and the evidence we have obtained [and subject to the inherent limitations outlined elsewhere in this report], nothing has come to our attention that causes us to believe that the selected KPIs as set out in the subject matter paragraph for the year ended 31 March 2018 are not prepared, in all material respects, in accordance with the accompanying IDC reporting criteria.

I N D E P E N D E N T A S S U R A N C E P R O V I D E R ’ S L I M I T E D A S S U R A N C E R E P O R T O N S E L E C T E D K E Y P E R F O R M A N C E I N D I C AT O R S c o n t i n u e dT O T H E D I R E C T O R S O F I N D U S T R I A L D E V E LO P M E N T C O R P O R AT I O N O F S O U T H A F R I C A


OTHER MATTERSThe maintenance and integrity of the IDC’s Website (www.idc.co.za) is the responsibility of IDC management. Our procedures did not involve consideration of these matters and, accordingly we accept no responsibility for any changes to either the information in the Report or our independent limited assurance report that may have occurred since the initial date of its presentation on IDC website.

RESTRICTION OF LIABILITYOur work has been undertaken to enable us to express a limited assurance conclusion on the selected KPIs to the Directors of IDC in accordance with the terms of our engagement, and for no other purpose. We do not accept or assume liability to any party other than IDC, for our work, for this report, or for the conclusion we have reached.


Registered Auditor

Per Fikile ZwaneDirector Chartered Accountant (SA)Registered Auditor

31 July 2018



Registered Auditor

Per Nqabisa RaveleDirector Chartered Accountant (SA)Registered Auditor

31 July 2018



I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O P A R L I A M E N TO N T H E I N D U S T R I A L D E V E L O P M E N T C O R P O R A T I O N O F S O U T H A F R I C A L I M I T E D

REPORT ON THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS OpinionWe have audited the consolidated and separate financial statements of the Industrial Development Corporation of South Africa Limited and its subsidiaries (the Group) set out on pages 24 to 100, which comprise the consolidated and separate statement of financial position as at 31 March 2018, the consolidated and separate statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, as well as the notes to the consolidated and separate financial statements, including a summary of significant accounting policies. In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Industrial Development Corporation of South Africa Limited and its subsidiaries as at 31 March 2018, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Industrial Development Corporation Act (Act No. 22, 1940 as amended) (Industrial Development Corporation Act). Basis for opinionWe have conducted our audit in accordance with the International Standards on Auditing (ISAs). Our responsibilities under those

standards are further described in the auditor’s responsibilities for the audit of the consolidated and separate financial statements section of this audit report. We are independent of the Group in accordance with the Independent Regulatory Board for Auditors’ Code of Professional Conduct of Registered Auditors (IRBA code) and other independence requirements applicable to performing audits of the financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IESBA code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA code is consistent with the International Ethics Board for Accountants’ Code of ethics for professional accountants (parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit mattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole and in forming our opinion, and we do not provide a separate opinion on these matters.

Key audit matter How the matter was addressed in the audit

Impairment of loans and advancesRefer to note 1.8(a) and note 8 to the consolidated and separate financial statements.

This key audit matter is applicable to both the consolidated and separate financial statements

Loans and advances, represent 21% and 20% of total assets of the Group and company respectively, and are considered significant to the separate and consolidated financial statements. The estimation of impairment is inherently uncertain and is subject to significant judgement. Furthermore, models used by the accounting authority to determine credit impairments require certain inputs that are not fully observable.

Our audit procedures included the following:• We evaluated the design and implementation, and where

possible the operating effectiveness, of the following controls: 1. the identification of impairment losses; 2. the governance processes in place for credit models, inputs

and overlays; 3. the post investment monitoring forums where key

judgements are considered; and 4. how the accounting authority ensured they have

appropriate oversight over loan provisions.


The accounting authority compensates for any model and data deficiencies by applying overlays additional impairments that are over and above the numbers generated by the impairment models) to these outputs, which increase the provision. The valuation of these overlays can be highly subjective. This estimation uncertainty is increased due to the ongoing volatility in South Africa and wider regional economy markets. Impairments are calculated on a specific and portfolio basis. Due to the significance of these judgements on the loan impairment balance and the significance of loans and advances in the financial statements, the impairment of loans and advances was considered a key audit matter.

• We evaluated the valuation models used by the company with specific emphasis on the assumptions used and determined whether the impairment on loans and advances has been calculated in accordance with the relevant accounting standards.

• We paid particular attention to the valuation of, and rights to, security held by the Group and company by inspecting relevant supporting documentation on these securities.

• Where management has used specialists to provide valuations, we assessed their competence, independence, professional qualifications and experience.

• We assessed whether the credit reviews performed by accounting authority are in accordance with the company’s Investment Monitoring Committee Policy by comparing the policy requirements against what has been applied during the year, and assessed whether the conclusions reached were appropriate.


Valuation of unlisted investments Refer to note 1.7(a), 1.8 (b), 1.28 and note 9, 11 and 12 to the consolidated and separate financial statements for detailed disclosure of investments in unlisted shares.


Unlisted investments are classified as available for sale investments and are significant in context of the consolidated and separate financial statements. For the company, significant judgement is applied by management in the valuation of unlisted equities in: 1. subsidiaries, 2. associates, joint ventures and partnerships and 3. other entities. For the Group, significant judgement is applied by management in the valuation of unlisted equities in other entities. Significant judgements and assumptions are applied by management in valuing these investments include the following:• Free cash flows of investees.• Replacement values.

Our audit procedures included the following:• We assessed the models used by the accounting authority

and discount rates applied at year-end, and reperformed a sample of the valuations by agreeing valuation inputs to independently sourced data.

• We benchmarked inputs used for valuations to current market best practices in assessing the appropriateness of the methodologies applied.

• We assessed and challenged the reasonability of cash flows and discount rates used in valuing unlisted investments by comparing them to similar instruments.

• We independently recalculated the expected fair values to evaluate if the accounting authority’s estimates are within a reasonable range in comparison with our independent expectation.


Impairment of loans and advances (continued)Refer to note 1.8(a) and note 8 to the consolidated and separate financial statements.



REPORT ON THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS (CONTINUED)Key audit matters (continued)Key audit matter How the matter was addressed in the audit

Valuation of unlisted investments (continued)Refer to note 1.7(a), 1.8 (b), 1.28 and note 9, 11 and 12 to the consolidated and separate financial statements for detailed disclosure of investments in unlisted shares.


• Discount or premium applied to the Industrial Development Corporation of South Africa Limited’s stake in investees.

• Debt weighting – this is the target interest-bearing debt level.• Realisable value of assets.• Probabilities of failure in using the Net Asset Value-model. Due to the significant judgment applied by accounting authority and the work effort from the audit team, the valuation of unlisted investments was considered a key audit matter.

• We also assessed the disclosures made relating to the valuation of unlisted investments to ensure consistency with the requirements of the relevant accounting standards and with the methodologies applied by the accounting authority.


Impairment of cash generating units at Foskor Refer to note 1.8 (c) and note 15 respectively of the consolidated financial statements for detailed disclosure of the impairments of assets. This key audit matter is applicable to the consolidated financial statements

Included in (account balance) is a cash generating unit (CGU) at Foskor Proprietary Limited (Foskor), a subsidiary of the Industrial Development Corporation of South Africa Limited. Significant judgements and assumptions are applied by the Group, in the impairment of the CGU include the following: • Risks specific to future cash flows• Reasonableness of net asset value• Weighted Average Cost of Capital (WACC) assessment• Reasonability of the assumptions and inputs• Sensitivity analysis This estimation uncertainty is increased due to the ongoing volatility in South Africa and wider regional economy markets. Due to the significant judgment applied by management and the work effort from the audit team, the impairment of cash generating unit at Foskor, was considered a key audit matter.

Our audit procedures included the following:• We challenged the Group’s impairment assessment by

involving our own internal valuation team and recalculated the impairment assessment.

• We assessed the reasonability of the Group’s WACC by comparing the factors used in determining the WACC to requirements per relevant accounting standards.

• We evaluated the reasonability of cash flows based on the selling price used by the Group in its assessment by independently assessing the underlying factors giving rise to these inputs and whether these factors are reasonable.

I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O P A R L I A M E N T c o n t i n u e dO N T H E I N D U S T R I A L D E V E L O P M E N T C O R P O R A T I O N O F S O U T H A F R I C A L I M I T E D


RESPONSIBILITIES OF THE BOARD OF DIRECTORS FOR THE FINANCIAL STATEMENTSThe board of directors, which constitutes the accounting authority, is responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the PFMA and the Industrial Development Corporation Act and for such internal control as the accounting authority determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and separate financial statements, the accounting authority is responsible for assessing the group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the accounting authority either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated and separate financial statementsOur objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

A further description of our responsibilities for the audit of the consolidated and separate financial statements is included in the annexure to this auditor’s report.

REPORT ON THE AUDIT OF THE ANNUAL PERFORMANCE REPORT

Introduction and scopeIn accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof, we have a responsibility to report material findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report. We performed procedures to identify findings but not to gather evidence to express assurance.

Our procedures address the reported performance information, which must be based on the approved performance planning documents of the public entity. We have not evaluated the completeness and appropriateness of the performance indicators/ measures included in the planning documents. Our procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, our findings do not extend to these matters.

We evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected objectives presented in the annual performance report of the public entity for the year ended 31 March 2018:


REPORT ON THE AUDIT OF THE ANNUAL PERFORMANCE REPORT (CONTINUED)Introduction and scope (continued)

Predetermined objectives Unit of measurement

Guideline/ Criteria Boundary Pages in the annual

performance report

Value of funding disbursed Rand Value (ZAR) bn IDC Internal Criteria IDC only 20

Funding leveraged Ratio IDC Internal Criteria IDC only 20

Expected jobs created/saved Number (#) IDC Internal Criteria IDC only 20

Expected direct jobs created Number (#) IDC Internal Criteria IDC only 20

Value of funding to black Industrialists Rand Value (ZAR) million

IDC Internal Criteria IDC only 20

Value of funding women empowered businesses Rand Value (ZAR) million


Value of funding for youth empowered businesses Rand Value (ZAR) million


Funding for transactions for localisation initiatives Rand Value (ZAR) million


Level of impairments Rand Value (ZAR) bn IDC Internal Criteria IDC only 21

Revenue generation from assets Percentage (%) IDC Internal Criteria IDC only 21

Customer satisfaction index Overall customer satisfaction rating

(1-10)


SEFA balanced score card SEFA’s performance rating


Foskor profitability Rand Value (ZAR) million


Scaw profitability Rand Value (ZAR) million


Scaw Restructuring Rating as per milestones achieved


Cost to income ratio Percentage (%) IDC Internal Criteria IDC only 21

Growth in levels of jobs supported by IDC clients Percentage (%) IDC Internal Criteria IDC only 22

Increased number of jobs created per unit of funding by IDC (reduce cost per job)

Percentage (%) IDC Internal Criteria IDC only 22

Increase in levels of empowerment in IDC’s portfolio Percentage (%) IDC Internal Criteria IDC only 22

Growth rate in IDC’s reserves Percentage (%) IDC Internal Criteria IDC only 23

We performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. We performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

We did not raise any material findings on the usefulness and reliability of the reported performance information for the selected objectives indicated above. Other mattersWe draw attention to the matter below.

I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O P A R L I A M E N T c o n t i n u e dO N T H E I N D U S T R I A L D E V E L O P M E N T C O R P O R A T I O N O F S O U T H A F R I C A L I M I T E D


Achievement of planned targetsRefer to the Director’s report on the performance information on pages 20 to 23 for information on the achievement of planned targets for the year. REPORT ON THE AUDIT OF COMPLIANCE WITH LEGISLTATIONIntroduction and scopeIn accordance with the PAA and the general notice issued in terms thereof, we have a responsibility to report material findings on the compliance of the public entity with specific matters in key legislation. We performed procedures to identify findings but not to gather evidence to express assurance. We did not raise material findings on compliance with the specific matters in key legislation set out in the general notice issued in terms of the PAA. OTHER INFORMATIONThe accounting authority is responsible for the other information. The other information comprises the information included in the annual report. The other information comprises of the confirmation of accuracy and fair presentation report, the independent assurance providers’ limited assurance report on selected performance information, the accounting officer’s statement of responsibility for annual financial statements, the report of the Board Audit Committee and the Directors’ Report. The other information does not include the consolidated and separate financial statements, the auditor’s report and those selected objectives presented in the annual performance report that have been specifically reported in this auditor’s report.

Our opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements and the selected objectives presented in the annual performance report, or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement in this other information, we are required to report that fact. We have nothing to report in this regard.

INTERNAL CONTROL DEFICIENCIESWe considered internal control relevant to our audit of the consolidated and separate financial statements, reported performance information with applicable legislation, however, our objective was not to express any form of assurance on it. We did not identify any significant deficiencies in internal control.

AUDITOR TENUREIn terms of the IRBA rule published in Government Gazette Number 39475 dated 4 December 2015, we report that SizweNtsalubaGobodo Inc. and Ngubane & Company (JHB) Inc. have been the auditors of Industrial Development Corporation for 11 years and 1 year respectively.


Registered Auditor

Per Nhlanhla SigasaDirector Chartered Accountant (SA)Registered Auditor

31 July 2018



Registered Auditor

Per Nqabisa RaveleDirectorChartered Accountant (SA)Registered Auditor

31 July 2018



A N N E X U R E – A U D I T O R ’ S R E S P O N S I B I L I T Y F O R T H E A U D I TAs part of an audit in accordance with the ISAs, we exercise professional judgement and maintain professional scepticism throughout our audit of the consolidated and separate financial statements, and the procedures performed on reported performance information for selected objectives and on the public entity’s compliance with respect to the selected subject matters. FINANCIAL STATEMENTSIn addition to our responsibility for the audit of the consolidated and separate financial statements as described in the auditor’s report, we also: • identify and assess the risks of material misstatement of the

consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• obtain an understanding of internal control relevant to the audit to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the public entity’s internal control.

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors, which constitutes the accounting authority.

• conclude on the appropriateness of the board of directors, which constitutes the accounting authority’s use of the going concern basis of accounting in the preparation of the financial statements. We also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to

events or conditions that may cast significant doubt on the Industrial Development Corporation of South Africa Limited and its subsidiaries ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. Our conclusions are based on the information available to me at the date of the auditor’s report. However, future events or conditions may cause the public entity to cease to continue as a going concern.

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCEWe communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also confirm to the accounting authority that we have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on our independence, and where applicable, related safeguards.


R E P O R T O F T H E B O A R D A U D I T C O M M I T T E EReport of the Board Audit Committee in terms of Regulations 27(1)(10)(b) and (c) of the Public Finance Management Act of 1999 (as amended) and requirements of King IV Code of Governance.

BACKGROUNDThe Board Audit Committee (BAC) oversees the Corporation’s financial reporting process on behalf of the Board of Directors, in particular with regard to evaluation of the adequacy and efficiency of accounting policies, internal controls, risk management and financial reporting processes. In addition, the BAC assesses the effectiveness of the Internal Auditors and the independence and effectiveness of the External Auditors.

The Corporation’s management has the primary responsibility for the financial statements, maintaining effective internal control over financial reporting and assessing the effectiveness of internal control over financial reporting.

RESPONSIBILITIES, COMPOSITION AND FUNCTIONS OF THE COMMITTEEThe Committee’s role and responsibilities include its statutory duties as per the Public Finance Management Act, 1 of 1999 (as amended), the requirements of the King IV Code of Governance, Companies Act, 71 of 2008 (as amended) and the responsibilities assigned to it by the Board.

As a Committee, we therefore report that we have adopted appropriate formal terms of reference as approved by the Board and are satisfied that we have discharged our responsibilities as per the Companies Act, King IV and PFMA.

The Committee has carried out its functions through the attendance at Audit Committee meetings and discussions with Executive Management, Internal Audit, External Auditors and external advisers where appropriate.

We meet at least four times per annum, with authority to convene additional meetings as circumstances require.

To execute the key functions and discharge the Committee’s responsibilities as outlined in its Terms of Reference during the period under review, we:• Assisted the Board of directors in its evaluation of the adequacy

and efficiency of the internal control systems, accounting practices, information systems, risk management and auditing processes applied within the Corporation in the day-to-day management of its business

• Facilitated and promoted communication between the Board, management, the external auditors and Internal Audit Department on matters that are the responsibility of the Committee

• Introduced measures that, in the opinion of the Committee, may enhance the credibility and objectivity of the financial statements and reports prepared with reference to the affairs of the Corporation (and IDC Group)

• Nominated and recommended for appointment as the Corporation’s external auditors the firms of registered auditors,

SizweNtsalubaGobodo Inc. and Ngubane & Company (JHB) Inc., who, in the opinion of the Committee, are independent of IDC

• Determined the fees to be paid to the external auditors and the auditors’ terms of engagement

• Ensured that the appointment of the external auditors comply with the Companies Act and any other legislation relating to the appointment of auditors.

INTERNAL CONTROLWe monitored the effectiveness of IDC’s internal controls and compliance with the Enterprise-Wide Risk Management Framework (ERMF). The emphasis on risk governance is based on three lines of defence and the BAC uses the regular reports received from the three lines of defence (process owners/department heads; Risk and Compliance Department management; and Internal Audit Department) to evaluate the effectiveness of the internal controls. The ERMF places weight on accountability, responsibility, independence, reporting, communication and transparency, both internally and with all IDC’s key external stakeholders.

No findings have come to the attention of the Committee to indicate that any material breakdown in internal controls has occurred during the financial year under review. The Committee is of the opinion that the internal accounting controls are adequate to ensure that the financial records may be relied upon for preparing the consolidated Annual Financial Statements, that accountability for assets and liabilities is maintained and that this is based on sound accounting policies, supported by reasonable and prudent judgements and estimates. The BAC is further of the opinion that the internal controls of the Corporation have been effective in all material aspects throughout the year under review.

This opinion is based on the information and explanations given by management regarding various processes and initiatives aimed at improving the internal control environment and the integrity of information, discussions with Internal Audit, as well as the independent external auditors on the results of their audits.

To formulate its opinion, the Committee:• Monitored the identification and correction of weaknesses and

breakdowns of systems and internal controls• Monitored the adequacy and reliability of management

information and efficiency of management information systems• Reviewed quarterly, interim and final financial results and

statements and reporting for proper and complete disclosure of timely, reliable and consistent information

• Evaluated on an ongoing basis the appropriateness, adequacy and efficiency of accounting policies and procedures, compliance with generally accepted accounting practice and overall accounting standards, as well as any changes

• Discussed and resolved any significant or unusual accounting issues

• Reviewed reports supplied by management regarding the effectiveness and efficiency of the credit monitoring process, exposures and related impairments and adequacy of impairment provisions to discharge its obligations satisfactorily


• Reviewed and monitored all key financial performance indicators to ensure that they are appropriate and that decision-making capabilities are maintained at high levels

• Reported to the Board on the effectiveness of the Corporation’s internal reporting controls.

EXTERNAL AUDITORSAs a Committee, we recognise the importance of maintaining the independence of the Corporation’s Independent Auditor, both in fact and appearance. Each year, the Committee evaluates the qualifications, performance and independence of the Corporation’s Independent Auditor and determines whether to re-engage the current Independent Auditor. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the auditors, the auditors’ capabilities and the auditors’ technical expertise and knowledge of the Corporation’s operations and industry. Based on this evaluation, the Audit Committee has retained both SizweNtsalubaGobodo Inc. and Ngubane & Company (JHB) Inc. as the auditors.

The Committee, in consultation with Executive Management, agreed to the engagement letter, terms, audit plan and audit fees for the financial year ended 31 March 2018.

The Committee:• Approved the external auditors’ annual plan and related scope of

work• Monitored the effectiveness of the external auditors in terms of

their skills, independence, execution of the audit plan, reporting and overall performance

• Considered whether the extent of reliance placed on internal audit by the external auditors was appropriate and whether there were any significant gaps between the internal and external audits

• The BAC has also approved the Non-audit Services Policy that specifies that the external auditors are precluded from engaging in non-audit related services.

FINANCIAL STATEMENTSWe have reviewed the financial statements of the Corporation and IDC Group and are satisfied that they comply in all material respects with IFRS and the requirements of the Companies Act and PFMA. During the period under review the Committee:• Reviewed and discussed the audited Annual Financial

Statements included in this Integrated Report with the external auditors, the Chief Executive and the Chief Financial Officer

• Reviewed the external auditors’ report and management’s response

• Reviewed any significant adjustments resulting from external audit queries and accepted unadjusted audit differences

• Reviewed areas of significant judgements and estimates in the Annual Financial Statements

• Received and considered reports from the Internal Auditors.

EXPERTISE AND EXPERIENCE OF FINANCE FUNCTIONWe have considered and have satisfied ourselves of the overall appropriateness of the expertise and adequacy of resources of IDC’s finance function and experience of the senior members of management responsible for the financial function.

DUTIES ASSIGNED BY THE BOARDIntegrated and Sustainability ReportingThe BAC fulfils an oversight role regarding the Corporation’s Integrated Report and the reporting process and considers the level of assurance coverage obtained from management, and internal and external assurance providers in making its recommendation to the Board.

We considered the Corporation’s information as disclosed in the Integrated Report and have assessed its consistency with operational and other information known to Committee members and for consistency with the Annual Financial Statements. We have discussed the information with management and have considered the conclusions of the external assurance provider.

The Committee is satisfied that the sustainability information is, in all material respects, reliable and consistent with the financial results. Nothing has come to the attention of the Committee to indicate any material deficiencies in this regard.

Combined assuranceThe Committee is responsible for monitoring the combined assurance model detailing significant processes, line management monitoring, Internal Audit and external assurances. This model is used to assess the appropriateness of assurance over risks/controls provided to the Board.

Engagement regarding the extent to which the various assurance providers rely on each other’s work takes place continuously and we are of the view that a better coordination between External and Internal Audit has been achieved.

A Combined Assurance Plan integrating Internal Audit, Compliance and Risk Management Plans have been drafted for use in the next financial year to monitor the activities that relate to the Combined Assurance Process.

Going concernThe Committee concurs that the adoption of the going concern assumption in the preparation of the consolidated Annual Financial Statements is appropriate and sound. This is after the Committee reviewed a documented assessment by management of the going concern premise of the Corporation and IDC Group.

Governance of riskThe Board has assigned oversight of the Corporation’s risk management function to a separate Board Risk and Sustainability Committee. The Chairperson of the BAC attends the Board Risk

R E P O R T O F T H E B O A R D A U D I T C O M M I T T E E c o n t i n u e d


Committee meetings as an ex-officio member to ensure that information relevant to these committees is shared regularly.

The Committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk and information technology risks as they relate to financial reporting. We are satisfied that the appropriate and effective risk management processes are in place.

Internal AuditInternal audit forms part of the third line of defence as set out in the ERMF and engages with the first and second lines of defence to facilitate the escalation of key control breakdowns.

The Internal Audit Department has a functional reporting line to the Committee Chairperson and an operational reporting line to the CEO. The BAC, with respect to its evaluation of the adequacy and effectiveness of the internal controls, receives reports from Internal Audit on a quarterly basis, assesses the effectiveness of internal audit function and reviews and approves the Internal Audit plan.

The Audit Committee is responsible for ensuring that the Corporation’s internal audit function is independent and has the necessary resources, standing and authority within the Corporation to discharge its duties. We approved the internal audit function’s annual audit plan, and as a Committee, we monitored and challenged, where appropriate, action taken by management with regard to adverse internal audit findings.

The Committee has overseen a process by which internal audit has performed audits according to a risk-based audit plan where the effectiveness of risk management and internal controls were evaluated. These evaluations were the main inputs considered by the Board in reporting on the effectiveness of internal controls. The Committee is satisfied with the independence and effectiveness of the internal audit function.

CONCLUSIONHaving considered, analysed, reviewed and debated information provided by management, Internal Audit and External Audit, the Committee confirmed that:• The internal controls of the Group were effective in all material

aspects throughout the year under review• These controls ensured that the Group’s assets had been

safeguarded• Proper accounting records had been maintained• Resources had been utilised efficiently• The skills, independence, audit plan, reporting and overall

performance of the external auditors were acceptable.

Following our review of the financial statements for the year ended 31 March 2018, we are of the opinion that they comply with the relevant provisions of the PFMA, as amended, and IFRS and that they fairly present the results of the operations, cash flow and financial position of the Corporation.

We have complied with all the King IV principles, with the inclusion of integrated reporting, evidenced by this issue of the Corporation’s Integrated Report for the financial year ended March 2018. The Committee is satisfied that it has complied in all material respects, with its legal, regulatory and other responsibilities.

This Integrated Report was recommended by the BAC to the Board for approval.

Ms NP MnxasanaChairperson of the Board Audit Committee27 June 2018


INTRODUCTIONThe Industrial Development Corporation of South Africa Limited was established in 1940 by the Industrial Development Corporation Act, No 22 of 1940. It is a registered public corporation and a Schedule 2 listed entity in terms of the Public Finance Management Act (PFMA), No 1 of 1999, and the related Treasury regulations. This report is presented in accordance with the provisions of the prescribed legislation and addresses the performance of the IDC, as well as relevant statutory information requirements. The Board of Directors is the Accounting Authority as prescribed in the PFMA.

NATURE OF BUSINESSThe IDC is a State-owned development finance institution that provides financing to entrepreneurs engaged in competitive industries, follows normal Company policies and procedures in its operations, pays income tax at corporate rates, and, subject to performance and in line with its Dividend Policy, pays dividends to its Shareholder.

The IDC’s vision is to be the primary driving force of commercially sustainable industrial development and innovation for the benefit of South Africa and the rest of Africa. Its objective is to lead industrial capacity development.

As part of its industry development activities, the IDC has equity interests in several companies operating in a range of industries throughout the economy. Although we aim to keep our shareholding in these companies to levels below 50%, we do in some instances gain control of these businesses for various reasons. Details of trading subsidiaries and joint ventures are set out in the notes to the financial statement on pages 68 to 74.

PUBLIC FINANCE MANAGEMENT ACTThe IDC Board is responsible for the development of the Corporation’s strategic direction. Our Board-approved strategy and business plan are captured in the Shareholder’s Compact and Corporate Plan. Following agreement for the strategy and business plan with the Shareholder Representative, the documents form the basis for detailed action plans and continuous performance evaluation.

Our business units and departments are guided by the Shareholder’s Compact and Corporate Plan to prepare annual business plans, budgets and capital programmes to meet their strategic objectives.

Day-to-day management responsibility is vested in line management through a clearly defined organisational structure and formal, delegated authority.

We have a comprehensive system of internal controls designed to ensure that we meet corporate objectives and the requirements of the PFMA.

Processes are in place to ensure that where controls fail, the failure is detected and corrected.

PERFORMANCE MANAGEMENTThe IDC’s performance indicators reflect the Corporation’s goals as set out earlier in the Integrated Report. Measures related to our key objective of industrial capacity development are complemented with other indicators that measure our development impact, financial sustainability and efficiency, stakeholder relations, as well as the performance of important subsidiaries.

Our primary performance evaluation focus is on our financing activities. The performance measurement system ensures that the IDC remains aligned to its mandated objectives. We review performance indicators annually to account for changes in our external and internal environments and ensure that long-term objectives will be achieved. Performance indicators and targets form part of our annual Corporate Plan and are approved by the Shareholder Representative prior to the start of a financial year. Targets may also be reviewed mid-year to take into account performance achievement in the previous year and potential changes in the environment.

Performance targets are set at ‘base’, and ‘target’ levels. The ‘base’ defines levels of acceptable performance and the ‘target’ levels of exceptional performance. Performance targets are set at corporate, team and individual levels and performance-linked remuneration is based on the achievement of such targets.

Performance against indicators is measured and reported on regularly to the IDC’s Executive Committee and the Board. Regular activity reports and management accounts ensure that target deviations can be detected and, if necessary, corrected.

PERFORMANCE INDICATORSThe IDC adopted a balanced approach to performance measuring and adapted the principles of the balanced scorecard to support its own objectives and operations. We measure indicators in the following five areas:• Development impact• Financial sustainability• Customers/stakeholders• Human capital• Internal processes• Subsidiaries.

The performance measurement process and outcomes are audited by internal and external auditors in line with the requirements set by the Auditor General to ensure that targets are achieved accordingly and that the overall performance is a fair reflection of the Corporation’s activities during the period. Detailed performance against predetermined indicators for both short- and long-term targets are shown on pages 20 to 23.

D I R E C T O R S ’ R E P O R T


PERFORMANCE OVERVIEWIDC’s 2018 performance results are encouraging, especially in light of significant increases in target levels for key indicators such as jobs and disbursements, and the challenges posed by the current operating environment.

DEVELOPMENT OUTCOMESThe value of funding approvals net of cancellations has been on an upward trend since 2016, with R16.7 billion approved in 2018. This is a 9% increase in the value of approvals compared to 2017. In addition, the number of approvals also increased by 15%, from 175

to 202. R269 million of off-balance sheet funding, not included in the total value above, mostly related to MCEP, was also approved. IDC was not, however, able to leverage external funding to the extent targeted. This can be attributed to lower appetite for private investors to invest in the economy, requiring IDC to increase its share of funding to ensure that projects are fully funded.

R15.4 billion was disbursed in 2018. This was a turnaround in the trend witnessed in the previous four years (2014 to 2017) which saw the value of disbursements remaining relatively flat with the annual value ranging between R10.9 billion and R11.4 billion.

R’bn Number

20 250

18

16 200

14

12 150

10

8 100

6

4 50

2

0

20142015

20162017

20180

Value Number

13.8

11.5

14.4 15

.3 16.7

Funding approvals

R’bn Number

18 450

16 400

14 350

12 300

10 250

8 200

6 150

4 100

2 50

0

20142015

20162017

20180

Value Number of clients

11.2

10.9 11

.4

11.0

14.6

Value of funding disbursed and number of clients disbursed to 1

As in 2017, the largest share of the funding was for capacity expansions, projects, and start-ups (2018: 72%; 2017: 75% of total). Funding for transactions which combined capacity expansions with the acquisition of a company increased from 2% to 6%. These transactions are done to assist Black Industrialists enter into

or increase their presence in an industry. The share of funding for ownership changes that does not have an expansionary component decreased from 10% to 8% while the share of funding to distressed businesses remained at a similar level to last year.

UTILISATION OF FUNDING APPROVED

2018 2017

39% - Capacity expansions

33% - Projects and new start-ups

8% - Ownership changes

14% - Distressed business

6% - Expansionary ownership changes

29% - Capacity expansions

46% - Projects and new start-ups

10% - Ownership changes

13% - Distressed business

2% - Expansionary ownership changes

1 For measurement against predetermined objectives, R741 million of disbursements for subsidiaries which did not relate to expansions or capital equipment purchases was excluded from the total amount of funding disbursed.


Good performances were recorded on other development indicators1. The total number of jobs expected to be created and saved from IDC’s funding approvals that were signed during the year increased by 10% to 22 193. Of the total number of jobs, 15 656 are expected to be created and 6 537 saved. The impact of the operating environment is evident as jobs saved, mainly because of support to the construction and clothing and textiles industries, increased and contributed more to IDC’s total jobs impact. Significantly higher jobs numbers were recorded in several of the areas that IDC funds including the Metals and Mining Value Chain, the Agro-Processing and Agriculture Value Chain, the Clothing and Textiles SBU, and the Heavy Manufacturing SBU.

The numbers of jobs expected to be created and saved increased at a lower rate than the value of funding approved. This resulted in the jobs per million rand of IDC funding approved (including indirect jobs) decreasing from 5.36 to 6.44. This number was impacted negatively by the exclusion of a transaction for performance purposes.

Actual jobs at clients are gathered annually to determine the actual jobs that have been created during the year. This information indicates that clients employed c.a. 184 000 jobs in 2018 compared to c.a. 178 000 in 2017. When the indirect impact is also included, there was a 4.3% increase in IDC’s employment impact. This is significantly higher than the 0.9% increase in non-government employment over the same period.

The trend in the value of funding approved for Black Industrialists continued to increase, with R7.8 billion transactions signed in 2018 – 59% higher than in 2017. The increased funding to this group of entrepreneurs was also reflected in the number of transactions approved with 108 deals signed compared to 86 in 2017. The value of funding for women and youth entrepreneurs declined as there were no very large projects with shareholding by these groups. Despite this, the number of deals signed for women entrepreneurs increased, meaning more entrepreneurs are being reached.

2 For measurement against predetermined objectives, development impact indicators are defined to only take into account a funding approval when an agreement is signed. In the Integrated Report, numbers are typically reported on deals that have been approved by the relevant credit committee.

1 For measurement against predetermined objectives, a funding approval of R100 million in the construction sector was excluded as it is not part of IDC’s priority approved sectors. This approval to a women-empowered company is expected to create 5 298 jobs.

‘000

20142015

20162017

20180

35

30

25

20

15

10

5

SavedCreated

19.7

19.7

18.0 20

.2 22.5

Number of jobs expected to be created and saved2

R’bn Number

20142015

20162017

20180

12

10

8

6

4

2

Black-empoweredBlack-owned Total number

5.6

4.0

11.1

8.6

9.4

Funding for black economic empowerment 2

0

160

120

140

100

80

60

40

20

R’bn Number

20152016

20172018

0.0

8.0

7.0

6.0

4.0

5.0

2.0

3.0

1.0

4.5

2.3

4.9

7.8

Funding to Black Industrialists 2

0

120

100

80

60

40

20

Value Number

D I R E C T O R S ’ R E P O R T c o n t i n u e d


R’bn Number

20142015

20162017

20180.0

2.5

2.0

1.5

1.0

0.5

0.1 0.1

0.9

1.7

0.9

Funding to youth entrepreneurs 2

0

60

50

40

30

20

10

Value Number

R’bn Number

20142015

20162017

20180.0

3.5

3.0

2.0

2.5

1.0

1.5

0.5

3.0

0.8

0.3

3.3

2.0

Funding to women entrepreneurs 2

0

60

50

40

30

20

10

Value Number

FINANCIAL PERFORMANCE The IDC mini-group recorded a R2.8 billion profit (after capital profits), the same as the previous year. Net interest, dividend and fee income increased by 35% compared to the previous year. Increases in operating costs were contained at 1.5%. The cost-to-income ratio (excluding cash resource income, impairments costs, and income from mature listed investments) improved to 39% from 46% in 2017.

Of concern is impairments and write-offs which more than doubled from the previous year. This increase was impacted by Scaw where the introduction of strategic equity partners resulted in a significant write-off (R1.6 billion) and a R1.8 billion impairment of Foskor facilities. Higher levels of impairments resulted in the ratio for impairments as a percentage of the portfolio at cost increasing to 17.4% from 16.7% in the previous year. The interventions currently underway at these two subsidiaries, which both recorded losses higher than expected, as well as the establishment of a dedicated department to monitor and manage subsidiaries and other material investments is expected to address this issue.

The value of IDC’s reserves increased by 5.5%, significantly lower than the comparator yield of 9.2% on long-term government bonds. This can be ascribed to the higher risk profile that the Corporation takes compared to commercial funders.

OTHER PERFORMANCE AREASThe results from the customer satisfaction survey were in line with expectations. Turnaround times continue to be given as one of the key areas of customer dissatisfaction. A key focus of the Corporation is to continue to improve its processes to ensure a more efficient organisation.

PERFORMANCE AGAINST PREDETERMINED OBJECTIVESThe tables on the next pages show performance against objectives for short- and long-term targets.


Performance against short-term targets

Pers

pect

ive Theme Metric Description Weight Base Target Actual Achievement

Dev

elop

men

t Im

pact

Funding activity Value of funding disbursed

Total value of funding disbursed by IDC

20% R14.5 billion R18.5 billion R14.6 billion1

Base achieved

Funding leveraged

Amount of outside total funding attracted for each rand of IDC funding. Guarantees considered as fully leveraged funding. 10% Not weighted.

Not weighted

2:1 0.87:1 Not achieved

Jobs Expected jobs created / saved

Expected direct jobs created/saved for funding approvals with agreements signed

20% 23 951 29 488 22 193 Not achieved

Expected direct jobs created

Expected direct jobs created for funding approvals with agreements signed as a percentage of total jobs created/saved

Not weighted

80% 71% Not achieved

Economic empowerment

Value of funding to black industrialists

Value of funding approvals with agreements signed for transactions benefiting black industrialists

5% R4 873 million R7 383 million R7 811 million

Target achieved

Value of funding approvals with agreements signed for transactions benefiting black woman industrialists

Not weighted

R598 million R1 290 million

Achieved

Value of funding for women empowered businesses

Value of funding approvals with agreements signed for transactions benefiting businesses where women have more than 25% shareholding and are operationally involved in the business


Target achieved

Value of funding for youth empowered businesses

Value of funding approvals with agreements signed for transactions benefiting businesses where youth have more than 25% shareholding and are operationally involved in the business

5% R770 million R1 000 million R919 million

Base achieved

Localisation Funding for transactions for localisation initiatives

Value of funding agreements signed for transactions aimed at inputs into infrastructure or other government procurement and components for motor vehicles


Target achieved

1 For measurement against predetermined objectives, R741 million of disbursements for subsidiaries which did not relate to expansions or capital equipment purchases was excluded from the total amount of funding disbursed.


RA

RA

RA

RA

RA

RA

RA

RA

RA


Pers

pect


Fina

ncia

l Sus

tain

abili

ty

Impairments Level of impairments

Impairments as a percentage of the portfolio at cost

10% 18.4% 16.4% 17.4% Base achieved

Moderation of 10% on rating for indicator if rand value of cumulative impairments as per balance sheet exceeded

Not weighted

R15.4 billion R14.2 billion

Achieved

Cost and income management

Revenue generation from assets

Net interest, dividends, fees and money market income as a percentage of total assets

5% 3.9% 4.4% 5.3% Target achieved

Cust

omer

s/

Stak

ehol

ders Customers Customer

Satisfaction IndexOverall customer satisfaction rating (1-10)

5% 7.8 8.5 7.8 Base achieved

Subs

idia

ries

sefa sefa balanced scorecard

sefa performance rating 5% sefa’s performance rating 3.3 Base achieved

Foskor Foskor profitability

Foskor operating losses before capital gains

5% (R216 million) (R194 million) (R763 million)

Not achieved

Scaw Scaw profitability Scaw operating losses before capital gains

2.5% (R97 million) (R87 million) (R538 million)

Not achieved

Scaw restructuring

Implementation of divestment strategy

2.5% Rating as per milestones achieved Rating of 3.5 on a scale of 1 to 5• Grinding Media and Cast

Products carved out into separate units

• Competition Commission approval

• Appointment of Board and Management

• Conclusion of one of the three strategic equity partner transactions.

Inte

rnal

pro

cess

es

Efficiencies Cost to income ratio

Administration costs, excluding impairments and project costs as a percentage of net interest, dividend and fee income (excl. dividend income from Sasol, Kumba Iron Ore, BHP Billiton, South 32, Arcelor Mittal SA and Sappi)

5% 35.7% 25.7% 39.2% Not achieved

Performance against short-term targets (continued)

RA

RA

RA

RA

RA

RA

RA

RA

RA


Performance against long-term targets

Pers

pect


Dev

elop

men

t Im

pact

Industrial capacity development

Growth in funding disbursed to investments in SA

Value of IDC funding in SA (excluding funding in the rest of Africa)

20% Growth in gross fixed capital formation in manufacturing (-0.9%)

Growth in gross fixed capital formation in manufacturing + 10% (9.1%)

19.9% Target achieved

Not weighted

Funding disbursed should not fall below 3 year historical average

Disburse-ment above

three-year average

Achieved

Growth in funding disbursed to rest of Africa

Value of IDC funding in rest of Africa

5% 5% increase in the percentage of disbursement into RoA (9.6%)

7.5% increase in the percentage of disbursement into RoA (9.8%)


Dev

elop

men

t Im

pact

(con

tinu

ed)

Job creation Growth in levels of jobs supported by IDC clients

Number of people employed at SA companies in IDC’s portfolio and calculated impact on indirect jobs

15% Growth in levels of employment the economy (excl. govt. employment) (0.9%)

Growth in levels of employment in the economy (excl. govt. employment) + 7% (7.9%)

4.3% Base achieved

Not weighted

No net job losses in IDC clients and calculated impact on indirect jobs

Jobs at IDC clients including indirect impact

increased

Achieved

Increased number of jobs created per unit of funding by IDC (reduce cost per job)

Number of jobs expected to be created, including calculated indirect jobs divided by the value of IDC’s SA funding approvals (excluding funding in the rest of Africa, and jobs saved)

10% Change in the labour/capital ratio of the economy + 5% (-2.5%)

Change in the labour/capital ratio of the economy + 15% (7.5%)

-11.0% Not achieved

Not weighted

The number of jobs created per unit of funding should not reduce

below three year average

Number of jobs created

per unit of funding above

three-year historical average

Achieved

Economic empowerment

Increase in levels of empowerment in IDC’s portfolio

% of number of SA companies with more than 50% black shareholding for which funding is approved

10% Up to 2.5% increase in the percentage of black-owned

businesses per annum (54.7%)

Up to 10% increase in the percentage of black-owned

businesses per annum (58.7%)


Not weighted

Number of IDC funding approvals to companies with more than 50%

black shareholding falls below three year average

Number above

three-year average

Achieved


RA

RA

RA

RA

RA


Pers

pect


Fina

ncia

l Su

stai

nabi

lity Strength of

balance sheetGrowth rate in IDC’s reserves

% growth in IDC’s reserves

30% Yield on long-term govt.

bonds (9.2%)

Yield on long-term govt.

bonds + 2% (11.2%)

5.5% Not achieved

Hum

an

Capi

tal HC sustainability People

Sustainability Index (PSI)

Composite index measuring sustainability of IDC’s human capital

10% 5% increase in PSI score per

annum (74.8%)

10% increase in PSI score per annum (78.3%)

67.4% Not achieved

Performance against long-term targets (continued)

FUNDINGThe IDC sources loan funding mainly from international development agencies, facilities from commercial banks and bond issuances. The general 2018 funding requirements for the IDC Mini Group to, inter alia, finance advances of R15.3 billion and borrowing redemptions of R4.4 billion, amounted to R19.8 billion (2017: R22.0 billion). These requirements were met partly out of R3.4 billion of internally generated funds, namely repayments received and profits. New borrowings amounted to R8.5 billion for the year.

CORPORATE GOVERNANCEThe IDC’s directors endorse the King IV Report on Corporate Governance and, during the review period, implemented these proposals. Our performance in this regard is outlined in the Corporate Governance section of the Integrated Report with more detail provided online.

DIVIDENDSA dividend of R50 million was paid during the financial year. On 27 June 2018, the directors declared a dividend of R50 million.

VALUATION OF SHARESThe value of the Group’s investment in listed shares increased to R47.3 billion at the end of the 2018 financial year (2017: R44.8 billion).

POST REPORTING DATE EVENTListed sharesThe value of the Group’s listed shares increased by R4.3 billionbetween financial year-end and approval date.

Sale of a major subsidiary: Scaw (‘Remainco’)At the end of March 2018, the IDC Group accounted one of its major subsidiaries, Scaw as a non-current asset held for sale (see note 10 to the Annual Financial Statements). Subsequently, Scaw was sold on the 1st of May 2018 and the IDC shareholding decreased from 100% to 26%.

SHARE CAPITALThe authorised (R1.5 billion) and issued share capital (R1.4 billion) remained unchanged during the reporting year.

AUDIT COMMITTEE INFORMATIONThe names of the Audit Committee members are reflected on page 53 of the Integrated Report.

GOING CONCERNThe directors assessed the IDC as being a going concern in terms of financial, operational and other indicators. The directors are of the view that our status as a going concern is assured.

DIRECTORS AND SECRETARYThe current directors of the IDC and the name and registered office of the Secretary appears on the inside back cover of the Integrated Report. Further details of directors are available on page 20 of the Integrated Report.

RA


Group Company

Figures in Rand million Note(s) 2018 2017 2018 2017AssetsCash and cash equivalents 5 6 156 7 699 5 726 6 660Derivative financial instruments 19 142 76 108 70Trade and other receivables 6 3 351 2 224 1 257 609Inventories 7 1 748 2 771 4 4Current tax receivable 270 478 270 471Loans and advances 8 30 660 26 673 28 564 25 802Investments 9 57 516 57 635 35 941 36 810Non-current assets held for sale 10 4 508 1 676 - 67Investments in subsidiaries 11 - - 46 395 44 183Investments in associates 12 23 972 20 361 23 623 19 182Deferred tax 13 487 169 - -Investment property 14 403 366 32 15Property, plant and equipment 15 7 683 9 613 54 54Biological assets 16 52 51 - -Intangible assets 17 10 44 - -Total Assets 136 958 129 836 141 974 133 927Equity and LiabilitiesEquityEquity Attributable to Equity Holders of Parent Share capital 18 1 393 1 393 1 393 1 393Reserves 45 097 44 561 59 094 57 166Retained income 45 533 42 143 27 298 25 255

92 023 88 097 87 785 83 814Non-controlling interest 84 193 - -Total Equity 92 107 88 290 87 785 83 814LiabilitiesBank overdraft 5 19 103 - -Derivative financial instruments 19 139 27 126 16Trade and other payables 20 3 379 4 051 1 097 1 489Current tax payable 8 5 2 -Retirement benefit obligation 21 384 588 188 180Liabilities of disposal groups 10 2 108 368 - -Other financial liabilities 22 33 217 30 367 46 723 42 553Deferred tax 13 4 707 4 874 6 012 5 820Provisions 23 888 1 137 41 28Share-based payment liability 24 2 26 - 27Total Liabilities 44 851 41 546 54 189 50 113Total Equity and Liabilities 136 958 129 836 141 974 133 927

Financial statements for the year ended March 31, 2018

S T A T E M E N T O F F I N A N C I A L P O S I T I O N


Group CompanyFigures in Rand million Note(s) 2018 2017 2018 2017Continuing operationsRevenue 25&26 14 223 17 372 6 638 6 459Cost of sales (6 226) (9 010) - -Gross profit 7 997 8 362 6 638 6 459Finance costs 27 (2 433) (2 607) (2 492) (2 679)Gross profit after financing costs 5 564 5 755 4 146 3 780Other income 1 594 329 1 423 213Net capital gains 29 2 383 1 688 2 383 1 688Operating expenses (6 957) (6 416) (6 438) (3 702)Operating profit (loss) 31 2 584 1 356 1 514 1 979Non-administrative income/(expenses) 30 378 (378) 378 (378)Profits/(losses) from equity accounted investments 419 963 - -Profit before taxation 3 381 1 941 1 892 1 601Taxation 32 381 621 201 194Profit from continuing operations 3 762 2 562 2 093 1 795Loss from discontinued operations 10 (538) (362) - -Profit for the year 3 224 2 200 2 093 1 795Other comprehensive income:Items that will not be reclassified to profit or loss:Gains (losses) on property revaluation - (6) - (6)Remeasurements on net defined benefit liability/asset 2 (4) 12 (4)Share of comprehensive income of associates and joint ventures 5 (4) - -Income tax relating to items that will not be reclassified 1 1 - 1Total items that will not be reclassified to profit or loss 8 (13) 12 (9)

Items that may be reclassified to profit or loss:Exchange differences on translating foreign operations (149) (23) - -Available-for-sale financial assets adjustments 937 3 648 2 187 5 997Share of comprehensive income of associates and joint ventures (405) (370) 60 6Income tax relating to items that may be reclassified 145 (2 286) (331) (1 955)Total items that may be reclassified to profit or loss 528 969 1 916 4 048Other comprehensive income for the year net of taxation 33 536 956 1 928 4 039Total comprehensive income for the year 3 760 3 156 4 021 5 834

Attributable to:

Profit for the year attributable to :Owners of the parent 3 440 2 446 2 093 1 795Non-controlling interest (216) (246) - -

3 224 2 200 2 093 1 795

Total comprehensive income for the year attributable to:Owners of the parent 3 976 3 402 4 021 5 834Non-controlling interest (216) (246) - -

3 760 3 156 4 021 5 834


S T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E


Group

Figures in Rand million

Total share

capital

Foreign currency

translation reserve

Associated entities reserve

Revaluation reserve

Common control reserve

Other reserve

Share-based

payment reserve

Retained income

Total attributable

to equity holders of

the Group / company

Non-controlling

interest

Total equity

Balance as at 31 March 2016

1 393 2 139 913 38 594 1 657 (2) 304 39 717 84 715 102 84 817

Changes in equityTotal comprehensive income for the year

- (393) (4) 1 357 - (4) - 2 446 3 402 (246) 3 156

Transactions with non-controlling shareholders

- - - - - - - - - 337 337

Dividends - - - - - - - (20) (20) - (20)Total changes - (393) (4) 1 357 - (4) - 2 426 3 382 91 3 473Balance at April 1, 2017 1 393 1 746 909 39 951 1 657 (6) 304 42 143 88 097 193 88 290Changes in equityTotal comprehensive income for the year

- (548) 5 1 077 - 2 - 3 440 3 976 (216) 3 760

Transactions with non-controlling shareholders - - - - - - - - - 107 107Dividends - - - - - - - (50) (50) - (50)Total changes - (548) 5 1 077 - 2 - 3 390 3 926 (109) 3 817Balance at March 31, 2018

1 393 1 198 914 41 028 1 657 (4) 304 45 533 92 023 84 92 107

Note(s) 18 33 33 33 33 33 24 33

Company


Total share

capital

Foreign currency

translation reserve


Revaluation reserve


Other reserve

Share-based

payment reserve

Retained income

Total attributable

to equity holders of

the Group / company

Non-controlling

interest

Total equity

Balance as at 31 March 2016

1 393 - (41) 51 924 1 222 22 - 23 480 78 000 - 78 000

Changes in equityTotal comprehensive income for the year

- - 6 4 037 - (4) - 1 795 5 834 - 5 834

Dividends - - - - - - - (20) (20) - (20)Total changes - - 6 4 037 - (4) - 1 775 5 814 - 5 814Balance at April 1, 2017 1 393 - (35) 55 961 1 222 18 - 25 255 83 814 - 83 814Changes in equityTotal comprehensive income for the year

- - 60 1 856 - 12 - 2 093 4 021 - 4 021

Dividends - - - - - - - (50) (50) - (50)Total changes - - 60 1 856 - 12 - 2 043 3 971 - 3 971Balance at March 31, 2018

1 393 - 25 57 817 1 222 30 - 27 298 87 785 - 87 785

Note(s) 18 33 33 33 33 33 24 33

S T A T E M E N T S O F C H A N G E S I N E Q U I T YFinancial statements for the year ended March 31, 2018


Group CompanyFigures in Rand million Note(s) 2018 2017 2018 2017Cash flows from operating activitiesCash generated from operations 37 36 2 937 (359) 2 383Interest received 3 374 3 165 3 445 2 971Dividends received 2 855 1 758 2 832 1 272Finance costs (2 318) (1 930) (2 249) (1 953)Tax refunded (paid) 38 453 (384) 264 (378)Changes in operating funds (4 661) (853) (2 340) 918Increase on operating assets (7 511) (3 235) (6 510) (2 648)Increase in operating liabilities 2 850 2 382 4 170 3 566Net cash generated from operating activities (261) 4 693 1 593 5 213Cash flows from investing activitiesPurchase of property, plant and equipment 15 (1 719) (905) (21) (42)Proceeds on sale of property, plant and equipment 355 369 - -Purchase of other intangible assets 17 (4) (29) - -Acquisition of investments (2 077) (3 505) (4 799) (4 891)Purchase of biological assets 16 (18) - - -Purchase of other financial assets (66) (7) (38) (8)Proceeds on realisation of investments 2 381 173 2 381 225Net cash used in investing activities (1 148) (3 904) (2 477) (4 716)Cash flows from / (used in) financing activitiesDividends paid (50) (20) (50) (20)Net cash used in financing activities (50) (20) (50) (20)Net (decrease)/increase in cash and cash equivalents (1 459) 769 (934) 477Cash at the beginning of the year 7 596 6 827 6 660 6 183Total cash at end of the year 5 6 137 7 596 5 726 6 660

S T A T E M E N T O F C A S H F L O W SFinancial statements for the year ended March 31, 2018


Industrial Development Corporation

Other financing activities

Foskor (Pty) Limited Scaw South Africa (Pty) Ltd

Other* Total

Figures in Rand million 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017IncomeInterest received 3 445 4 822 147 135 34 22 1 1 (253) (659) 3 374 4 321Dividends received 2 832 1 272 683 1 044 - - - - (660) (558) 2 855 1 758Fee income 361 365 93 36 - - - - (2) (1) 452 400Farming, manufacturing and mining income - - - - 5 893 5 615 3 554 3 041 (1 905) 2 237 7 542 10 893Revenue * 6 638 6 459 923 1 215 5 927 5 637 3 555 3 042 (2 820) 1 019 14 223 17 372Share of profits of equity-accounted investments - - 45 15 (5) (2) - - 379 1 875 419 1 888Other income 1 423 213 17 17 82 55 2 078 - (2 409) 44 1 191 329Net capital gains 2 383 1 688 11 - - - - - (11) - 2 383 1 688ExpensesFinancing costs (2 492) (2 679) (34) (32) (79) (163) (94) (329) 266 596 (2 433) (2 607)Operating expenses (979) (1 889) (397) (351) (6 311) (5 987) (3 820) (2 968) 2 628 (2 188) (8 879) (13 383)Share of losses of equity-accounted investments - - - - - - - - - (925) - (925)Taxation 201 194 (9) 24 188 425 - - 1 (22) 381 621Depreciation (22) (17) (4) (4) (336) (347) (113) (170) (38) (192) (513) (730)Project feasibility expenses (129) (88) - - - - - - - (14) (129) (102)Net movement in impairments (4 930) (2 086) (110) (68) - - - - 2 388 1 200 (2 652) (954)Impairment of property, plant and equipment - - - - (229) (520) (5) - 5 (115) (229) (635)Profit/(Loss) from discontinued operations - - - - - - (74) (362) (464) - (538) (362)Profit for the year 2 093 1 795 442 816 (763) (902) 1 527 (787) (75) 1 278 3 224 2 200Total assets 141 974 133 927 37 044 2 342 8 341 8 431 5 575 4 503 (55 977) (19 367) 136 958 129 836Interest in equity-accounted investments 23 623 19 182 992 938 - - - - (643) 366 23 972 20 486Total liabilities 54 189 50 113 2 994 628 3 949 3 740 10 037 9 410 (26 318) (22 345) 44 851 41 546Capital expenditure 21 42 4 - 728 504 90 - 876 359 1 719 905Capital expenditure commitments - - - - - - - - 16 14 16 14

*All revenue is from external customers.

R E P O R T A B L E S E G M E N T SFinancial statements for the year ended March 31, 2018


Industrial Development Corporation

Other financing activities

Foskor (Pty) Limited Scaw South Africa (Pty) Ltd

Other* Total

Figures in Rand million 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017IncomeInterest received 3 445 4 822 147 135 34 22 1 1 (253) (659) 3 374 4 321Dividends received 2 832 1 272 683 1 044 - - - - (660) (558) 2 855 1 758Fee income 361 365 93 36 - - - - (2) (1) 452 400Farming, manufacturing and mining income - - - - 5 893 5 615 3 554 3 041 (1 905) 2 237 7 542 10 893Revenue * 6 638 6 459 923 1 215 5 927 5 637 3 555 3 042 (2 820) 1 019 14 223 17 372Share of profits of equity-accounted investments - - 45 15 (5) (2) - - 379 1 875 419 1 888Other income 1 423 213 17 17 82 55 2 078 - (2 409) 44 1 191 329Net capital gains 2 383 1 688 11 - - - - - (11) - 2 383 1 688ExpensesFinancing costs (2 492) (2 679) (34) (32) (79) (163) (94) (329) 266 596 (2 433) (2 607)Operating expenses (979) (1 889) (397) (351) (6 311) (5 987) (3 820) (2 968) 2 628 (2 188) (8 879) (13 383)Share of losses of equity-accounted investments - - - - - - - - - (925) - (925)Taxation 201 194 (9) 24 188 425 - - 1 (22) 381 621Depreciation (22) (17) (4) (4) (336) (347) (113) (170) (38) (192) (513) (730)Project feasibility expenses (129) (88) - - - - - - - (14) (129) (102)Net movement in impairments (4 930) (2 086) (110) (68) - - - - 2 388 1 200 (2 652) (954)Impairment of property, plant and equipment - - - - (229) (520) (5) - 5 (115) (229) (635)Profit/(Loss) from discontinued operations - - - - - - (74) (362) (464) - (538) (362)Profit for the year 2 093 1 795 442 816 (763) (902) 1 527 (787) (75) 1 278 3 224 2 200Total assets 141 974 133 927 37 044 2 342 8 341 8 431 5 575 4 503 (55 977) (19 367) 136 958 129 836Interest in equity-accounted investments 23 623 19 182 992 938 - - - - (643) 366 23 972 20 486Total liabilities 54 189 50 113 2 994 628 3 949 3 740 10 037 9 410 (26 318) (22 345) 44 851 41 546Capital expenditure 21 42 4 - 728 504 90 - 876 359 1 719 905Capital expenditure commitments - - - - - - - - 16 14 16 14

*All revenue is from external customers.


South Africa Rest of Africa Other* TotalFigures in Rand million 2018 2017 2018 2017 2018 2017 2018 2017IncomeInterest received 2 757 3 701 617 620 - - 3 374 4 321Dividends received 2 281 1 237 515 521 59 - 2 855 1 758Fee income 454 400 - - - - 454 400Farming, manufacturing and mining income

7 354 10 755 61 60 125 78 7 540 10 893

Revenue 12 846 16 093 1 193 1 201 184 78 14 223 17 372Share of profits of equity-accounted investments

(11) 1 723 430 165 - - 419 1 888

Other income 1 584 329 - - 10 - 1 594 329Net capital gains 2 383 1 688 - - - - 2 383 1 688ExpensesFinancing expenses (2 433) (2 607) - - - - (2 433) (2 607)Operating expenses (9 089) (13 235) (2) (60) (1) (80) (9 092) (13 375)Share of losses of equity-accounted investments

- (836) (59) (48) (132) (41) (191) (925)

Taxation 381 621 - - - - 381 621Depreciation (512) (739) - - - - (512) (739)Impairment of property, plant and equipment

(229) (634) - - - - (229) (634)

Net movement in impairments

(2 652) (954) - - - - (2 652) (954)

Project feasibility expenses (129) (102) - - - - (129) (102)Impairment reversal (538) (362) - - - - (538) (362)Profit for the year 1 601 985 1 562 1 258 61 (43) 3 224 2 200Total assets 124 426 119 409 10 185 8 199 2 347 2 228 136 958 129 836Interest in equity-accounted investments

20 731 16 621 3 241 3 740 - - 23 972 20 361

Total liabilities 44 792 41 476 18 17 41 53 44 851 41 546Capital expenditure 1 719 905 - - - - 1 719 905Capital expenditure commitments

16 14 - - - - 16 14

* Other – includes all countries outside the African continent

G E O G R A P H I C A L S E G M E N T SFinancial statements for the year ended March 31, 2018


1. ACCOUNTING POLICIES The Industrial Development Corporation of South Africa Limited (IDC, Company or Corporation) is domiciled in South Africa. The consolidated financial statements for the year ended 31 March 2018 comprise the IDC, its subsidiaries and the Group’s interest in associates and jointly controlled entities (referred to as the Group).

The financial statements were authorised for issue by the directors on 27 June 2018.

1.1 Statement of compliance The separate and consolidated financial statements have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board (IASB) as well as the requirements of the Public Finance Management Act 1 of 1999 (PFMA).

1.2 Basis of preparation The separate and consolidated financial statements are presented in South African Rand, which is the Company’s functional currency, rounded to the nearest million.

These consolidated financial statements are prepared on the historical cost basis, except for the following:• Derivative financial instruments are measured at fair value• Financial instruments held-for-trading are measured at

fair value• Financial instruments classified as available-for-sale are

measured at fair value• Financial instruments designated at fair value through

profit or loss are measured at fair value• Investments in subsidiaries, associates and jointly-

controlled entities are carried at fair value in the separate financial statements of the company

• Biological assets are measured at fair value less costs to sell• Investment property is measured at fair value• Land and buildings are measured at revalued

amount, being its fair value at the date of revaluation less subsequent accumulated depreciation and accumulated impairment losses

• Aircrafts are measured at fair value, less subsequent accumulated depreciation and accumulated impairment losses

• Non-current assets held-for-sale are measured at fair value less cost to sell.

Standards, amendments and interpretations to existing standards not yet effective and also not early adopted:

a) IFRS 9 – Financial Instruments (Effective 1 January 2018)

IFRS 9 – Financial Instruments will replace certain key elements of IAS 39. The two key elements that would impact the Group’s accounting policies include:

• Classification and measurement of financial assets and financial liabilities: the standard requires that all financial assets be classified as either held at fair value or amortised cost.

i. The amortised cost classification is only permitted where it is held within a business model where the underlying cash flows are held in order to collect contractual cash flows and that the cash flows arise solely from payment of principal and interest.

ii. The standard further provides that gains and losses on assets held at fair value are measured through the income statement unless the entity has elected to present gains and losses on non-trading equity investments (individually elected) directly through comprehensive income. With reference to financial liabilities held at fair value, the standard proposes that changes to fair value attributable to credit risk are taken directly to other comprehensive income without recycling.

• Impairment methodology: Impairments in terms of IFRS 9 will be determined based on an expected credit loss model rather than the current incurred loss model required by IAS 39. Entities are required to recognise an allowance for either 12-month or lifetime expected credit losses (ECLs), depending on whether there has been a significant increase in credit risk since initial recognition. The measurement of ECLs reflects a probability-weighted outcome, the time value of money and the entity’s best available forward-looking information. The aforementioned probability-weighted outcome must consider the possibility that a credit loss occurs and the possibility that no credit loss occurs, even if the possibility of a credit loss occurring is low.

The ECL model applies to debt instruments recorded at amortised cost or at FVTOCI, such as loans, debt securities and trade receivables, lease receivables and most loan commitments and financial guarantee contracts.

The implementation of IFRS 9 is anticipated to have a significant impact on the preparation of the Group’s financial statements. The Group has initiated a process to determine the quantitative impact of the standard on the Group’s statement of financial position and on-going performance metrics. The impact of IFRS 9 is still being assessed.

b) IFRS 15 Revenue from Contracts with Customers (Effective 1 January 2018)

This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, and IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services.

I D C A C C O U N T I N G P O L I C I E S 2 0 1 8


The standard contains a single model that applies tocontracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract- based five step analysis of transactions to determine whether, how much and when revenue is recognised.

The Group is in the process of evaluating the impact of IFRS 15 on its financial statements.

All other standards and interpretations issued but not yet effective are not expected to have a material impact on the Group, namely

i. IAS 40 Investment Property (IAS 40): amendments clarify the requirements on transfers to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use

ii. IFRS 2 Classification and Measurement of Share-based Payment Transactions (IFRS 2): the amendments eliminate diversity in practice in three main areas, namely: (1) effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; (2) classification of a share-based payment transaction with net settlement features for withholding tax obligations; and (3) accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.

iii. IFRS 16 (Effective for annual periods beginning on or after 1 January 2019)

IFRS 16 replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The standard specifies how a user will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.

Based on the preliminary assessment performed, the Group does not anticipate a significant impact on its consolidated financial statements.

iv. IFRIC 22 (Effective for annual periods beginning on or after 1 January 2019)

IFRIC 22 clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation covers foreign currency transactions when an entity recognises a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration before the entity recognises the related asset, expense or income.

It does not apply when an entity measures the related asset, expense or income on initial recognition at fair value or at the fair value of the consideration received or paid at a date other than the date of initial recognition of the non-monetary asset or non-monetary liability. Also, the interpretation need not be applied to income taxes, insurance contracts or reinsurance contracts. The Group is in a process of evaluating the impact of IFRIC 23 on its financial statements.

v. IFRIC 23 (Effective for annual periods beginning on or after 1 January 2019)

IFRIC 23 clarifies the accounting for uncertainties in income taxes. The interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. The Group is in a process of evaluating the impact of IFRIC 23 on its financial statements.

All new Standards and Interpretations will be adopted on their effective dates.

1.3 Investments in subsidiaries Subsidiaries are entities controlled by the IDC. The Group ‘controls’ an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases. Investments in subsidiaries in the Company’s separate financial statements are carried at fair value as available-for-sale financial assets.

i) Business combinations The acquisition method is used to account for the

acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. The assets, liabilities and contingent liabilities acquired are assessed and included in the statement of financial position at their estimated fair value to the Group. If the cost of

I D C A C C O U N T I N G P O L I C I E S 2 0 1 8 c o n t i n u e d


acquisition is higher than the net assets acquired, any difference between the net asset value and the cost of acquisition of a subsidiary is treated in accordance with the Group’s accounting policy for goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss.

ii) Transactions eliminated on consolidation Intercompany transactions, balances and unrealised

gains on transactions between Group companies are eliminated on consolidation.

Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

iii) Non-controlling interests Non-controlling interests (NCI) are measured at their

proportionate share of the acquiree’s identifiable net assets at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

iv) Loss of control When the Group loses control over a subsidiary, it

derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

1.4 Consolidated Structured entities The Group has established a number of consolidated structured entities (CSEs) for trading and investment purposes. CSEs are entities that are created to accomplish narrow and well defined objectives. A CSE is consolidated if, based on an evaluation of the substance of the relationship with the Group and the Group has control over the CSE. CSEs are the Group entities which are designed so that voting rights are not relevant to the determination of power, but instead other rights are relevant. CSEs controlled by the Group are generally those established under terms that impose strict limitations on the decision-making powers of the CSEs’ management and that result in the Group receiving the majority of the benefits related to the CSEs’ operations and net assets.

Investments in CSEs in the Company’s separate financial statements are carried at fair value.

1.5 Investments in associates Investments in associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates

includes goodwill identified on acquisition, net of any accumulated impairment loss.

The Group’s share of its associates’ post-acquisition profits and losses is recognised in profit or loss, and its share of post-acquisition movements in reserves is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted for against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains and losses arising from transactions with equity-accounted investments are eliminated against the investment to the extent of the Group’s interest in the investment. Unrealised losses are eliminated only to the extent that there is no evidence of impairment.

Investments in associates in the Company’s separate financial statements are carried at fair value.

1.6 Joint ventures and partnerships Joint ventures and partnerships are those entities over whose activities the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

The consolidated financial statements include the Group’s share of the total recognised gains and losses of joint ventures on an equity accounted basis, from the date that joint control is established by contractual agreement until the date that it ceases. When the Group’s share of losses exceeds its interest in a joint venture, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of a joint venture.

Unrealised gains and losses arising from transactions with equity-accounted joint ventures and partnerships are eliminated against the investment to the extent of the Group’s interest in the investment.

Investments in joint ventures and partnerships in the Company’s separate financial statements are carried at fair value.

1.7 Financial instrumentsa) Financial assets The Group classifies its financial assets into the

following categories: financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classification of its financial assets at initial recognition.


i) Financial assets at fair value through profit or loss This category has two subcategories: financial

assets held for- trading and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held-for-trading unless they are designated as hedging instruments.

The Group designates financial assets at fair value through profit or loss when either• The assets are managed, evaluated and reported

internally on a fair value basis• The designation eliminates or significantly reduces an

accounting mismatch which would otherwise arise• The asset contains an embedded derivative that

significantly modifies the cash flows that would otherwise be required under the contract.

ii) Loans and receivables Loans and receivables are non-derivative assets with

fixed or determinable payments that are not quoted in an active market other than those that the Group intends to sell in the near future. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable.

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest method.

iii) Held to maturity Held-to-maturity investments are non-derivative

financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity assets, the entire category would be tainted and reclassified as available-for-sale.

iv) Available-for-sale Available-for-sale investments are non-derivative

investments that are not designated as another category of financial assets. Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.

v) Recognition and measurement Purchases and sales of financial assets at fair value

through profit or loss, held-to-maturity and available-for-sale are recognised on trade date - the date on which the Group commits to purchase or sell the asset. Loans are recognised when the cash is advanced to the borrowers. Financial assets are initially recognised at fair

value plus transaction costs for all financial assets not carried at fair value through profit or loss.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently measured at fair value. Loans and receivables and held-to-maturity investments are subsequently measured at amortised cost using the effective interest method less impairment loss. Gains and losses arising from changes in the fair value of the financial instruments through profit or loss category are included in profit or loss in the period in which they arise. Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised directly in other comprehensive income, until the financial asset is disposed of, derecognised or impaired, at which time the cumulative gain or loss previously recognised in other comprehensive income is recognised in profit or loss. However, interest calculated using the effective interest method is recognised in profit or loss for available-for-sale debt investments. Dividends on available-for-sale equity instruments are recognised in profit or loss when the entity’s right to receive payment is established.

Financial assets (or, where applicable, a part of a financial asset or part of a group of similar financial assets) are derecognised when the contractual rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all the risks and rewards of ownership, without retaining control. Any interest in the transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

vi) Cash and cash equivalents For the purpose of the cash flow statement, cash and

cash equivalents comprise cash on hand, deposits held on call with banks, and investments in money market instruments and bank overdrafts, all of which are available for use by the Group unless otherwise stated.

Cash and cash equivalents are subsequently measured at amortised cost in the statement of financial position.

b) Financial liabilities Financial liabilities are recognised initially at fair value,

generally being their issue proceeds net of transaction costs incurred. Financial liabilities, other than those at fair value through profit or loss are subsequently measured at amortised cost and interest is recognised over the period of the borrowing using the effective interest method.

Where the Group classifies certain liabilities at fair value through profit or loss, changes in fair value are recognised in profit or loss. This designation by the



Group takes place when either:• The liabilities are managed, evaluated and reported

internally on a fair value basis; or• The designation eliminates or significantly reduces an

accounting mismatch which would otherwise arise; and• The liability contains an embedded derivative that

significantly modifies the cash flows that would otherwise be required under the contract.

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method.

c) Financial guarantees Financial guarantees are contracts that require the

Group to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are initially recognised at their fair value and the initial fair value is amortised over the life of the financial guarantee. The guarantee liability is subsequently measured at the higher of this amortised amount and the present value of any expected payment (when payment under the guarantee has become probable). Financial guarantees are included with other liabilities.

d) Offsetting of financial instruments Financial assets and liabilities are offset and the net

amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity.

e) Derivative financial instruments Certain Group companies use derivative financial

instruments to hedge their exposure to foreign exchange rate risks and other market risks arising from operational, financing and investment activities.

The Group does not hold or issue derivative financial instruments for trading purposes.

The derivatives that do not meet the requirements for hedge accounting are accounted for as trading instruments.

i) Embedded derivatives Derivatives may be embedded in another contractual

arrangement (a ‘host contract’). The Group accounts for an embedded derivative separately from the host contract when the host contract is not itself carried at fair value through profit or loss, the terms of the embedded derivative would meet the definition of a derivative if they were contained in a separate contract, and the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risk of the host contract. Separated embedded derivatives are accounted for depending on their classification, and are presented in the statement of financial position together with the host contract.

ii) Hedge accounting The following hedge relationships are applied:

Fair value hedge – a hedge of exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss.

Cash flow hedge – a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect profit or loss.

a) Fair value hedge Changes in fair value are recognised in profit or loss.

Any adjustments to the carrying amount related to the hedged risk are recognised in profit or loss.

b) Cash flow hedge Changes in fair value where the portion of the gain

or loss is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss. The change in fair value recognised directly in other comprehensive income is transferred to profit or loss when the future transaction affects profit or loss.

No adjustments are made to the carrying amount of the hedged item.


c) Discontinuation of hedge accounting The Group discontinues hedge accounting

prospectively if any one of the following occurs:

• The hedging instrument expires or is sold, terminated or exercised

• The forecast transaction is no longer expected to occur (in the case of a cash flow hedge, the cumulative unrealised gain or loss recognised in other comprehensive income, is recognised immediately in profit or loss)

• The hedge no longer meets the conditions for hedge accounting

• The Group revokes the designation.

1.8 Impairment of assetsa) Impairment of financial assets carried at amortised

cost The Group assesses whether there is objective evidence

that a financial asset or Group of financial assets not carried at fair value through profit or loss are impaired at each reporting date. A financial asset or Group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or Group of financial assets that can be reliably estimated. Impairment losses are recognised in profit or loss and reflected in an allowance account against loans and advances.

Objective evidence that a financial asset or Group of assets is impaired includes observable data that comes to the attention of the Group about the following loss events:

• Significant financial difficulty of the issuer or obligor;

• A breach of contract, such as default or delinquency in interest or principal payments;

• The Group granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a concession that the lender would not otherwise consider;

• It becoming probable that the borrower will enter bankruptcy or other financial reorganisation;

• The disappearance of an active market for that financial asset resulting in financial difficulties; or

• Observable data indicating that there is a measurable decrease in the estimated future cash flows from a Group of financial assets since the initial recognition of those assets, although the decreases cannot yet be identified with the individual financial assets in the Group.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, referred to as specific impairments, and individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a Group (portfolio) of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

The recoverable amount of the assets is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of the asset).

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (i.e. on the basis of the Group’s grading process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for Groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the Group, and as well as historical loss experience for assets with credit risk characteristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions which did not affect the period on which the historical loss experience is based. This also serves to remove the effects of conditions in the historical period that do not exist currently.

Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related observable data from period to period (for example, changes in interest rates, foreign currency exchange rates, payment status, or other factors indicative of changes in the probability of losses in the Group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.



If an impairment loss decreases due to an event occurring subsequently and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), then the previously recognised impairment loss is reversed through profit or loss with a corresponding increase in the carrying amount of the underlying asset. The reversal is limited to an amount that does not state the asset at more than what its amortised cost would have been in the absence of impairment.

b) Impairment of available-for-sale financial assets The Group assesses at each reporting date whether

there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a decrease in the fair value of the instrument below its cost is considered in determining whether the assets are impaired.

If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from other comprehensive income and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss.

Any increase in the fair value after an impairment loss has been recognised is treated as a revaluation and is recognised directly in other comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

c) Impairment of non-financial assets At each reporting date, the Group reviews the carrying

amounts of its non-financial assets (other than biological assets, land and buildings, deferred tax assets and investment property,) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or cash-generating units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The ‘recoverable amount’ of an asset or CGU is the greater of its value in use and its fair value less costs to sell. ‘Value in use’ is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation if no impairment loss had been recognised.

Any impairment loss of a revalued asset is treated as a revaluation decrease.

1.9 Intangible assetsa) Goodwill Business combinations are accounted for using the

acquisition method as at the acquisition date.

The Group measures goodwill at the acquisition date as: • The fair value of the consideration transferred; plus • The recognised amount of any non-controlling

interests in the acquire; plus • If the business combination is achieved in stages,

the fair value of the pre-existing equity interest in the acquire; less

• The net recognised amount (generally fair value) of the identifiable assets required and the liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit and loss.

Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses. Impairment losses on goodwill are recognised in profit or loss and determined in accordance with the impairment of non-financial assets.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.


Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and the settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquirees’ awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared to the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

b) Intangible assets acquired separately Intangible assets acquired separately are measured

on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.

Amortisation is charged on a straight-line basis over the estimated useful lives of the intangible assets which do not exceed four years. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes being accounted for on a prospective basis.

c) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets acquired in a business combination are measured at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately.

1.10 Foreign currency translationa) Transactions and balances Transactions in foreign currencies are translated into

South African Rand at the foreign exchange rate prevailing at the date of the transaction. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and amortised cost in foreign currency translated at the exchange rate at the end of the reporting period, if applicable.

Monetary assets and liabilities denominated in foreign currencies at the reporting date have been translated into South African Rand at the rates ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Rand at foreign exchange rates ruling at the dates the fair value was determined.

Foreign currency differences are recognised in profit and loss, except for available for sale investments and effective cash flows hedges which are recognised in other comprehensive income.

b) Financial statements of foreign operations All foreign operations have been accounted for as

foreign operations. Assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation are translated into South African Rand at foreign exchange rates ruling at the reporting date. Income and expenses are translated at the average foreign exchange rates, provided these rates approximate the actual rates, for the year. Exchange differences arising from the translation of foreign operations are recognised in other comprehensive income. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to profit or loss.

1.11 Investment property Investment property is property held either to earn rental income or for capital appreciation, or both.

a) Measurement Investment property is measured initially at cost,

including transaction costs and directly attributable expenditure in preparing the asset for its intended use. Subsequently, all investment properties are measured at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an



orderly transaction between market participants at the measurement date.

Valuation takes place annually, based on the aggregate of the net annual rental receivable from the properties, considering and analysing rentals received on similar properties in the neighborhood, less associated costs (insurance, maintenance, repairs and management fees). A capitalisation rate which reflects the specific risks inherent in the net cash flows is applied to the net annual rentals to arrive at the property valuations.

Gains or losses arising from a change in fair value are recognised in profit or loss.

External, independent valuers having appropriate, recognised professional qualifications and recent experience in the location and category of the property being valued are used to value the portfolio.

When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

1.12 Property, plant and equipmenta) Measurement All items of property, plant and equipment recognised

as assets are measured initially at cost. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of material and direct labour and any other cost directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. Except for land, buildings and aircraft all other items of property, plant and equipment are subsequently measured at cost less accumulated depreciation and any accumulated impairment losses.

Land, buildings and aircraft are subsequently measured at fair value less subsequent accumulated depreciation and accumulated impairment losses. Land, buildings and aircraft are revalued by external, independent valuers. Valuers have appropriate recognised professional qualifications and recent experience in the location and category of the property being valued are used to value the portfolio.

Any surplus in excess of the carrying amount is transferred to a revaluation reserve net of deferred tax. Surpluses on revaluation are recognised in profit or loss to the extent that they reverse revaluation decreases of the same assets recognised as expenses in the previous periods.

Decreases in revaluation are charged directly against the revaluation reserves only to the extent that the decrease does not exceed the amount held in the revaluation reserves in respect of that same asset, otherwise they are recognised in profit or loss.

Where parts of an item of property, plant and equipment have significantly different useful lives, they are accounted for as separate items of property, plant and equipment. Although individual components are accounted for separately, the financial statements continue to disclose a single asset.

b) Subsequent cost The Group recognises the cost of replacing part of such

an item of property, plant and equipment in carrying amount when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in profit or loss as an expense as they are incurred.

c) Depreciation Depreciation is recognised in profit or loss on a straight-

line basis, based on the estimated useful lives of the underlying assets. Depreciation is calculated on the cost less any impairment and expected residual value of the asset. Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

Item Average useful life Buildings and infrastructure • Building structure 50 years • Elevators 10 years Plant and machinery • Aircraft 5 years • Heavy plant and machinery 10-20 years • Equipment 8-10 years Other property, plant and equipment • Motor vehicles 1-6 years • Office furniture and equipment 1-6 years

The residual values, useful lives and depreciation method are re-assessed at each financial year-end and adjusted if appropriate.

d) De-recognition The carrying amount of items of property, plant and

equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal.

Gains or losses arising from de-recognition are determined as the difference between the net disposal proceeds and the carrying amount of the item of


property, plant and equipment and included in profit or loss when the items are derecognised. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained income.

1.13 Biological assetsA biological asset is a living animal or plant.

c) Measurement A biological asset is measured initially and at reporting

date at its fair value less costs to sell. If the fair value of a biological asset cannot be determined reliably at the date of initial recognition, it is stated at cost less any accumulated depreciation and impairment losses.

Gains or losses arising on the initial recognition of a biological asset at fair value less costs to sell, and from a change in fair value less costs to sell of biological assets, are included in profit or loss in the period in which they arise.

1.14 Leasesa) Finance leases Leases of assets under which the lessee assumes all the

risks and benefits of ownership are classified as finance leases.

i) Finance leases - Group as lessee Finance leases are recognised as assets and liabilities in

the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease. The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.

ii) Finance leases - Group as lessor The Group recognises finance lease receivables in the

statement of financial position.

Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the Group’s net investment in the finance lease.

b) Operating leases Leases of assets under which the lessor effectively

retains all the risks and benefits of ownership are classified as operating leases.

i) Operating leases - Group as lessee Lease payments arising from operating leases are

recognised in profit or loss on a straight-line basis over the lease term. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense.

ii) Operating leases - Group as lessor Receipts in respect of operating leases are accounted

for as income on the straight-line basis over the period of the lease.

The assets subject to operating leases are presented in the statement of financial position according to the nature of the assets.

c) Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset.

At inception or upon re-assessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group’s incremental borrowing rate.

1.15 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of the ordinary shares are recognised as a deduction from equity, net of any tax effects.

1.16 Inventoriesa) Spares and consumables Spares and consumables are valued at the lower of

cost and net realisable value, on a weighted average method.

The cost of inventories comprises all costs of purchase, conversion and other costs incurred in bringing the inventories to the present location and condition.

Obsolete, redundant and slow-moving items of spares and consumable stores are identified on a regular basis and written down to their net realisable value.



Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

b) Raw materials, finished goods and phosphate rock Raw materials, finished goods and phosphate rock

are valued at the lower of cost of production and net realisable value.

Cost of production is calculated on a standard cost basis, which approximates the actual cost and includes the production overheads. Production overheads are allocated on the basis of normal capacity to finished goods.

The valuation of inventory held by agents or in transit includes forwarding costs, where applicable.

1.17 ProvisionsProvisions are recognised when:• The Group has a present obligation as a result of a past

event;• It is probable that an outflow of resources embodying

economic benefits will be required to settle the obligation; and

• A reliable estimate can be made of the obligation.

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision. Provisions are not recognised for future operating losses.

A constructive obligation to restructure is recognised when an entity:• Has a detailed formal plan for the restructuring,

identifying at least: - The business or part of a business concerned - The principal locations affected - The location, function, and approximate number

of employees who will be compensated for terminating their services

- The expenditures that will be undertaken - When the plan will be implemented - Has raised a valid expectation in those affected

that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

a) Decommissioning provision The obligation to make good environmental or other

damage incurred in installing an asset is provided in full immediately, as the damage arises from a past event.

If an obligation to restore the environment or dismantle an asset arises on the initial recognition of the asset, the cost is capitalised to the asset and amortised over the useful life of the asset. The cost of an item of property, plant and equipment includes not only the ‘initial estimate’ of the costs relating to dismantlement, removal or restoration of property, plant and equipment at the time of installing the item but also amounts recognised during the period of use, for purposes other than producing inventory.

If an obligation to restore the environment or dismantle an asset arises after the initial recognition of the asset, then a provision is recognised at the time that the obligation arises.

b) Onerous contracts A provision for onerous contracts is recognised when

the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.

Before a provision is established, the Group recognises any impairment loss on the assets associated with the contract.

1.18 Contingent liabilities and commitmentsa) Contingent liabilities A contingent liability is a possible obligation that

arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.

Contingent liabilities are not recognised in the statement of financial position of the Group but disclosed in the notes.

After their initial recognition contingent liabilities recognised in business combinations that are recognised separately are subsequently measured at the higher of:

• The amount that would be recognised as a provision

• The amount initially recognised less cumulative amortisation

b) Commitments Items are classified as commitments where the

Group has committed itself to future transactions.


Commitments are not recognised in the statement of financial position of the Group but disclosed in the notes.

1.19 Taxation

a) Current tax assets and liabilities Current tax for current and prior periods is, to the extent

unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

b) Income tax Current and deferred taxes are recognised as income or

an expense and included in profit or loss for the period, except to the extent that the tax arises from:

• A transaction or event which is recognised, in the same or a different period, to other comprehensive income

• A business combination

Current tax is charged or credited in profit or loss, except when it relates to items credited or charged directly to equity or other comprehensive income, in which case the current tax is also recognised in equity or other comprehensive income.

Current tax also includes any adjustment to tax payable in respect of previous years.

c) Deferred tax Deferred tax is recognised in respect of temporary

differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is recognised for all taxable temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which unused tax deductions can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax will be realised.

Deferred tax is not recognised if the temporary differences arise on the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities

in a transaction that affects neither taxable income nor accounting income. Deferred tax is also not recognised in respect of temporary differences relating to investments in associates, subsidiaries and joint ventures to the extent that it is probable that they will not reverse in the foreseeable future and the timing of the reversal of the temporary difference is controlled.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax is charged or credited in profit or loss, except when it relates to items credited or charged directly to equity or other comprehensive income, in which case the deferred tax is also recognised in equity or other comprehensive income.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

1.20 Revenue

Revenue comprises sales to customers, dividends, interest and fee income, but excludes value-added tax, and is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.

a) Sales to customers Revenue from sale of goods is recognised in profit or

loss when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, associated costs and possible return of goods can be estimated reliably and there is no continuing managerial involvement with the goods. This occurs when the group entity has delivered products to the customer and the customer has accepted the products. The delivery of products and the transfer of risks are determined by the terms of sale.

b) Dividends Dividend income is recognised when the right to

receive payment is established on the ex-dividend date for equity instruments and is included in dividend income.

c) Interest Interest income and expense are recognised in profit

or loss using the effective-interest method taking into account the contractual expected timing and amount



of cashflows. The effective-interest method is a method of calculating the amortised cost of a financial asset or financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. Interest income and expense include the amortisation of any discount or premium or other differences between the initial carrying amount of an interest-bearing financial instrument and its amount at maturity calculated on an effective-interest-rate basis.

d) Fees The Group earns fees and commissions from a range of

services it provides to clients and these are accounted for as follows:

• Income earned on the execution of a significant act is recognised when the significant act has been performed.

• Income earned from the provision of services is recognised as the service is rendered by reference to the stage of completion of the service.

• Income that forms an integral part of the effective interest rate of a financial instrument is recognised as an adjustment to the effective interest rate and recognised in interest income.

• Fees charged for servicing a loan are recognised in revenue as the service is provided.

1.21 Borrowing costs

Borrowing costs are expensed in the period in which they are incurred, except to the extent that they are capitalised when directly attributable to the acquisition, construction or production of a qualifying asset.

1.22 Employee benefits

a) Post-retirement medical benefits Some Group companies provide post-employment

healthcare benefits to their retirees. The entitlement to post-employment healthcare benefits is based on the employee remaining in service up to retirement age. The expected costs of these benefits are accrued over the period of employment, using the projected unit of credit method. Valuations of these obligations are carried out annually by independent qualified actuaries.

b) Defined contribution plans The majority of the Group’s employees are members

of defined contribution plans and contributions to these plans are recognised in profit or loss in the year to which they relate.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and under which the Group will have no legal or constructive obligations to pay further

contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and previous periods.

c) Defined benefit plans The Group operates a defined benefit and a defined

contribution plan, the assets of which are held in separate trustee-administered funds. The schemes are generally funded through payments to insurance companies or trustee-administered funds as determined by periodic actuarial valuations. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service and compensation.

The liability in respect of defined benefit pension plans is the present value of the defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government securities that have terms to maturity approximating the terms of the related liability. Actuarial gains and losses arising from experience adjustments and the effects of changes in actuarial assumptions to the defined benefit plans are recognised fully in other comprehensive income.

Past-service costs are recognised immediately in profit or loss when they occur.

d) Short-term employee benefits Short-term employee benefit obligations are measured

on an undiscounted basis and are expensed as the related services are provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

1.23 Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed regularly by the executive committee to make decisions about resources allocated to each segment and assess its performance, and for which discreet financial information is available.


1.24 Discontinued operations and non-current assets held-for-salea) Discontinued operations A discontinued operation is a component of the

Group’s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held-for-sale, if earlier. A disposal group that is to be abandoned may also qualify.

b) Non-current assets held for sale Non-current assets and disposal groups are classified as

held for sale if their carrying amount will be recovered through a sale transaction rather than continuing use. This classification is only met if the sale is highly probable and the assets are available for immediate sale.

c) Measurement Immediately before classification as held-for-sale,

the measurement of the assets (and all assets and liabilities in a disposal group) is brought up-to-date in accordance with the applicable IFRS. Then, on initial classification as held for sale, the non-current assets and disposal groups are recognised at the lower of carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is first allocated to goodwill and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property and biological assets, which continue to be measured in accordance with the Group’s accounting policies.

Impairment losses on initial classification as held-for-sale are included in profit or loss, even when there is a revaluation. The same applies to gains and losses on subsequent measurement.

d) Reclassification The non-current assets held-for-sale will be reclassified

immediately when there is a change in intention to sell. At that date, it will be measured at the lower of its carrying value before the asset was classified as held for sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset not been classified as held-for-sale and its recoverable amount at the date of the subsequent decision not to sell.

1.25 Related parties The IDC operates in an economic environment together with other entities directly or indirectly owned by the South

African government. Only parties within the national sphere of government will be considered to be related parties.

Key management is defined as individuals with the authority and responsibility for planning, directing and controlling the activities of the entity. All individuals from the level of executive management up to the Board of Directors are regarded as key management per the definition of the standard. Close family members of key management personnel are considered to be those family members who may be expected to influence, or be influenced by key management individuals in their dealings with the entity.

Other related party transactions are also disclosed in terms of the requirements of IAS 24.

1.26 Share based payments A Group company operates an equity-settled share based plan and a cash-settled share based plan.

The equity settled share-based payments vest immediately, the reserve was recognised in equity at grant date.

The cash-settled plan was entered into with one of the Group company’s employees, under which the company receives services from employees by incurring the liability to transfer cash to the employees for amounts that are based on the value of the company’s shares. The fair value of the transaction is measured using an option pricing model, taking into account all terms and conditions. The fair value of the services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:• Including any market performance conditions• Excluding the impact of any service and non-market

performance vesting conditions• Including the impact of any non-vesting conditions

The services received by the company are recognised as they are received and the liability is measured at fair value. The fair value of the liability is re-measured at each reporting date and at the date of settlement. Any changes in the fair value are recognised in profit or loss for the period.

1.27 Determination of fair values A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.

Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.



a) Financial assets and liabilities ‘Fair value’ is the price that would be received to sell

an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the Instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

b) Property, plant and equipment The market value of land and buildings is the estimated

amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

c) Intangible assets The fair value of other intangible assets is based on the

discounted cash flows expected to be derived from the use and eventual sale of the assets.

d) Investment property Valuation methods and assumptions used in

determining the fair value of investment property

i) Capitalisation method The value of the property reflects the present value of

the sum of the future benefits which an owner may expect to derive from the property. These benefits are expressed in monetary terms and are based upon the estimated rentals for the property in an orderly transaction between market participants. The usual property outgoings are deducted to achieve a net rental, which is then capitalised at a rate an investor, would require receiving the income.

ii) Comparative method The method involves the identification of comparable

properties sold in the area or in a comparable location within a reasonable time. The selected comparable properties are analysed and compared with the subject property. Adjustments are then made to their values to reflect any differences that may exist. This method is based on the assumption that a purchaser will pay an amount equal to what others have paid or are willing to pay.

iii) Residual land valuation method This method determines the residual value which is the

result of the present value of expected inflows less all outflows (including income tax) less the developer’s required profits. This is the maximum that the developer can afford to pay for the real estate. This residual value is in theory also the market value of the land.

e) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes,

is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. For finance leases the market rate of interest is determined by reference to similar lease agreements.

f) Share-based payment transactions A Group company entered into a Business Assistance

Agreement, which is considered to be an equity-settled, share-based payment transaction. The fair value of the technical and business services received in exchange for the grant of equity instruments is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the equity instruments granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions


about the number of equity instruments that are expected to vest.

1.28 Use of estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

a) Income taxes Significant judgement is required in determining the

worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

b) Fair value of financial instruments The fair value of financial instruments that are not

traded in an active market is determined by using valuation techniques. The Group uses its judgement to make assumptions that are mainly based on market conditions existing at each reporting date.

Listed equities are valued based on their listed value (fair value) on 31 March 2018.

Unlisted equities are valued based on various valuation methods, including free cash flow, price earnings (PE) and net asset value basis (NAV) bases.

Judgements and assumptions in the valuations and impairments include determining the:

• Free cash flows of investees • Replacement values • Discount or premium applied to the IDC’s stake in

investees • Sector/subsector betas • Debt weighting - this is the target interest bearing

debt level • Realisable value of assets • Probabilities of failure in using the NAV-model

c) Post-employment obligations Significant judgement and actuarial assumptions

are required to determine the fair value of the post-employment obligations. More detail on these actuarial assumptions is provided in the notes to the financial statements.

d) Environmental rehabilitation liability In determining the environmental rehabilitation liability,

an inflation rate of 6.02% (FY2017: 5.78%) was assumed to increase the rehabilitation liability for the next 20 years, and a rate of 9.2% (FY2017: 8.39%) to discount that amount to present value. The discount rate assumed of 9.2% is a risk-free rate, specifically the rate at which the R186 South African government bond was quoted at year end.

e) Fair value of share-based payments The fair value of equity instruments on grant date is

determined based on a simulated company value, using the Geometric Brownian Motion model. The valuation technique applied to determine the simulated company value is part of the Monte Carlo simulation methodology.

f) Impairment of assets The Group follows the guidance of IAS 36, Impairment

of Assets to determine when an asset is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates the impairment indicators that could exist at year end, such as significant decreases in the selling prices of finished goods, significant decreases in sales volumes and changes in the international export regulatory environment.

1.29 Transfer of functionsa) Between entities under common control i) Recognition The receiving entity recognises the assets and liabilities

acquired through a transfer of functions on the effective date of the transfer. All income and expenses that relate to the functions transferred are also recognised from the effective date of the transfer. The recognition of these income and expenses are governed by the accounting policies related to those specific income and expenses and accordingly this policy does not provide further guidance thereon.

ii) Measurement Assets and liabilities acquired, by the receiving entity,

through a transfer of functions are measured at initial recognition at the carrying value that they were transferred. The difference between the carrying value of the assets and liabilities transferred and any consideration paid for the assets and liabilities



transferred is recognised in equity. The carrying value at which the assets and liabilities are initially recognised is therefore the deemed cost thereof. Therefore, the subsequent measurement of these assets and liabilities the accounting policies relevant to those assets and liabilities are followed. Accordingly, this accounting policy does not provide additional guidance on the subsequent measurement of the transferred assets and liabilities.

iii) Derecognition The transferring entity derecognises the assets and

liabilities on the effective date of the transfer of functions. These transferred assets and liabilities are measured at their carrying values upon derecognition. The resulting difference between the carrying value of the assets and liabilities transferred and any consideration received for the assets and liabilities transferred is recognised in equity.

Between entities that are not under common control

i) Recognition The receiving entity recognises the assets and liabilities

acquired through a transfer of functions on the effective date of the transfer. All income and expenses that relate to the functions transferred are also recognised from the effective date of the transfer. The recognition of these income and expenses are governed by the accounting policies related to those specific income and expenses and accordingly this policy does not provide further guidance thereon.

ii) Measurement Assets and liabilities acquired, by the receiving entity,

through a transfer of functions are measured at initial recognition at the fair value that they were transferred. The difference between the fair value of the assets and liabilities transferred and any consideration paid for the assets and liabilities transferred is recognised in profit or loss. The fair value of these assets and liabilities is therefore deemed cost of thereof. Therefore the subsequent measurement of these assets and liabilities the accounting policies relevant to those assets and liabilities are followed. Accordingly, this accounting policy does not provide additional guidance on the subsequent measurement of the transferred assets and liabilities.

iii) Derecognition The transferring entity derecognises the assets and

liabilities on the effective date of the transfer of functions. These transferred assets and liabilities are measured at their fair values upon derecognition. The resulting difference between the fair value of the assets and liabilities transferred and any consideration received for the assets and liabilities transferred is recognised in profit or loss.

1.30 Preparation of the annual financial statements The financial results have been prepared under the supervision of Nonkululeko Dlamini CA (SA), the Group’s Chief Financial Officer.


2. Financial assets and liabilities

The table below sets out the Group’s classification of each class of financial assets and liabilities, and their fair values.


Group - 2018

Notes Held for trading

Loans and receivables

Available-for-sale

Other amortised

cost

Total Fair value

Cash and cash equivalents 5 - 6 156 - - 6 156 6 156Loans and advances to clients 8 - 30 660 - - 30 660 29 874Investments – listed equities 9 - - 45 621 - 45 621 45 621Investments – unlisted equities 9 - - 5 005 - 5 005 5 005Investments – preference shares 9 - - 6 890 - 6 890 6 890Derivative assets 19 142 - - - 142 142Trade and other receivables 6 - 1 800 - - 1 800 1 800Loans 22 - - - 33 217 33 217 30 258Derivative liabilities 19 139 - - - 139 139Bank overdrafts 5 - - - 19 19 19Trade and other payables 20 - - - 2 875 2 875 2 875


Group - 2017



Available-for-sale

Other amortised

cost

Total Fair value

Cash and cash equivalents 5 - 7 699 - - 7 699 7 699Loans and advances to clients 8 - 26 673 - - 26 673 25 003Investments – listed equities 9 - - 43 048 - 43 048 43 048Investments – unlisted equities 9 - - 7 335 - 7 335 7 335Investments – preference shares 9 104 - 7 148 - 7 252 7 252Derivative assets 19 76 - - - 76 76Trade and other receivables 6 - 1 916 - - 1 916 1 916Loans 22 - - - 30 367 30 367 29 786Derivative liabilities 19 27 - - - 27 27Bank overdrafts 20 - - - 103 103 103Trade and other payables 20 - - - 3 682 3 682 3 682


Company - 2018



Available-for-sale

Other amortised

cost

Total Fair value

Cash and cash equivalents 5 - 5 726 - - 5 726 5 726Loans and advances to clients 8 - 28 564 - - 28 564 27 918Investments – listed equities 9 - - 24 142 - 24 142 24 142Investments – Unlisted equities 9 - - 4 909 - 4 909 4 909Investments – preference shares 9 - - 6 890 - 6 890 6 890Derivative assets 19 108 - - - 108 108Trade and other receivables 6 - 1 254 - - 1 254 1 254Loans 22 - - - 46 723 46 723 44 158Derivative liabilities 19 126 - - - 126 126Trade and other payables 20 - - - 714 714 714


Company - 2017



Available - for-sale

Other amortised

cost

Total Fair value

Cash and cash equivalents 5 - 6 660 - - 6 660 6 660Loans and advances to clients 8 - 25 802 - - 25 802 24 647Investments – listed equities 9 - - 22 243 - 22 243 22 243Investments – unlisted equities 9 - - 7 315 - 7 315 7 315Investments – preference shares 9 104 - 7 148 - 7 252 7 252Derivative assets 19 70 - - - 70 70Trade and other receivables 6 - 605 - - 605 605Loans 22 - - - 42 553 42 553 41 990Derivative liabilities 19 16 - - - 16 16Trade and other payables 20 - - - 1 190 1 190 1 190

N O T E S T O T H E F I N A N C I A L S T A T E M E N T SFinancial statements for the year ended March 31, 2018


3. Financial risk management Financial risk

This risk category encompasses losses that may occur as a result of the way the IDC is financed and its own financing or investment activities. Financial risk includes credit and settlement risk related to the potential for counterparty default, market risk related to volatility in interest rates, exchange rates, commodity and equity prices, liquidity / funding risk related to the cost of maintaining various financial positions as well as financial compliance risk. Other financial risks faced by the Corporation include the risk of concentration of investments in certain economic sectors, regions and/or counterparties as well as the risk of over-dependency in relation to income on a limited number of counterparties and/or financial products and the risk of margin erosion due to inappropriate pricing relative to the cost of funding. The management of these risk areas is therefore critical for the IDC.

Financial: credit risk

This refers to the risk that a counterparty to a financial transaction will fail to meet its obligations in accordance with the agreed terms and conditions of the contract, thereby causing the asset holder to suffer a financial loss. Credit risk, as defined by the IDC, comprises the potential loss on loans, advances, guarantees, quasi- equity and equity investments due to counterparty default.

Credit risk arises as a result of the Corporation’s lending activities as well as the placement of deposits with financial institutions.

Approach to Managing Credit Risk

The IDC endeavours to maintain credit risk exposure within acceptable parameters, managing the credit risk inherent in the entire portfolio as well as the risk associated with individual clients or transactions. The effective management of credit risk is a critical component of a comprehensive approach to risk management and is essential to the long-term success of the Corporation. This is the dominant risk within the IDC as the providing of loans, advances, quasi equity, equity investments and guarantees represent the Corporation’s corebusiness.

Managing Credit Risk Concentration Risk concentrations can arise in a financial organisation’s assets, liabilities or off-balance sheet items, through the execution or processing of transactions (either product or service), or through a combination of exposures across these broad categories.

The potential for loss reflects the size of the position and the extent of loss given a particular adverse circumstance. The IDC can be exposed to various forms of credit risk concentration which, if not properly managed, may cause significant losses that could threaten its financial health. Accordingly the IDC considers the management (including measurement and control) of its credit concentrations to be of vital importance. There is recognition in Basel II that portfolios of financial institutions can exhibit credit concentrations and that prudently managing such concentrations is one of the important aspects in effective credit risk management. However, despite the recognition of credit concentrations as important sources of risk for portfolios, there is no generally accepted approach or methodology for dealing with the issue (including measurement) of concentration particularly with respect to sector or industry concentration.

Concentrations within a lending and/or investment portfolio can be viewed in a variety of ways: by borrower, product type, collateral type, geography, economic sector and any other variable that may be associated with a group of credits. Investment or credit concentrations are considered to be a large group of exposures that respond similarly to the same stresses. These stresses can be:- Sensitivity to a certain industry or economicfactors;- Sensitivity to geographical factors, either a single country or region of interlinkedones;- Sensitivity to the performance of a single company or counterparty;and/or- Sensitivity to a particular risk mitigation technique, e.g. a particular collateral type.

The IDC has various established methodologies for the management of the credit concentrations it is exposed to and has established risk concentration limits, thresholds and policies for:- Exposure to a single obligor or counterparty- A group of related parties


- Geographical locations;and- Economicsectors.

The concentration limits and thresholds are reviewed on an annual basis or sooner should the need arise. The status of the IDC investment book is reported to IDC Executive Management, the Board Risk and Sustainability Committee and the IDC Board on a regular basis.

Counterparty and related party limits The need for Counterparty and related party limits are to identify and protect the IDC’s Statement of Financial Position and Statement of Comprehensive Income from significant losses/volatility which threaten financial sustainability, should a counterparty default or experience material loss in value. A Counterparty is defined as IDC’s client whereas a related party is any legal entity to whom the IDC has a credit exposure to, which has one or more of the following similarities with another client which IDC has or had a credit exposure to:- Shareholding of more than50%,- Management control,- Revenue or expenses reliance of 51% or more,and/or- Provision of security for 51% or more of IDC’sexposure.

The Basel principles for the management of credit risk indicate in particular, that an important element of credit risk management is the establishment of exposure limits on single counterparties and groups of connected counterparties. In determining the recommended Counterparty limit for the IDC, its strategic objectives are taken into account.

Africa Portfolio and regional limits and country thresholds Country risk refers to risk(s) associated with investing or lending in a country, arising from possible changes in the business environment that may adversely affect operating profits or the value of assets in the host country. These risks include political risk, exchange rate risk, economic risk, sovereign risk and transfer risk, and an investment’s returns could suffer as a result of political changes or instability in a country.

The focus of the IDC’s activities in the African continent is determined by its mandate and managed through our investment criteria and regional investment limits, including country thresholds. Country thresholds, enables effective risk management of country concentration risk. The IDC’s objectives are to contribute to the economic integration and industrial development in SADC and the Rest of Africa. The IDC views Africa in terms of South Africa, the Southern African region and the Rest of Africa. This distinction is evident from the importance that the South African Government places on Southern Africa relative to the rest of the Continent. As such the Corporation’s activities are weighted in favour of Southern Africa in terms of budget allocation and resultant exposure. In order for IDC to achieve its mandate in the Southern African region and Rest of Africa, the Corporation focuses on being a catalyst for sustainable economic change.

Given the importance of the IDC’s mandate and its objectives, in conjunction with the consistent improvement of the African economic landscape, both in performance and risk profile, Portfolio and Regional Limits and Country Thresholds are reviewed at least on an annual basis in order to support and enhance the developmental objectives of the IDC’s strategy as well as its vision and mission statement.

The IDC continues to diversify its regional funding profile from being historically concentrated in the developed regions to other less developed provinces.

Should approval of a transaction result in breach of this limit explicit approval is required from the Board Investment Committee.

3. Financial risk management (continued)

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S c o n t i n u e d



Geographical analysisGroup Company

Loans and advances to clients

Investment Securities Loans and advances to clients

Investment Securities

Figures in Rand million 2018 2017 2018 2017 2018 2017 2018 2017Carrying amount as per Note 8 and 9

30 660 26 673 57 516 57 635 28 564 25 802 35 941 36 810

Concentration by location:South Africa 22 505 20 312 55 184 54 765 20 409 19 441 33 609 33 940SADC 2 605 2 562 712 945 2 605 2 562 712 945Rest of Africa 5 550 3 799 164 231 5 550 3 799 164 231Outside Africa - - 1 456 1 694 - - 1 456 1 694

30 660 26 673 57 516 57 635 28 564 25 802 35 941 36 810

Carrying value of available-for-sale investments, excluding investments in subsidiaries, associates and joint ventures.

Economic industry limits

Managing industry concentration remains one of the key strategic priorities of the Corporation. Concentration risk in the context of industries generally results from an uneven distribution of an institution’s exposure to specific industries which can generate losses large enough to jeopardise its solvency or profitability. Concentrations of credit exposures in industries can pose risks to the earnings and capital of any financial institution in the form of unexpected losses. One of the risk management techniques of managing industry risk concentration entails the establishment of concentration limits, the monitoring and analysis thereof. The monitoring and limiting of the concentration of exposures in certain industry is necessary to reduce the risk of an exposure to a significant downturn in a particular industry in time, and thus to be able to avoid losses, as far as possible, by implementing counter measures (e.g. withdrawing from, reducing or hedging certain exposures). Experience has shown that the earlier risks are identified, the more effectively it can be countered.

Although the IDC’s business cuts across a number of industries, it could be exposed to concentration risk by virtue of disproportionately large exposures in any of these industries. Managing and monitoring such concentrations to limit downside potential is therefore an integral part of an effective risk management programme. To avoid undue losses due to associated exposures, the IDC strives to identify potential common risk factors and minimise its aggregate exposure to these risk factors.

The goal of industry limits is for the IDC to attempt to diversify or at least identify its portfolio concentrations based on exposures to sectors and to identify concentrations of exposures that could become closely related, especially during a crisis; this provides an important mechanism to protect the long term financial sustainability of the IDC. The key challenge to establish a industry limit methodology is to ensure that it is effective in protecting the institution from credit events and is practical in its enforcement without restricting investment activities. The establishment of industry limits is aligned with the overall strategy of the IDC (including its risk appetite).

During the year under review, the IDC implemented a new methodology for the management and measuring of Credit concentration risk. The revised methodology became effective on 1 April 2017.


Industry analysisGroup Company





30 660 26 673 57 516 57 635 28 564 25 802 35 941 36 810

Concentration by Industry:Agriculture and Food 4 402 2 759 262 99 2 774 2 759 262 99Chemicals and Petroleum 1 954 1 732 22 124 21 534 1 954 1 732 646 709Finance & Insurance 1 877 1 330 98 32 1 732 459 1 32Metals and Machinery 5 236 2 976 9 656 10 144 4 953 2 976 9 656 10 144Mining 2 680 4 706 17 786 16 910 2 680 4 706 17 786 16 910Other Manufacturing 1 867 1 568 626 1 615 1 867 1 568 626 1 615Other Services 1 287 1 250 4 211 4 045 1 287 1 250 4 211 4 045Trade, Catering and Accommodation

3 367 3 381 266 254 3 367 3 381 266 254

Transport, Communication and Utilities

7 990 6 971 2 487 3 002 7 950 6 971 2 487 3 002

30 660 26 673 57 516 57 635 28 564 25 802 35 941 36 810

Carrying value of available-for-sale investments, excluding investments in subsidiaries, associates and joint ventures.

Internal rating model and pricing

The changing banking regulatory requirements and increased focus by international and local DFIs to incorporate Basel II best practice risk management makes it increasingly important for IDC to regularly measure credit risk and ensure that risk costs are transparent and appropriately accounted for. IDC therefore updated and redesigned its Project Finance and SME/Middle market rating and pricing methodologies and models with the assistance of consultants. These models were fully implemented during the 2017 financial year.

The rating and pricing methodology follows a two-step approach namely; rating which is incorporated into the pricing solution for debt, equity, guarantee and mezzanine finance transactions.

The models offer amongst others, the following key value added features:- Calculation of an Expected Loss ( EL), where EL = (PD*EAD*LGD), which is included as a risk margin in the price of a facility

based on the client’s riskiness;- Customised qualitative factors based on consultation with industry specialists in the business units to reflect specific IDC

industry focus, when rating a client;objectively determine the credit quality of individual clients as well as the portfolio;- Quantification of the development score impact into a ZAR amount.

The key objectives of internal rating methodologies and related rating models are:- To assess the overall credit or investment risk on a quantitative and objective basis;- To objectively determine the credit quality of individual clients as well as the portfolio;- To aid in portfolio analysis;- To allow migration analysis of individual clients as well as the portfolio; and- To assist in identifying which clients are due for review.





Maximum credit risk exposureGroup Company





30 660 26 673 57 516 57 635 28 564 25 802 35 941 36 810

Individually impairedLow risk 903 719 1 884 1 817 880 591 1 884 1 817Medium risk 4 095 5 090 1 081 1 048 4 045 4 836 1 081 1 018High risk 2 837 2 572 476 604 2 176 2 055 476 599Gross amount 7 835 8 381 3 441 3 469 7 101 7 482 3 441 3 434Allowance for impairment (4 168) (3 037) (2 507) (2 428) (3 504) (2 434) (2 507) (2 428)Carrying amount 3 667 5 344 934 1 041 3 597 5 048 934 1 006Past due but not impairedLow risk 141 122 - - 113 90 - -Medium risk 619 1 754 - - 619 1 747 - -High risk 297 409 - - 296 409 - -Carrying amount 1 057 2 285 - - 1 028 2 246 - -Past due comprises of:00 – 30 days 170 35 - - 145 35 - -31 – 60 days 60 63 - - 60 63 - -61 – 90 days 58 24 - - 58 24 - -91 – 120 days 25 109 - - 24 109 - -120 days + 744 2 054 - - 741 2 015 - -Carrying amount 1 057 2 285 - - 1 028 2 246 - -Neither past due nor impairedLow risk 8 416 6 168 41 906 38 687 6 837 5 653 20 331 17 897Medium risk 12 569 10 587 14 378 17 858 11 256 10 579 14 378 17 858High risk 5 953 3 253 298 49 6 838 3 230 298 49Carrying amount 26 938 20 008 56 582 56 594 24 931 19 462 35 007 35 804Portfolio impairment (1 002) (964) - - (992) (954) - -Total carrying amount 30 660 26 673 57 516 57 635 28 564 25 802 35 941 36 810Carrying value of renegotiated loans

3 869 3 465 5 206 4 132

The IDC loan book is reviewed on a regular basis, by IMC Loans, which monitors and manages the quality and arrears on a proactive basis. Clients are classified according to their risk profiles based on the most recent available financial information and repayment profile. A low risk client is a client that is not in arrears and for which no impairment triggers have been identified. A medium risk client is one which is in arrears by more than 90 days and for which no impairment triggers have been identified. A high risk client is one who is in arrear for more than 90 days and for whom impairment triggers have been identified and who fails to respond to initial legal action (e.g. letter of demand). High risk clients include those for which legal action is in progress or where the client has ceased manufacturing or has been placed in liquidation.

Impaired loans and investments

Impaired loans and investments are loans and investments for which the Group determines that it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan/investment agreements.


Past due but not impaired loans

These are loans and securities where contractual interest or principal payments are past due but the Group believes that impairment is not appropriate on the basis of level of security/collateral available and/or the stage of collection of amounts owed to the Group.

Allowances for impairment

The Group establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loan loss allowance on the entire portfolio.

Renegotiated loans

Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s financial position and where the Group has made concessions that it would not otherwise consider. Once the loan is restructured it remains in this category independent of satisfactory performance after restructuring.

Collateral

The Group holds collateral against loans and advances to clients in the form of mortgage bonds over property, other registered securities over assets and guarantees. Estimates of fair values are based on the value of collateral assessed at the time of borrowing and are generally not updated except when a loan is individually assessed as impaired.

An estimate of the fair value of collateral held against financial assets is shown below:

Figures in Rand million 2018 2017 2018 2017IDC financing activities* (R’m)Against impaired assets General notarialbond 16 14 16 14Special notarial bonds 300 280 300 280Mortgage bond 1 032 890 1 032 890Other 78 93 78 93

1 426 1 277 1 426 1 277Gross value of impaired loans 7 835 8 381 7 101 7 482

IDC financing activities* (R’m) 2018 2017 2018 2017Against loans in arrears and not impairedGeneral notarial bond 1 069 1 045 1 069 1 045Mortgage bond 200 240 200 240Special notarial bond 305 300 305 300Other 7 3 7 3

1 581 1 588 1 581 1 588Gross value of loans in arrears not impaired 1 057 2 285 1 028 2 246

Liquidity risk

Liquidity risk refers to the risk that the Corporation will not be able to meet its obligations as they become due, increase in financing assets, including commitments and any other financial obligations (funding liquidity risk), or will only be able to do so at materially disadvantageous terms (market liquidity risk). Liquidity risk is governed by the Liquidity and Liquidity Risk Premia policy and the Asset and Liability Committee (ALCO) provides the objective oversight and makes delegated decisions within the prudential guidelines and policies established by the Board related to liquidity risk exposures





Sources of liquidity risk include:- Unpredicted accelerated drawdowns on approved financing or call-ups of guarantee obligations;- Inability to roll and/or access new funding;- Unforeseen inability to collect what is contractually due to the Group;- Liquidity stress at subsidiaries and/or other SOE’s;- A recall without due notice of on-balance sheet funds managed by the Group on behalf of 3rd parties;- A breach of covenant(s), resulting in the forced maturity of borrowing(s); and- Inability to liquidate assets in a timely manner with minimal risk of capital losses.

Day-to-day liquidity management is performed by Corporate Treasury within Board approved treasury limits, such that:- At all times, there is sufficient readily-available liquidity to meet probable operational cash flow requirements for a rolling three

months period; and- Excess liquidity is minimised in order to limit the consequential drag on profitability.

Liquidity coverage ratios are used to ensure that suitable levels of unencumbered high-quality liquid assets are held to protect against unexpected yet plausible liquidity stress events. Two separate liquidity stresses are considered, firstly an acute three month liquidity stress (Scenario 1) impacting strongly on both funding and market liquidity and secondly, a protracted twelve month liquidity stress (Scenario 2) impacting moderately on both funding and market liquidity. Approved high-quality liquid assets include cash, near-cash, committed facilities, as well as a portion of the Group’s listed equity investments.

Consolidated local and foreign currency liquidity coverage Scenario 1 Scenario 22018Approved high-quality liquid assets 13 763.1 13 763.1Net stressed outflows (9 428.4) (11 068.1)Liquidity coverage ratios (%) 146.0 124.32017Approved high-quality liquid assets 13 344.0 13 344.0Net stressed outflows (5 628.7) (9 421.0)Liquidity coverage ratios (%) 237.1 141.6

Structural liquidity mismatch ratios are used to ensure adequate medium- to long-term liquidity mismatch capacity. This is done by restricting, within reasonable levels, potential future borrowing requirements related to existing business. The structural liquidity mismatch is based on conservative cash flow profiling with the added assumption that liquidity in the form of high- quality liquid assets are treated as readily-available (i.e. recognised in the first time bucket).

Consolidated local and foreign currency structural liquidity mismatch (SLM) 0-18 months 0-36 months 0-36 months2018Cumulative liquidity positive variance 2 629.3 1 416.0 7 735.1Funding related liabilities 19 897.5 19 238.2 15 689.5SLM (%) 13.2 7.4 49.32017Cumulative liquidity positive variance 8 199.8 6 130.6 8 458.5Funding related liabilities 19 496.8 16 432.6 15 278.1SLM (%) 42.1 37.3 55.4

Market risk

Market risk is the risk that the value of a financial position or portfolio will decline due to adverse movements in market rates. In respect of market risk, the Group is exposed to interest rate risk, exchange rate risk and equity price risk. Market risk is governed by the Asset and Liability Management policy and the Asset and Liability Committee (ALCO) provides the objective oversight and makes delegated decisions related to market risk exposures.


Interest rate risk

Interest rate risk is the risk that adverse movements in market interest rates may cause a reduction in the IDC’s future net interest income and/or economic value of its shareholder’s equity.

Sources of interest rate risk include:- Repricing risk, as a result of interest-bearing assets and liabilities which reprice within different periods. This also includes the

endowment effect caused by an overall quantum difference between interest-bearing assets and liabilities;- Basis risk, as a result of the imperfect correlation between interest rate changes on interest-bearing assets and liabilities which

reprice within the same period (spread volatility);- Yield curve risk, as a result of unanticipated yield curve shifts (twists and pivots); and- Optionality, as a result of embedded options in the Group’s assets and liabilities. This risk is mitigated by imposing contract

breakage penalties on prepayments and early settlements.

The sensitivity to interest rate shocks and/or changes in interest-bearing balances is measured by means of earnings and economic value approaches. The former focuses on quantifying the impact on net interest income over the next twelve months whereas the latter is used to gauge the impact on the fair market values of assets, liabilities and equity.

Interest rate sensitivity mismatch – Finance activities

RSA and RSL (Rate sensitive assets and rate sensitive liabilities)

Interest rate sensitivity mismatch 0-3 months 4-6months 7-12monthsMarch 2018Cumulative interest rate sensitivitySA Rand 7 428.8 7 479.1 7 519.1

US Dollar (109.4) (295.3) (286.2)Euro (18.6) 9.9 7.3March 2017Cumulative interest rate sensitivitySA Rand 6 683.9 6 205.3 5 778.4US Dollar (21.1) (260.9) (261.7)Euro (38.6) (5.7) (8.4)

Furthermore, interest rate risk management is monitored through the sensitivity analysis done to the financial assets and liabilities.

A 100 basis points (bps) increase/(decrease) in market interest rates resulted in the following sensitivities:

Next twelve months net interest income sensitivity

Effect of a 100 basis point increase/(decrease) in market rates:

2018 Rand US Dollar EuroR mil+ 100 bps rate shock 79.7 (1.9) 0.03- 100 bps rate shock (79.7) 1.9 (0.03)2017R mil+ 100 bps rate shock 65.5 (1.8) (0.1)- 100 bps rate shock (65.5) 1.8 0.1





Exchange rate risk

Exchange risk is the risk that adverse changes in exchange rates may cause a reduction in the Group’s future earnings and/or its shareholders equity.

In the normal business, the Group is exposed to exchange rate risk, through its trade finance book and exposure to investments in and outside Africa. The risk is further divided into:- Transaction risk arises from transactions undertaken by the Group in a foreign currency that will ultimately require an actual

conversion in the foreign exchange markets from one currency to another, thus having a direct cash effect;- Translation risk arises from the periodic translation consolidation of the financial statements of the Group and its subsidiaries

and affiliates for the purpose of uniform reporting to shareholders; and- Any open (unhedged) position in a particular currency gives rise to exchange rate risk. Open positions can be either short (i.e.

the Group will need to buy foreign currency to close the position) or long (i.e. the Group will need to sell foreign currency to close the position) with the net open foreign currency position referring to the sum of all open positions (spot and forward) in a particular currency.

For purposes of hedging, net open foreign currency positions are segmented into the following components:- All exposures related to foreign currency denominated lending and borrowing; and- All foreign currency denominated payables in the form of operating and capital expenditure, as well as foreign currency

denominated receivables in the form of dividends and fees.

Net open foreign currency positions US Dollar Euro2018Foreign currency lending and borrowing 4.5 1.0-Loans (assets) 465.9 43.5-Derivative hedges (FEC’s) 134.3 59.7-Borrowings (liabilities) 595.7 102.2Other net (payables) / receivables 5.5 2.1Net open foreign currency positions 10.0 3.12017Foreign currency lending and borrowing 1.8 (1.3)-Loans (assets) 439.7 42.6-Derivative hedges (FEC’s) 123.6 89.5-Borrowings (liabilities) (561.5) (133.4)Other net (payables) / receivables 3.2 5.5Net open foreign currency positions 5.0 4.2

The Group does not hedge its exchange rate risk on foreign currency denominated shareholder loans, equity and quasi equity investments.

Equity price risk

Equity price risk is the risk that adverse movements in equity prices may cause a reduction in the value of the Group’s investments in listed and/or unlisted equity investments, and therefore also its future earnings and/or value of its shareholders equity.

Sources of equity price risk include:- Systematic risk or volatility in relation to the market as a whole; and- Unsystematic risk or company-specific risk factors.

The investment portfolio’s beta is used as an indication of systematic risk which is not diversifiable. In light of the long-term nature of the Group’s investments, unsystematic risk is managed by means of diversification.


Sensitivity analysis were performed on the Group’s equity portfolio, to determine the possible effect on the fair value should a range of variables change, e.g. cash flows, earnings, net asset values etc. These assumptions were built into the applicable valuation models.

In calculating the sensitivities for investments the key input variables were changed in a range from -10% to +10%. The effect of each change on the value of the investment was then recorded. The key variables that were changed for each valuation technique were as follows:- Discounted cash flow: Net income before interest and tax- Price earnings: Net income- Listed companies: Share price- Forced sale net asset value: Net asset value.

From the table below it is evident that a 10% increase in the relevant variables, will have a R10 821 million increase in the equity values as at 31 March 2018 (2017: R9 521 million) and a 10% decrease will lead to a R10 003 million decrease in the equity values (2017: R9 521 million).

Period 10% increase 10% decreaseMarch 31, 2018 R 10 821m -R 10 003mMarch 31, 2017 R 9 521m -R 9 521m

Capital management

The IDC is accountable to its sole shareholder, the Economic Development Department. The performance as well as management of IDC capital is supported by the agreement between the Corporation and the shareholder in a form of the Shareholder’s Compact which outlines the agreements between the two parties.

Regulatory capital

IDC is not required by law to keep any level of capital but has to utilise its capital to achieve the shareholder’s mandate.The IDC Act of 1940, as amended, dictates that IDC can be geared up to a 100% of its capital.

Risk appetite

The Board approved risk appetite limit serves as a monitoring tool to ensure that the impact of investment activities in the Corporation do not have a negative impact on the Corporation’s financial position.

There were no changes to the Group’s approach to capital management during the year.





4. Fair value information

The table below analyses assets and liabilities carried at fair value:

Figures in Rand million Level 1 Level 2 Level 3 TotalGroup 2018Derivative assets - 142 - 142Biological assets - - 52 52Investment property - 403 - 403Land and buildings - - 2 389 2 389Listed shares 45 621 - - 45 621Unlisted shares - - 5 005 5 005Preference shares - - 6 890 6 890Assets held for sale - 4 508 - 4 508

45 621 5 053 14 336 65 010Derivative liabilities - 139 - 139

Group 2017Derivative assets - 76 - 76Biological assets - - 51 51Investment property - 366 - 366Land and buildings - - 3 488 3 488Furniture and fixtures - 35 - 35Listed shares 43 048 - - 43 048Unlisted equities - - 7 335 7 335Preference shares - 104 7 148 7 252Assets held for sale - 1 676 - 1 676

43 048 2 257 18 022 63 327Derivative liabilities - 27 - 27

Company 2018 Derivative assets - 108 - 108Investment property - 32 - 32Furniture and fixtures - 38 - 38Listed shares 24 142 - - 24 142Unlisted shares - - 4 909 4 909Preference shares - - 6 890 6 890Investments in subsidiaries 34 199 - 12 196 46 395Investments in associates 1 648 - 21 975 23 623

59 989 178 45 970 106 137Derivative liabilities - 126 - 126

Company 2017Derivative assets - 70 - 70Investment property - 15 - 15Furniture and fixtures - 30 - 30Listed shares 22 243 - - 22 243Unlisted shares - - 7 315 7 315Preference shares - 104 7 148 7 252Investments in subsidiaries 32 844 - 11 339 44 183Investments in associates 1 791 - 17 391 19 182

56 878 219 43 193 100 290Derivative liabilities - 16 - 16


Reconciliation of assets and liabilities measured at level 3

Note(s) Opening balance

Gains/losses

recognised in profit or

loss

Gains/losses recognised

in other comprehensive

income

Purchases Sales Transfers out of level 3

Closing balance

Group - 2018AssetsBiological assets 51 1 - - - - 52Land and buildings 3 488 (30) (1 336) 321 (54) - 2 389Unlisted shares 7 335 128 (2 283) 1 258 (1 489) - 4 949Preference shares 7 148 52 (1 258) 953 - - 6 895

18 022 151 (4 877) 2 532 (1 543) - 14 285

Group - 2017AssetsBiological assets 215 (110) - - - (54)* 51Land and buildings 3 141 (78) 328 107 (10) - 3 488Unlisted shares 7 034 (3) 1 306 147 (1 149) - 7 335Preference shares 7 401 (2 215) 298 2 191 (527) - 7 148

17 791 (2 406) 1 932 2 445 (1 686) (54) 18 022

Note(s) Opening balance

Gains/losses

recognised in profit or

loss

Gains/losses recognised

in other comprehensive

income

Purchases Sales Transfers out of level 3

Closing balance

Company - 2018AssetsUnlisted shares 7 315 86 (2 568) 562 (799) - 4 596Preference shares 7 148 (256) (186) 514 (325) - 6 895Investments in subsidiaries

11 339 (2 050) 2 587 520 (1 729) - 10 667

Investments in associates 17 391 (2 698) 4 897 2 332 - - 21 92243 193 (4 918) 4 730 3 928 (2 853) - 44 080

Company - 2017AssetsUnlisted shares 6 403 (3) 73 842 - - 7 315Preference shares 7 401 (2 215) 469 2 191 (698) - 7 148Investments in subsidiaries

12 373 (2 469) (3 019) 4 454 - - 11 339

Investments in associates 14 210 (1 155) 3 792 544 - - 17 39140 387 (5 842) 1 315 8 031 (698) - 43 193

4. Fair value information (continued)



* Adoption of the new biological asset statement in 2017 resulted in two subsidiaries, Green Valley Nuts and Rotondo Walnuts, reclassifying bearer plants from biological assets to property, plant and equipment. This resulted in a transfer of R54 million out of level 3 assets in the Group.


Valuation processes applied by the Group

The Group’s main instruments of monitoring the performance of its investee companies are through quarterly IMC meetings, including but not limited to the PACS (payment and collection system) regular client review visits, as well as by way of analysis of management accounts and audited financial statements.

The Post Investment Monitoring Department (PIMD) creates a focused approach to the monitoring of IDC investments. One of the key monitoring activities is the IMC Equity meetings, wherein the calculations of fair values and impairments are assessed and approved by the Committee. The IMC Equity Meetings are normally held three times per financial year, in April, August and December for reporting periods of February, June and September respectively.

Valuation techniques using observable inputs

The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements:

Level 1

Instruments valued with reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available and the price represents actual and regularly occurring market transactions on an arm’s length basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. These include listed shares.

Level 2

Instruments valued using inputs other than quoted prices as described above for Level 1 but which are observable for the instrument, either directly or indirectly, such as:

• Quoted price for similar assets or liabilities in an active market;• Quoted price for identical or similar assets or liabilities in inactive markets;• Valuation model using observable inputs; and• Valuation model using inputs derived from/corroborated by observable market data. • These include derivative financial instruments, investment properties and option pricing models.

Valuation techniques using unobservable inputs

Level 3

Instruments valued using inputs not based on observable data and the unobservable inputs have a significant effect on the instruments’ valuation. This category includes instruments that valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Valuation techniques include price earnings, net present value and discounted cash flow models, comparison with similar instruments for which market observable prices exist and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates and discount rates.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.


Price Earnings (PE) Valuation

The PE valuation method is the first valuation option, but has only been used in respect of companies with:

• At least 2 years’ profit history;• Forecast/Budgeted steady growth in profits;• Is low risk;• Has a good year on year performance; and• a long history of consistent return - operating in an industry that is not prone to fluctuations.

Free Cash Flow Valuation (FCF)

FCF is the most widely used valuation method by the Group on its Level 3 financial instruments. The below approach is followed:

• All inputs are substantiated, especially in instances where there are prior year losses;• This method is used without exception for valuing all projects and start-ups unless the going concern principle is in doubt.

In the case where a project has a limited remaining life (e.g. Mining operations or single contract with a determined end), a separate “Limited Life” FCF model is used.

Net Asset Value Valuation (NAV)

Forced-Sale basis

The Group uses the Forced-Sale NAV method in the following circumstances:

• Where the going concern assumption is not applicable; or• Where it has been motivated that no other model is appropriate.

NAV - Going Concern

The Group uses NAV (without applying forced sale) where it can be motivated that no other model is appropriate based on the following conditions:

• An entity is consistently making losses and not meeting budgets (excluding start-up operations);• An entity has material variances between actual and budgeted figures;• An entity operates in high volatile sector making it almost impossible to budget;• An entity has completed all studies necessary to implement a project but has however not yet secured the necessary capital to

fully fund the implementation of the project;• An entity is not fully funded and there is no clear indication that it will obtain the necessary funding to complete the project/

expansion/continue operations.

4. Fair value information (continued)




Quantitative information about fair value measurements using significant unobservable inputs (Level 3)

Description Valuation techniques Unobservable input RangeEquity InstrumentsAll sectors Risk-free rate 7.63%

Expected long term growth 5.00%Agro-processing Discounted cash flow Cost of Debt 5.1% - 12.7%

Discount factor 7.7% - 23.4%Sector beta 1.00

Price-earning valuation Industry/sector PE ratio 16.5% - 22.8%Risk Adjusted PE ratio 6.9% - 14.2%Expected long term growth 5%

Basic Metals and Mining Discounted cash flow Cost of Debt 4.1% - 12.8%Discount factor 6.7% - 21.5%Sector beta 1.00

Basic and Speciality Chemicals Discounted cash flow Cost of Debt 4.5% - 11.9%Discount factor 4.9% - 14.0%Sector beta 1.00

Automotive Discounted cash flow Cost of Debt 6.3% - 13.9%Discount factor 12.6% - 16.9%Sector beta 1.00

Light Manufacturing & Tourism Discounted cash flow Cost of Debt 9.9% - 12.5%Discount factor 8.0% - 16.1%Sector beta 1.00

Heavy Manufacturing Discounted cash flow Cost of Debt 3.8% - 9.5%Discount factor 13.7% - 20.2%Sector beta 1.00 - 1.01

Chemical Products Discounted cash flow Cost of Debt 7.9% - 12.5%Discount factor 14.1% - 17.4%Sector beta 1.00

New Industries Discounted cash flow Cost of Debt 7.9% - 15.4%Discount factor 5.6% - 21.5%Sector beta 1.00

Biological assetsPecan nut trees - fruit on trees Discounted cash flow Pecan nut yield - tonnes per

hectare2 375 tonnes per hectare when

mature in 8 years Pecan nut price R 49 per kg in shellDiscount rate 16%Risk of damage due to forces of nature

10%

Discounted cash flow

Significant increases in any of the inputs in isolation would result in lower fair values. Significant decreases in any of the inputs in isolation would result in higher fair values.

Price-earning valuation

The fair value would increase (decrease) if:

- The risk-adjusted PE ratio were higher (lower) or- The expected long term growth were higher (lower)


5. Cash and cash equivalents

Group CompanyFigures in Rand million 2018 2017 2018 2017Cash and balances with bank 3 265 2 652 2 682 1 621Negotiable securities 2 891 5 047 3 044 5 039Bank overdraft (19) (103) - -

6 137 7 596 5 726 6 660

Current assets 6 156 7 699 5 726 6 660Current liabilities (19) (103) - -

6 137 7 596 5 726 6 660

6. Trade and other receivables

Group CompanyFigures in Rand million 2018 2017 2018 2017Trade receivables 1 800 1 916 1 254 605Prepayments 46 47 - -Other receivable 1 505 261 3 4

3 351 2 224 1 257 609

Trade and other receivables pledged as security

Prilla, a subsidiary, entered into an invoice discounting agreement with Nedbank Limited whereby it has discounted all of its debtors and has given first cession of all receivables as security for a R115 million finance facility advanced to it.

Fair value of trade and other receivables

Group CompanyFigures in Rand million 2018 2017 2018 2017Trade and other receivables 3 351 2 224 1 257 609

7. Inventories

Group CompanyFigures in Rand million 2018 2017 2018 2017Finished goods 614 1 020 - -Raw materials, components 270 696 - -Phosphate rock 195 404 - -Consumable stores 570 561 4 4Work in progress 99 90 - -

1 748 2 771 4 4

Group inventory to the value of R 3.45 million was written down as a net realisable value adjustment at 31 March 2018 (2017: R 21.4 million).




8. Loans and advances

Group CompanyFigures in Rand million 2018 2017 2018 2017Loans and advances to clients* 35 830 30 674 33 060 29 190Specific impairment of loans and advances (4 168) (3 037) (3 504) (2 434)Portfolio impairment of loans and advances (1 002) (964) (992) (954)

30 660 26 673 28 564 25 802

* Interest rates range between 0.4% and 26%

Reconciliation of provision for impairment of loans and receivables

Specific impairment of loans and advancesOpening balance 3 037 5 058 2 434 4 490– Charge for the year 1 900 (946) 2 157 (725)–Recoveries (55) (15) (55) (15)– Effect of foreign currency movements (13) (89) (13) (89)Write-offs (701) (971) (1 019) (1 227)

4 168 3 037 3 504 2 434

Portfolio impairment of loans and advancesOpening balance 964 558 954 548Impairment charge for the year 38 406 38 406

1 002 964 992 954

Total allowances for impairmentSpecific allowances for impairment 4 168 3 037 3 504 2 434Collective allowance for impairment 1 002 964 992 954

5 170 4 001 4 496 3 388

Maturity of loans and advances– due within three months 1 664 1 729 1 664 1 729– due after three months but within one year 4 865 3 507 4 117 2 855– due after one year but within two years 5 300 4 530 5 075 4 278– due after two years but within three years 4 779 4 303 4 628 4 079– due after three years but within four years 3 800 3 414 3 746 3 304– due after four years but within five years 4 423 2 718 4 368 2 663– due after five years 10 999 10 473 9 462 10 282– impairment of loans and advances (5 170) (4 001) (4 496) (3 388)

30 660 26 673 28 564 25 802


9. Investments

Group CompanyFigures in Rand million 2018 2017 2018 2017Listed equities 45 629 43 284 24 150 22 479Unlisted equities 5 244 7 335 5 148 7 315Preference shares 9 150 9 340 9 150 9 340Preference shares - option values - 104 - 104

60 023 60 063 38 448 39 238Impairment of listed shares (8) (236) (8) (236)Impairment of unlisted shares (239) - (239) -Impairment of preference shares (2 260) (2 192) (2 260) (2 192)Shares at fair value 57 516 57 635 35 941 36 810

Specific allowance for impairment

Listed equitiesBalance at 1 April 236 324 236 324Impairment reversal for the year (228) (88) (228) (88)

8 236 8 236

Unlisted equitiesBalance at 1 April - 6 - 6Impairment charge/(reversal) for the year 239 (6) 239 (6)

239 - 239 -

Preference sharesBalance at 1 April 2 192 1 719 2 192 1 719Impairment charge for the year 68 473 68 473

2 260 2 192 2 260 2 192

Comprises:Impairment of listed shares 8 236 8 236Impairment of unlisted shares 239 - 239 -Impairment of preference shares 2 260 2 192 2 260 2 192

2 507 2 428 2 507 2 428

10. Discontinued operations or disposal groups or non-current assets held for sale

SEFA

On 20 November 2013, the Board of Directors of sefa approved the sale of certain properties in the property portfolio. Investment properties held-for-sale are current assets.

Additionally in a board meeting on 25 May 2015 it was resolved that all property should be transferred to Khula Business Premises, and thus all the properties at sefa company level will need to be reclassified from investment property to investment property held for sale. The resolution has no impact on sefa group level due to Khula Business Premises being a wholly owned subsidiary of sefa.




IDC

On 20 April 2016 a decision was made to sell the IDC-owned aircaft. The sales price agreed upon was $5.1 million (USD) and the sale was finalised in the first half of the 2018 financial year.

SCAW SOUTH AFRICA

The IDC shareholding was increased from 74% to 100% after the winding up of the ESOP Trust and the corporatisation of Scaw’s Grinding Media and Cast Divisions into two separate entities, which was implemented on the 1st of March 2018. The former BEE shareholder in Scaw swopped its previous 22% shareholding in Scaw for a 4% shareholding in Grinding Media SA.

Grinding Media and Cast Products divisions were carved-out of Scaw and began operating independently from the 1st of March 2018.

The remaining Scaw (‘Remainco’) constitute Rolled, Wire Rod Products and the main property assets of Scaw.

Remainco was sold on the 1st of May (after the financial year-end) and the IDC shareholding decreased from 100% to 26%, Remainco has been classified as a Non-current Asset held-for-sale in this set of financial statements.

Assets and liabilities of disposal groups held for sale: As at 31 March 2018, Remainco’s net assets were classified as held for sale and comprised the following assets and liabilities:

Group CompanyFigures in Rand million 2018 2017 2018 2017Profit and lossRevenue 3 330 2 421 - -Expenses (3 868) (2 783) - -Net loss before tax (538) (362) - -Tax - - - -

(538) (362) - -Assets and liabilities

Non-current assets held for saleAircraft - 67 - 67Property, plant and equipment 2 436 899 - -Intangible assets - 1 - -Deferred tax asset - 2 - -Other assets 30 - - -Inventories 844 298 - -Trade and other receivables 1 056 385 - -Cash and cash equivalents 128 11 - -- SEFA (Investment property) 14 12 - -

4 508 1 676 - 67Liabilities of disposal groupsOther financial liabilities 2 108 368 - -


11. Investments in subsidiaries

CompanyFigures in Rand million 2018 2017Fair value of investments 41 393 39 598Impairment of shares (2 678) (1 955)Loans receivable 8 548 7 438Impairment of loans (868) (898)

46 395 44 183

IDC subsidaries Share class

% interest Shares at cost and fair value

IDC net indebtedness to the holding

company

IDC net indebtedness by the holding

company2018 2017 2018 2017 2018 2017

Arengo 316 Ordinary 100 % - - 159 159 - -ADC Cables Ordinary 62 % 35 35 316 301 - -Dymson Nominee Ordinary 100 % 2 2 47 45 - -Findevco Ordinary 100 % - - - - (373) (373)Foskor Ordinary 59 % 205 8 956 700 - -Foskor Preference 3 177 3 007 - - - -Herdmans SA Ordinary 100 % - - - - - -Impofin Ordinary 100 % - - - - (88) (88)Kindoc Investments Ordinary 100 % - - 154 154 - -Kindoc Sandton Properties Ordinary 100 % - - 177 183 - -Konbel Ordinary 100 % - - - - (10) (10)Konoil Ordinary 100 % - - - - (12 720) (12 038)Prilla Ordinary 100 % 14 14 324 340 - -Scaw South Africa Ordinary 74 % - - 4 764 3 701 - -Scaw South Africa Preference 500 1 744 - - - -Small Enterprise Finance Agency (SEFA)

Ordinary 100% - - - - - -

Sustainable Fibre Solutions Ordinary 100 % 4 4 134 131 - -Sheraton Textiles Ordinary 80 % - - 57 62 - -Thelo Rolling Stock Leasing Ordinary 50 % - - 981 1 162 - -Other Ordinary 144 142 479 500 - -

4 081 4 956 8 548 7 438 (13 191) (12 509)Fair value adjustment 37 312 34 642 - - - -Impairment adjustment (2 678) (1 955) (868) (898) - -Fair value 38 715 37 643 7 680 6 540 (13 191) (12 509)

Legally the IDC owns 59% of Foskor, but for accounting purposes an effective 85% of Foskor is consolidated.




Subsidiaries with 50% stake

Although the Company holds 50% of the voting powers in Thelo Rolling Stock Leasing (Proprietary) Limited, the investment is considered a subsidiary because of additional voting powers granted to the IDC through its right to appoint three out of the five directors to the Board of Directors of Thelo Rolling Stock Leasing (Proprietary) Limited.

Profit and losses

The aggregate net profits and losses after taxation of subsidiaries attributable to the IDC were as follows:

Group CompanyFigures in Rand million 2018 2017 2018 2017Profits 18 1 201Losses (5) (2 209)

13 (1 008)

Included in financing are the following investments which have been made in terms of section 3 (a) of the Industrial Development Act with the approval of the State President:

Group CompanyFigures in Rand million 2018 2017 2018 2017Foskor Limited - At cost - - 8 8Sasol Limited - At cost 131 131 - -

131 131 8 8

A register of investments is available and is open for inspection at the IDC’s registered office.

Subsidiaries with material non-controlling interests

The following information is provided for subsidiaries with non-controlling interests which are material to the reporting company. The summarised financial information is provided prior to intercompany eliminations.

Subsidiary Country of incorporation

% Ownership interest held by non-controlling interest

2018 2017Foskor RSA 15 % 15 %Scaw RSA 26 % 26 %

The percentage ownership interest and the percentage voting rights of the non controlling interests were the same in all cases except for Foskor Limited where the voting rights were 41% (2017: 41%)


Summarised statement of financial position

Foskor ScawFigures in Rand million 2018 2017 2018 2017AssetsNon-current assets 5 757 5 501 - 1 668Current assets 2 584 2 930 915 2 834Total assets 8 341 8 431 915 4 502LiabilitiesNon-current liabilities 2 109 1 880 - 3 918Current liabilities 1 839 1 761 609 5 492Total liabilities 3 948 3 641 609 9 410Total net assets (liabilities) 4 393 4 790 306 (4 908)

Carrying amount of non-controlling interest 658 719 (80) (1 276)

Summarised statement of profit or loss and other comprehensive income

Foskor ScawFigures in Rand million 2018 2017 2018 2017Revenue 5 893 5 614 224 3 041Other income and expenses (6 843) (6 941) (230) (3 828)Profit/(loss)before tax (950) (1 327) (6) (787)Tax expense 188 425 - -Profit (loss) (762) (902) (6) (787)Other comprehensive income/(loss) (4) - - -Total comprehensive income (766) (902) (6) (787)Profit (loss) allocated to non-controlling interest (72) (135) - (204)

Summarised statement of cash flowsFoskor Scaw

2018 2017 2018 2017Cash flows from operating activities (395) 256 (493) 79Cash flows from investing activities (761) (518) 3 146 (79)Cash flows from financing activities 768 678 (2 800) (136)Net increase(decrease) in cash and cash equivalents (388) 416 (147) (136)

12. Investments in associates

Group CompanyFigures in Rand million 2018 2017 2018 2017Associated companies 23 769 20 170 23 601 19 160Fair value of investments – listed shares in associates - - 1 648 1 791Fair value of investments – unlisted shares in associates - - 15 321 11 901Impairment of shares - - (1 505) (1 555)Net asset value at acquisition 5 559 2 482 - -Accumulated equity-accounted income 21 843 19 588 - -Accumulated equity-accounted losses and impairments (11 800) (9 390) - -Loans receivable 10 290 8 635 10 260 8 730Impairment of loans (2 123) (1 145) (2 123) (1 707)Partnerships and joint ventures 203 191 22 22Partners’ capital 212 196 41 41Accumulated profits/(losses) (9) (5) (19) (19)

23 972 20 361 23 623 19 182

11. Investments in subsidiaries (continued)




Material associates

Companies Financial year-ends*

Country of incorporation

% holding

Total exposure

Total exposure

2018 2017BAIC Automobile SA (Pty) Ltd

RSA 35.00% 446 -

BEECO 333 RSA 23.00% 2 376 -Broadband Infraco Provides telecommunication

infrastructureRSA 26.00% 478 124

Columbus Stainless Steel Steel manufacturer RSA 24.00% 812 808Duferco Steel Processing Processes steel coil RSA 50.00% 556 523Eastern Produce Malawi Farms tea coffee and macadamia

nutsMalawi 26.80% 152 156

Hans Merensky Holds investments in timber and agricultural industries

31/12/2017 RSA 29.70% 953 879

Hulamin Limited Asset-leasing company 31/12/2017 RSA 29.60% 1 376 1 287Incwala Resources Platinum mining RSA 23.60% 650 584Karsten Boerdery Farms table grapes and dates RSA 38.20% 431 426KaXu Solar One Parabolic through solar energy farm 30/09/2017 RSA 29.00% 1 526 1 598KHI Solar One (Pty) Ltd Parabolic through solar energy farm 31/12/2017 RSA 29.00% 933 954Merafe Ltd Operates chrome and alloys plant 31/12/2017 RSA 21.78% 1 010 849Mozal S.A.R.L. Produces primary aluminium metal 31/12/2017 Mozambique 24.04% 3 089 3 584Palabora Copper Mining of various minerals RSA 20.00% 1 945 1 761Umicore Catalyst Manufactures automotive catalysts 31/12/2017 RSA 35.00% 207 219Xina Solar One Parabolic through solar energy farm 20.00% 1 067 -York Timber Ltd Sawmilling 31/12/2017 RSA 28.70% 885 764Other associates Various RSA various 4 877 5 654

23 769 20 170

* The financial year-ends for which the financial statements of the associated entities have been prepared, where they are different from that of the investor, are disclosed above.


Group CompanyFigures in Rand million 2018 2017 2018 2017Fair valueOpening fair value of shares 12 137 9 805Movement in fair values during the year:Duferco Steel Processing - 173Eastern Produce Malawi 6 2Hans Merensky 119 41Hulamin Limited (149) 33Incwala Resources (Pty) Limited (20) (228)Merafe Limited (109) 498Mozal S.A.R.L. 477 877Palabora Copper 382 137Umicore Catalyst - 131NewBEECO 333 2 283 -Other 339 668

15 465 12 137

Summarised financial information of material associates

2018Summarised statement of profit or loss and other comprehensive income from

Revenue Profit(loss) continuing operations

Other comprehensive

income

Total comprehensive

income

Dividend received from

associateBroadband Infraco 379 (122) - (122) -Columbus Stainless 13 651 457 9 466 -Duferco Steel Processing 19 451 1 567 - 1 567 -Eastern Produce Malawi 458 55 - 55 8Hans Merensky Holdings 9 806 389 - 389 7Hulamin Limited 10 160 332 - 332 14Karsten Group Holdings 900 88 - 88 7KaXu Solar One 832 (187) - (187) -KHI Solar One 312 (209) - (209) -Merafe Ltd 5 889 914 - 914 66Mozal S.A.R.L. 10 671 1 172 - 1 172 492Palabora Copper 9 912 1 193 95 1 290 -Umicore Catalyst 2 296 138 4 142 61Xina Solar One 617 17 91 (108) -York Timber Ltd 1 838 271 - 271 -


Non current assets

Current assets Non current liabilities

Current liabilities Total net assets

Broadband Infraco 1 144 99 472 144 627Columbus Stainless 2 011 5 746 463 3 461 3 833Duferco Steel Processing 1 031 1 416 806 1 340 301Eastern Produce Malawi 637 200 199 72 566Hans Merensky Holdings 3 801 2 672 1 244 1 693 3 536Hulamin Limited 3 543 3 687 953 1 628 4 649Karsten Group Holdings 1 905 882 1 042 430 1 315KaXu Solar One 6 668 815 6 882 253 348KHI Solar One 4 063 320 3 052 252 1 079Merafe Ltd 3 303 3 053 1 084 635 4 637Mozal S.A.R.L. 11 356 4 233 1 242 1 495 12 852Palabora Copper 7 384 5 607 2 261 1 495 9 235Umicore Catalyst 124 808 32 307 593Xina Solar One 9 052 970 6 915 744 2 363York Timber Ltd 4 161 897 1 546 432 3 080

12. Investments in associates (continued)




Summarised financial information of material associates

2017Summarised statement of profit or loss and other comprehensive income from

Revenue Profit(loss) continuing operations

Other comprehensive

income

Total comprehensive

income

Dividend received from

associateBroadband Infraco 390 (133) - (133) -Columbus Stainless 11 770 410 - 410 -Duferco Steel Processing 1 888 168 51 219 -Eastern Produce Malawi 365 54 - 54 10Hans Merensky 8 985 477 - 477 6Hulamin Limited 10 090 385 94 479 14Karsten Boerdery 705 213 - 213 6KaXu Solar One 1 065 (96) (36) (132) -KHI Solar One 31 180 (13) 167 -Merafe Ltd 5 702 532 - 532 -Mozal S.A.R.L. 9 868 718 - 718 450Palabora Copper 7 817 1 586 8 1 594 -Umicore Catalyst 2 764 176 1 177 44Xina Solar One - (30) (473) (503) -York Timber Ltd 953 32 - 32 -


Non current assets

Current assets Non current liabilities

Current liabilities Total net assets

Broadband Infraco 1 279 112 510 141 740Columbus Stainless 2 129 4 748 463 3 047 3 367Duferco Steel Processing 1 238 1 060 928 1 242 128Eastern Produce Malawi 37 662 12 494 11 674 6 981 31 501Hans Merensky 3 208 2 234 928 1 236 3 278Hulamin Limited 3 475 3 481 937 1 672 4 347Karsten Boerdery 1 728 1 030 1 056 419 1 283KaXu Solar One 6 937 729 6 966 165 535KHI Solar One 4 187 325 3 027 299 1 186Merafe Ltd 3 255 2 708 1 175 890 3 898Mozal S.A.R.L. 13 838 4 187 1 660 1 454 14 911Palabora Copper 5 755 5 609 1 953 1 199 8 212Umicore Catalyst 129 828 34 295 628Xina Solar One 8 220 162 5 279 627 2 476York Timber Ltd 3 531 1 070 1 536 405 2 660

GroupFigures in Rand million 2018 2017The aggregate amounts were as follows:Non-current assets 85 095 109 430Current assets 35 832 43 288

120 927 152 718

Equity 55 456 80 311Non-current liabilities 47 715 48 434Current liabilities 17 756 23 973

120 927 152 718

Statement of Comprehensive IncomeRevenue 93 094 64 696Profits 9 360 8 934Losses (1 896) (589)


Partnerships and joint ventures % interest Total exposure

2018

Total exposure

2017The Vantage Capital Fund Trust 100 168 178

Profits 2 3

Group CompanyFigures in Rand million 2018 2017 2018 2017The aggregate amounts were as follows:Non-current assets 133 169 25 78Current assets 228 256 - -

361 425 25 78

Equity 361 425 25 78

Statement of Comprehensive IncomeProfits - (3) - (3)Losses 6 25 - -

13. Deferred tax

Group CompanyFigures in Rand million 2018 2017 2018 2017Composition of deferred taxation asset is as follows:Capital and other losses 17 26 - -Calculated tax losses 470 143 - -

487 169 - -

Balance at the beginning of the year 169 215 - -Calculated tax losses 145 181 - -Temporary differences 173 (227) - -– Other 173 (227) - -Balance at the end of the year 487 169 - -

Composition of deferred taxation liability is as follows:Capital and other allowances 788 839 813 828Capital gains and losses and fair value adjustments 4 815 5 409 5 199 4 992

5 603 6 248 6 012 5 820

Reduced by taxation on:Calculated taxation losses (896) (1 374) - -

4 707 4 874 6 012 5 820

At beginning of the year 4 874 3 338 5 820 4 178Calculated taxation losses 116 (262) - -Temporary differences (283) 1 798 192 1 642– Property, plant and equipment (265) (261) - -– Provisions 105 903 - -– Capital gains and losses and fair value adjustments (123) 1 156 192 1 642Balance at the end of the year 4 707 4 874 6 012 5 820

12. Investments in associates (continued)




14. Investment property

2018 2018 2017 2017Figures in Rand million Cost Fair value Cost Fair valueGroupLand and buildings leased to industrialists 36 36 27 27Land held for development 343 343 316 316Farming land and buildings 24 24 23 23Total 403 403 366 366

CompanyLand and buildings leased to industrialists 32 32 15 15

Figures in Rand millionOpening balance

Fair value adjustments

Total

Reconciliation of investment property - Group - 2018Land and buildings leased to industrialists 27 9 36Farming land and buildings 23 1 24Land held for development 316 27 343

366 37 403


Fair value adjustments

Total

Reconciliation of investment property - Group - 2017Land and buildings leased to industrialists 18 9 27Farming land and buildings 20 3 23Land held for development 324 (8) 316

362 4 366


Other changes, movements

Total

Reconciliation of investment property - Company - 2018Land and buildings leased to industrialists 15 17 32


Total

Reconciliation of investment property - Company - 2017Land and buildings leased to industrialists 15 15


15. Property, plant and equipment


Group 2018 2017Cost or

revaluationAccumulated depreciation

Carrying value

Cost or revaluation

Accumulated depreciation

Carrying value

Land and buildings 3 013 (624) 2 389 4 193 (705) 3 488Plant and machinery 8 593 (4 687) 3 906 10 254 (5 071) 5 183Furniture and fixtures 217 (165) 52 214 (179) 35Motor vehicles 36 (26) 10 99 (43) 56Capitalised borrowing costs - - - 10 (2) 8Bearer plants 205 - 205 181 - 181Asset under construction 1 121 - 1 121 662 - 662Total 13 185 (5 502) 7 683 15 613 (6 000) 9 613

Company 2018 2017Cost or

revaluationAccumulated depreciation

Carrying value

Cost or revaluation


Carrying value

Plant and machinery 132 (120) 12 132 (111) 21Furniture and fittings 111 (73) 38 97 (67) 30Motor vehicles 8 (6) 2 7 (5) 2Asset under construction 2 - 2 1 - 1Total 253 (199) 54 237 (183) 54

Reconciliation of property, plant and equipment - Group - 2018

Opening balance

Additions Disposals Transfers Revaluations Depreciation Impairment loss

Total

Land and buildings 3 488 224 - (1 395) (124) (49) (3) 2 389Plant and machinery 5 183 1 008 (325) (1 288) - (442) (229) 3 906Furniture and fixtures 35 34 - 1 - (18) - 52Motor vehicles 56 6 - (47) - (5) - 10Asset under construction 662 408 (11) 62 - - - 1 121Bearer plants 181 39 (20) 8 - (3) - 205Capitalised borrowing costs 8 - - (8) - - - -

9 613 1 719 (356) (2 667) (124) (517) (232) 7 683

Reconciliation of property, plant and equipment - Group - 2017

Opening balance

Additions Disposals Transfers Revaluations Depreciation Impairment loss

Impairment reversal

Total

Land and buildings

3 141 106 (10) 234 94 (77) - - 3 488

Plant and machinery

6 370 420 (167) (301) - (618) (521) - 5 183

Aircraft 126 - (178) - - - - 52 -Furniture and fixtures

33 28 - (3) - (23) - - 35

Motor vehicles 52 15 - (2) - (9) - - 56Asset under construction

1 084 202 (32) (478) - - (114) - 662

Bearer plants - 133 (5) 53 - - - - 181Capitalised borrowing costs

10 1 - - - (3) - - 8

10 816 905 (392) (497) 94 (730) (635) 52 9 613





Reconciliation of property, plant and equipment - Company - 2018

Opening balance

Additions Depreciation Total

Plant and machinery 21 - (9) 12Furniture and fixtures 30 19 (11) 38Motor vehicles 2 1 (1) 2Asset under construction 1 1 - 2

54 21 (21) 54

Reconciliation of property, plant and equipment - Company - 2017

Opening balance

Additions Classified as held for

sale

Revaluations Depreciation Total

Plant and machinery 6 17 - - (2) 21Aircraft 123 - (111) (12) - -Furniture and fixtures 18 24 - - (12) 30Motor vehicles 1 1 - - - 2Asset under construction 18 - (17) - - 1

166 42 (128) (12) (14) 54

16. Biological assets

2018 2017Cost /

ValuationAccumulated depreciation

Carrying value

Cost / Valuation


Carrying value

Maize* 22 - 22 23 - 23Planted pecan nut trees*** 19 - 19 19 - 19Blueberry plants**** 11 - 11 9 - 9Total 52 - 52 51 - 51

Reconciliation of biological assets - Group - 2018

Opening balance

Additions Disposals Gains or losses arising

from changes in fair value

Total

Maize 23 - - (1) 22Planted pecan nut trees 19 16 (15) (1) 19Blueberry plants 9 2 - - 11

51 18 (15) (2) 52


Reconciliation of biological assets - Group - 2017


Opening balance

Transfers Gains or losses arising

from changes in fair value

Total

Maize 16 - 7 23Planted pecan nut trees 190 (54) (117) 19Blueberry plants 9 - - 9

215 (54) (110) 51

Biological assets represent unharvested maize on land and pecan nuts on trees. Due to the fact that there is an active market at year end and the fair value of the maize could be determined by using an external independent valuer the biological asset would be measured at fair value less estimated point-of-sale costs of agricultural produce, which is determined at the point of sale harvest.

There are 129.03 hectares (2017: 119.05 hectares) of plants. The current plant density for the majority of plants at the Diepe Kloof farm is 4 000 and 5 000 plants per hectare and the plant densities at the Klyne Fontein farm is 3 333 and 4 167 plants per hectare. Fair value cannot be determined for blueberry plants as trustworthy information about the projected yields for the above mentioned varieties are not available and any predictions about yields cannot be verified in terms of historical yields.

17. Intangible assets

2018 2017

Figures in Rand millionCost /

ValuationAccumulated depreciation

Carrying value

Cost / Valuation


Carrying value

Goodwill 881 (881) - 881 (881) -Computer software, other 78 (68) 10 158 (114) 44Customer relationships - - - 93 (93) -Intellectual Property - - - 3 (3) -Total 959 (949) 10 1,135 (1,091) 44

Reconciliation of intangible assets - Group - 2018


Opening balance

Additions Transfers Amortisation/ Impairment

Total

Computer software, other 44 4 (18) (20) 10

Reconciliation of intangible assets - Group - 2017


Opening balance

Additions Transfers Amortisation Total

Computer software, other 63 29 (5) (43) 44

16. Biological assets (continued)




18. Share capital

Group CompanyFigures in Rand million 2018 2017 2018 2017AuthorisedA shares of R1 each - 1 000 000 1 1 1 1B shares of R1 each - 1 499 000 000 1 499 1 499 1 499 1 499

1 500 1 500 1 500 1 500

IssuedOrdinary Type A 1 1 1 1Ordinary Type B 1 392 1 392 1 392 1 392

1 393 1 393 1 393 1 393

A shares are not transferable otherwise than by an Act of Parliament, however the B shares may be sold with the authorisation of the President of the Republic of South Africa.

The A shares held by the State shall entitle it to a majority vote.

19. Derivative financial instruments

Group CompanyFigures in Rand million 2018 2017 2018 2017Derivative assetsForeign exchange contract assets 142 76 108 70Derivative liabilitiesForeign exchange contract liability 139 27 126 16

These derivative assets and liabilities are subject to master netting agreements, which allows the Company to off-set the assets and liabilities, arriving at a net liability position of R18m (2017: net asset position of R54m)

All contractual maturities for the derivative assets and liabilities are within 12 months.

20. Trade and other payables

Group CompanyFigures in Rand million 2018 2017 2018 2017Trade payables 2 875 3 682 714 1 190Accrued leave pay 141 103 83 82Accrued bonus 363 266 300 217

3 379 4 051 1 097 1 489

Movement in accrualsBonusesBalance at the beginning of the year 266 282 217 250Additional accruals raised during the year 334 331 167 265Utilised during the year (237) (347) (84) (298)Balance at the end of the year 363 266 300 217

Leave payBalance at the beginning of the year 103 111 82 78Additional accruals raised during the year 81 36 16 28Utilised during the year (43) (44) (15) (24)Balance at the end of the year 141 103 83 82


21. Retirement benefits

Pension and provident schemes

The Group has pension and provident schemes covering substantially all employees. All eligible employees are members of either defined contribution or defined benefit schemes. These schemes are governed by the Pension Funds Act, 1956, as amended. The assets of the schemes under the control of trustees are held separately from those of the Group.

The costs charged to profit or loss represent contributions payable to the scheme by the Group at rates specified in the rules of the scheme.

Defined contribution schemes

Employees and Group companies contribute to the provident funds on a fixed-contribution basis. No actuarial valuation of these funds are required. Contributions, including past-service costs, are charged to profit or loss when incurred.

Defined benefit scheme

A Group company and its employees contribute to a defined benefit pension fund. The pension fund is final salary fully funded. The assets of the fund are held in an independent trustee-administered fund, administered in terms of the Pension Funds Act, 1956, as amended.

The fund is valued every three years using the projected unit credit method. The actuarial valuation for purposes of IAS 19 was performed on 31 December 2017.

The deficit in the current year does not require a cash contribution to be made to increase the plan assets as the fund is not in deficit for the statutory valuation. The IAS 19 actuarial valuation makes use of difference basis than the statutory valuation.

GroupFigures in Rand million 2018 2017The amounts recognised in the statement of financial position are as follows:Present value of funded obligations 332 354Fair value of plan assets (384) (383)Other 52 29Liability recognised - -

The movement in the defined benefit obligation:Opening balance 354 364Current-service cost 1 1Interest-cost 33 36Actuarial (gains)/losses (20) (7)Benefit paid (36) (40)Closing balance 332 354




GroupFigures in Rand million 2018 2017Movement in asset planFair value of plan assets at beginning of the year 383 403Expected return on asset 36 42Actuarial (loss)/gain recognised during the year 3 (22)Benefits paid (38) (40)Fair value of plan assets at the end of the year 384 383

The amounts recognised in profit or loss are as follows:Current-service cost 1 1Interest cost 33 36Expected return on assets (36) (42)Net actuarial loss recognised during the year (16) (28)Total included in operating expenses (18) (33)

The amounts recognised in other comprehensive income in 2017 is income of R3m.

The actual return on plan assets was:Expected return on plan assets 36 42Actuarial gains/(losses) on plan assets 3 (22)Actual return on plan assets 39 20

* The transfer to previous shareholder relates to Scaw

Plan assets are comprised as followsEquity instruments 49 % 49 %Cash 22 % 7 %Debt instruments 20 % 20 %Other 9 % 24 %

100 % 100 %

The principal actuarial assumptions for accounting purposes were:Discount rate % 9.87 9.77Expected return on plan assets % 9.87 9.77Future salary increases % 8.10 8.47Future pension increases % 8.70 8.10Normal retirement age 60 60

The sensitivity of the overall pension liability to changes in the weighted principal assumptions is:

Impact on overall liability

2018 2017Inflation rate (increase of 1%) 9.5 7.8Inflation rate (decrease of 1%) 8.4 6.9

The expected contributions to the post-employment pension scheme for the year ending 31 March 2018 are R0.9 million.


Post-retirement medical benefits

Some Group companies have obligations to provide post-retirement medical benefits to their pensioners.

The accumulated post-retirement medical aid obligation and the annual cost of those benefits were determined by independent actuaries. Any surplus or shortfall between the actuarially determined liability and the aggregate amounts provided is charged to profit or loss.

Group CompanyFigures in Rand million 2018 2017 2018 2017The amounts recognised in the statement of financial position are as follows:Present value of unfunded obligation:Discovery Health members 384 588 188 180

Movement in the liability recognised in the statement of financial posi-tion:At the beginning of the year 588 589 180 158Acquired in business combination 57 - - -Contributions paid (18) (28) (9) (8)Current-service costs 3 7 2 2Interest cost 29 54 17 16Non current medical obligation classified as held for sale (236) (48) - -Deficit/surplus (39) 14 (2) 12Balance at the end of the year 384 588 188 180

The principal actuarial assumptions used for accounting purposes were:– Discount rate (%) 9.00 9.80 - -– General inflation rate (%) 5.80 5.90 - -– Medical inflation rate (%) 8.10 9.00 - -– Normal retirement age 59/63 60/65

2018 2017 2018 2017Present value of unfunded obligation history Change in past-service liability Change in service cost plus assetInflation rate (increase of 1%) 13.5% increase 13.8% increase 14.8% increase 15.0% increaseInflation rate (decrease of 1%) 11.2% decrease 11.3% decrease 12.1% decrease 12.3% decrease

The expected contributions to post-employment medical plans for the year ending 31 March 2019 are R0.2 million.

21. Retirement benefits (continued)




22. Other financial liabilities

Group CompanyFigures in Rand million 2018 2017 2018 2017Foreign loans 8 570 9 446 8 570 9 446Domestic loans 24 647 20 921 38 153 33 107

33 217 30 367 46 723 42 553

Non-current liabilitiesForeign loans 6 275 6 240 6 275 6 240Domestic loans 17 918 16 689 17 221 16 653

24 193 22 929 23 496 22 893

Current liabilitiesForeign loans 2 295 3 206 2 295 3 206Domestic loans 6 729 4 232 20 932 16 454

9 024 7 438 23 227 19 66033 217 30 367 46 723 42 553

Foreign Loans

– US dollar

Interest rate

2.15% to 4.1% 7 078 7 535 7 078 7 535– Euro 0.12% to 2.68% 1 492 1 907 1 492 1 907– SA rand-denominated 7.74% - 4 - 4

8 570 9 446 8 570 9 446

Maturity of foreign loans– due within one year 2 295 3 206 2 295 3 206– due after one year but within five years 5 181 4 440 5 181 4 440– due after five years 1 094 1 800 1 094 1 800

8 570 9 446 8 570 9 446

Maturity of domestic loans– no set dates of repayment - - 16 541 14 664– due within one year 6 729 4 234 4 391 1 790– due after one year but within five years 9 753 10 782 9 051 10 747– due after five years 8 165 5 905 8 170 5 906

24 647 20 921 38 153 33 107


Group CompanyFigures in Rand million 2018 2017 2018 2017Domestic loans Secured loans*Nedbank Limited 665 425 - -

Unsecured loansRand-denominated loans 8 660 6 240 8 660 6 340

Unemployment Insurance Fund Bond 1 286 1 514 1 286 1 514

Public Bond 4 555 5 822 4 555 5 822

Public Investment Corporation GreenBond 7 112 4 767 7 112 4 767

Loans from subsidiaries with no fixed terms of repayment

Interest free - - 13 191 12 509

Loans with no fixed terms of repayment

Loans with no fixed terms of repayment

Money market related Interest free

831

-

2 153

-

2 814

535

1 620

535Total domestic loans 23 109 20 921 38 153 33 107

Interest and non-interest bearing loans– Non-current interest-bearing loans 24 125 23 568 23 497 22 893– Current interest-bearing loans 9 025 6 791 9 501 6 615

33 150 30 359 32 998 29 508– Non-current interest-free loans– Current interest-free loans

67-

8-

- 13 725

- 13 045

67 8 13 725 13 04533 217 30 367 46 723 42 553

* Secured by assets of subsidiary companies

22. Other financial liabilities (continued)




23. Provisions

Reconciliation of provisions - Group - 2018


Opening balance

Additions Utilised during the

year

Transferred to

Non current liability held

for sale

Change in discount

factor

Total

Environmental rehabilitation 1 197 (59) (15) (64) 29 1 088Trust fund (185) - (15) - - (200)Other provisions 125 - - (125) - -

1 137 (59) (30) (189) 29 888

Reconciliation of provisions - Group - 2017


Opening balance

Additions Utilised during the

year

Acquired through business

combinations

Change in discount

factor

Total

Environmental rehabilitation 789 425 (15) (25) 23 1 197Trust fund (169) - (16) - - (185)Other provisions 148 87 (79) (31) - 125

768 512 (110) (56) 23 1 137

Reconciliation of provisions - Company - 2018


Additions Utilised during the year

Total

Environmental rehabilitation 28 21 (8) 41

Reconciliation of provisions - Company - 2017


Additions Total

Environmental rehabilitation 23 5 28

Environmental rehabilitation liability

African Chrome

As a result of the processes used in the manufacture of the chemical products of the company, the ground water has become contaminated with a by-product Chrome 6. In terms of minimum requirements of the National Water Act, 37 of 1998, Part 5, Section 20 and the Environment Conservation Act, 73 of 1989, Part V, Sub-sections 21 and 22, the company is required to remove the contaminated water and dispose of the waste material.


The Industrial Development Corporation, as primary shareholder, stands security for the entire environmental provision until the land is fully rehabilitated.

The rehabilitation process initially comprised of two phases namely Phase 1 and Phase 2. The entire process was expected to take a period of 3 years; with Phase 1 having commenced on the 1st of March 2012 and was completed during the 2013/14 financial year. Phase 2 activities commenced during 2013/14 financial year after Phase 1 was completed. An amount of R 18, 5 million was expected to be incurred for Phase 2 activities, this provisional amount was based on previous historical costs and it was adjusted for inflation. It was assumed that the amount incurred each year for Phase 2 activities will be settled at each respective year end. Phase 2 activities commenced during 2013/14 financial after Phase 1 was completed.

During the year tests were conducted to ascertain the success of Phase 1 in rehabilitating the surface of the soil. It was found that remediation works completed to date had effectively removed soil contamination from the surface of the site to concentration levels well below the recently gazetted South African Soil Screening Values (SSV2) for industrial land use. The site is therefore considered suitable for industrial re-development. However, the groundwater contamination has not been resolved giving rise to an environmental liability for the IDC.

In-situ Chromium Reduction Technology

During the year a new remediation technology (In-situ chromium reduction) for Chromium(Cr) VI groundwater contamination was explored. It was decided that Phase 2 would be substituted by this remediation method. In-situ chromium reduction is well proven remediation technology for CrVI contaminated groundwater which involves the injection or infiltration of a reductive reagent to precipitate and stabilise chromium in the less toxic form, CrIII.

The approach is as follows:

Conduct laboratory and field trials to determine most suitable reagent. Review all existing borehole and site infrastructure to determine suitability use for the remediation trials. Design upgraded system and refine according to the results of remediation field trials. Undertake full scale field trials to test the performance of the selected reagent. Install a combination of injection wells and/or infiltration galleries in the hot spot areas associated with the South and North-West plumes. Sample and test existing monitoring wells at regular intervals for p H, ORP and CrVI to monitor the reaction rate and spread of the reagent. It may be necessary to drill additional wells to ensure aquifer coverage.

In addition the following supporting management measures have been proposed:

Semi-annual groundwater sampling between the site and residential receptors for five years; Obtain Waste License for Remediation Activities and undertake the Basic Assessment for authorisation. Interest rates relating of the following government bonds were used as the discount rates for calculating the present value of future cashflows:R186 bond for current monthly site monitoring payments to Interwaste Environmental Solutions & Golder Associates over the next 9 years.

ZAR204 bond for the operation of in-situ reduction system for a period of two years

R186 bond for the groundwater monitoring (10 sessions over five years)

The government bonds were selected based on the approximate maturity date as at 31 March 2017. These rates were not adjusted for risks as there is no risk relating to the technology used to rehabilitate the land.

All cash flows were adjusted for inflation forecasted by IDC Research and Information Department.

23. Provisions (continued)




Foskor

The company continually contributes to the Environmental Rehabilitation Trust to ensure that adequate funds are available to pay for mine closure and reclamation costs. The Environmental Rehabilitation Trust is an irrevocable trust under the control of the company. The financial assets held by the Trust are intended to fund the environmental rehabilitation liability of Foskor (Pty) Ltd and are not available for general purposes of the Group. The objective of the Trust is to act as the financial provider for expenditure that its member, Foskor (Pty) Ltd, is likely to incur in order to comply with the statutory obligation for the environmental rehabilitation. The Trust is exempt from tax in accordance with Section 10(1)cP of the Income Tax Act (No. 58 of 1962).

Foskor, the Department of Water and Environmental Affairs and the Local Authority are in discussions on the rehabilitation of the gypsum dam area. The liability of the rehabilitiion and/or closure is the responsibility of Foskor once all the gypsum is removed. Foskor management has made a high level estimate of anticipated costs for the closure of the gypsum waste facility in Richards Bay. Management estimated, in consultation with external experts, who have done similar projects that the closure costs for conventional capping will vary from R350/m² to R750/m² excluding all the approvals and design related costs.

Columbus

Columbus Joint Venture was a partnership between IDC, Samancor Limited and Highveld Steel. The provision is for the rehabilitation of dumps of different waste streams that was estimated at 4.3 million tonnes, which were not included in the sale of Middleburg Stainless Steel in January 2002, and accordingly each partner was liable for its share of the rehabilitation. The rehabilitation is expected to be completed in 2018.

24. Share-based payments

On 7 July 2009 Foskor and the IDC, as the controlling shareholder of Foskor, have entered into a BEE Transaction. In terms of the transaction the IDC has legally sold a 12% interest in Foskor to Strategic Business Partners and Special Black Groups (collectively, the “BEE Partners”), a 6% interest in Foskor to the Foskor Employee Share Option Plan (“ESOP”), and a 9% interest in Foskor to communities (“the Community Trust”) as part of Foskor’s efforts to achieve the objectives set out in the DTI’s Broad Based Black Economic Empowerment Codes of Good Practice (“the DTI Codes”) and also to attain broad-based employee participation. The BEE Partners, employee beneficiaries of the ESOP and beneficiaries of the Community Trust are collectively referred to as the “BEE Participants”.

The transaction was recognised as a share-based payment in terms of the requirements of IFRS 2 Share-based Payment and consequently the 26% interest in Foskor sold to the BEE Participants has not been derecognised for accounting purposes in the Company or Group. Whilst certain rewards have been transferred to the BEE Participants, the IDC remains substantially exposed to the risks of the Foskor shares through its funding of the transaction. The transaction will continue to be accounted for in this manner until such time as the preference shares have been redeemed.

Group CompanyFigures in Rand million 2018 2017 2018 2017Equity-settled share-based payment reserveAt the beginning of the year 304 304 - -At the end of the year 304 304 - -

Cash-settled share-based payment liabilityAt the beginning of the year 26 26 27 90Fair value adjustment through profit or loss (24) - (27) (63)At the end of the year 2 26 - 27


Equity-settled reserve: Weighted average fair value assumptions

The fair value of services received in return for equity instruments granted is measured by reference to the fair value of the equity instruments granted. The estimate of the fair value of the equity instruments granted is measured based on the Monte Carlo Option Pricing model.

The following weighted average assumptions were used in the share pricing models at grant date:

Grant date 31 Dec 2009Initial company value (Exercise price) (R’m) 3 500Average share price at grant date (R) 382.19Annualised expected volatility (%) 43.19Risk-free interest rate (%) 8.54Dividend yield (%) 2.25Strike price (R) 655.68

Cash-settled share-based payment liability: Weighted average fair value assumptions

The following weighted average assumptions were used in the share pricing models during the year:

Group Company2018 2017 2018 2017

Exercise price (R’m) 3 500 3 500 3 500 3 500Average share price at grant date (R) 382.19 382.19 382.19 382.19Annualised expected volatility (%) 41.10 41.10 32.50 32.50Risk-free interest rate (%) 8.10 8.10 8.10 8.10Dividend yield (%) - - 2.22 2.22Strike price (R) 553.20 553.20 538.12 538.12

The employee Share Option Trust was due to end on 30 March 2018, however due to the underperformance of the scheme, no vesting has taken place. The scheme’s funder has not called an event of default, which results in the scheme being extended. Changes to the scheme are being considered for the future. The volatility indicator used in the calculation was based on market prices of globally listed proxy companies that are in the same industry as Foskor.

25. Revenue

Group CompanyFigures in Rand million 2018 2017 2018 2017Farming manufacturing and mining income 7 540 10 893 - -Interest received 3 374 4 321 3 445 4 822Dividends received 2 855 1 758 2 832 1 272Fee income 454 400 361 365

14 223 17 372 6 638 6 459

Dividends received on available-for-sale financial assets– Listed 2 595 1 365 1 911 359– Unlisted 56 242 56 204– Associated companies - - 661 558– Preference shares income 204 151 204 151

2 855 1 758 2 832 1 272Dividends received from the investments made in terms of section 3 (a) of the Industrial Development Act.Sasol Limited 682 1 044 - -

24. Share-based payments (continued)




26. Investment revenue

Group CompanyFigures in Rand million 2018 2017 2018 2017Interest incomeCash and cash equivalents 482 583 308 441Loans and advances to clients 2 723 3 722 2 984 4 380Other 169 16 153 1

3 374 4 321 3 445 4 822

27. Finance costs

Group CompanyFigures in Rand million 2018 2017 2018 2017(Profit)/loss on foreign currency borrowings 115 677 243 726Finance leases 2 - - -Current borrowings 2 263 1 665 2 228 1 888Other interest paid 53 265 21 65Total finance costs 2 433 2 607 2 492 2 679

28. Fee income

Group CompanyFigures in Rand million 2018 2017 2018 2017Fee incomeMetal fees 114 108 114 108Guarantee fees 21 29 21 29Other contract related fees 201 206 195 199Other fees 118 57 31 29Total fee income 454 400 361 365

29. Net capital gains

Group CompanyFigures in Rand million 2018 2017 2018 2017Capital gains on disposal of available-for-sale investments 2 383 1 688 2 383 1 688

30. Non-administrative expenses/(income)

Group CompanyFigures in Rand million 2018 2017 2018 2017Current liabilities (378) 378 (378) 378

(378) 378 (378) 378

Capital Gains Tax Provision for the exit from Main Street 333 (MS333)

In 2006 the IDC acquired 15.3% of the ordinary shares of MS333, which in turn invested in the ordinary shares of Exxaro, giving the latter its majority BEE shareholding status. The investment was done in terms of the Pangolin agreement, which was in effect for the 10-year period up to the 26th November 2016.

The expiry of the Pangolin agreement on 26 November 2016 (expiry date) removed standing restrictions on MS333 and its shareholders. Effectively, as on this date, Exxaro shares held by Main Street became free for trade. The MS333 shareholders’ agreement provides that after expiry date, MS333 will distribute its shareholding in Exxaro to its shareholders in exchange for each such shareholder’s shares in and claims against the unwinding of MS333.


The shareholders’ agreement further provides that:

1. Exxaro will repurchase sufficient shares from MS333 to enable the latter to settle its obligations.2. Any remaining Exxaro shares in MS333 will be distributed to the shareholders in proportion to their shareholdings

On 26 November 2016, the IDC derecognised its investment in MS333 in line with the requirements of International Financial Reporting Standards (IFRS) as, on that date, the risks and rewards of ownership of Exxaro shares transferred from MS333 to the shareholders. Upon de-recognition, a profit of R1.7 billion was recognised in profit and loss.

For tax purposes, a CGT trigger has not been achieved at 2017 year end, as the shares have not been transferred from MS333 to the proposed replacement structure. A provision for tax of R378 million was been made in the financial statements in accordance with the requirements of IAS 37, as it was highly probable that the IDC would pay Capital Gains Tax on the disposal of its MS333 shares upon implementation of the replacement structure.

In 2018 financial year it was determined that because the underlying asset remains the investment in Exxaro, no CGT will be payable on the transaction, thus leading to a reversal of the R378m provision.

31. Operating profit (loss)

Group CompanyFigures in Rand million 2018 2017 2018 2017Is arrived at after taking into account the following:Audit fees 18 18 8 7Profit on sale of investment property - (1) - -Revaluation of investment property 37 4 (17) -Repairs and Maintenance 601 651 4 5Impairment of debtors - 45 - -Depreciation on property, plant and equipment 517 730 21 14Impairment/(reversal of impairment) on property, plant and equipment 232 635 - -(Profit)/loss on sale of property, plant and equipment 1 23 - -Amortisation on intangible assets 20 29 - -Impairment on trade and other receivables 79 95 - -Research and development 13 10 17 10Project feasibility expenses 129 102 129 88Impairments and write-offs on other financial assets 2 653 954 4 930 2 086Employee costs 2 377 3 229 1 032 998Operating lease rentals 45 45 1 4

Net increase/(decrease) in impairmentsMachinery & Equipment 248 (48) 248 182Industrial Infrastructure 8 (475) 140 (470)New Industries 144 34 224 (23)Agro-processing and Agriculture 23 22 (30) (63)Automotive & Transport Equipment 126 (55) 284 (55)Basic Metals and Mining (1 132) (729) (950) (412)Clothing & Textiles (174) 44 (164) (170)Basic and Speciality Chemicals 268 284 2 100 1 160Chemical Products & Pharmaceuticals 166 180 236 140Media and Motion Pictures 70 9 10 15Light Manufacturing & Tourism (6) 107 (54) 148Heavy Manufacturing (11) (85) 1 1Information Communication Technology (127) (47) (127) 47Franchising (9) 47 (9) (21)Construction 7 (136) 7 (136)Other (21) 447 (21) 414

(420) (401) 1 895 757




Group CompanyFigures in Rand million 2018 2017 2018 2017Bad debts written off / (recovered)Machinery &Equipment 6 135 7 2Industrial Infrastructure 45 303 45 303New Industries 2 22 2 22Agro-processing and Agriculture 83 139 34 119Automotive &Transport Equipment 11 120 11 120Basic Metals and Mining 2 091 155 2 091 155Clothing&Textiles 175 120 175 316Basic and Speciality Chemicals 10 136 20 120Chemical Products&Pharmaceuticals 172 17 172 77Media and Motion Pictures 116 6 116 6Light Manufacturing&Tourism 38 2 38 2Heavy Manufacturing 142 31 142 31Information Communication Technology 127 - 127 -Franchising 5 7 5 11Construction 26 - 26 -Other 24 162 24 45

3 073 1 355 3 035 1 329

32. Taxation

Group CompanyFigures in Rand million 2018 2017 2018 2017Major components of the tax income

CurrentLocal income tax - current period (242) 116 (61) 107

DeferredDeferred tax - current year (139) (737) (140) (301)

(381) (621) (201) (194)

Reconciliation of the tax expense

Reconciliation between applicable tax rate and average effective tax rate.South African normal tax rate 28% 28 % 28 % 28 %

The normal rate of taxation for the year has been adjusted as a consequence of:–dividend income (25)% (24)% (20)% (22)%– capital gains and losses (26)% (23)% (21)% (30)%– provisions and impairments 12% 13 % 25 % 36 %–disallowed/exempt items (1)% (24)% (24)% (25)%Effective tax rate (12)% (30)% (12)% (13)%

31. Operating profit (loss) (continued)


33. Other comprehensive income

Components of other comprehensive income - Group - 2018


Gross Tax Share of other comprehensive

income of associates

Net

Items that will not be reclassified to profit or loss

Remeasurements on net defined benefit liability/assetRemeasurements on net defined benefit liability/asset 2 1 5 8Total items that will not be reclassified to profit or loss 2 1 5 8

Items that may be reclassified to profit or loss

Exchange differences on translating foreign operationsExchange differences arising during the year (149) - (399) (548)Available-for-sale financial assets adjustmentsGains (losses) arising during the year 937 145 (6) 1 076Total items that may be reclassified to profit or loss 788 145 (405) 528Total 790 146 (400) 536

Components of other comprehensive income - Group - 2017




Net


Remeasurements on net defined benefit liability/assetRemeasurements on net defined benefit liability/asset (4) - (4) (8)

Movements on revaluationGains (losses) on property revaluation (6) 1 - (5)Total items that will not be reclassified to profit or loss

(10) 1 (4) (13)

Items that may be reclassified to profit or lossExchange differences on translating foreign operations

Exchange differences arising during the year (23) - (370) (393)Available-for-sale financial assets adjustmentsGains (losses) arising during the year 3 648 (2 286) - 1 362Total items that may be reclassified to profit or loss 3 625 (2 286) (370) 969Total 3 615 (2 285) (374) 956




Components of other comprehensive income - Company - 2018




Net


Remeasurements on net defined benefit liability/assetRemeasurements on net defined benefit liability/asset 12 - - 12Total items that will not be reclassified to profit or loss 12 - - 12


Available-for-sale financial assets adjustmentsGains (losses) arising during the year 2 187 (331) 60 1 916Total items that may be reclassified to profit or loss 2 187 (331) 60 1 916Total 2 199 (331) 60 1 928

Components of other comprehensive income - Company - 2017




Net


Remeasurements on net defined benefit liability/assetRemeasurements on net defined benefit liability/asset (4) - - (4)

Movements on revaluationGains (losses) on property revaluation (6) 1 - (5)Total items that will not be reclassified to profit or loss (10) 1 - (9)


Available-for-sale financial assets adjustmentsGains (losses) arising during the year 5 997 (1 955) 6 4 048Total 5 987 (1 954) 6 4 039


34. Directors’ emoluments

Non-executive: Fees for services as directors:

Figures in Rand thousand 2018 2017DirectorMs BA Mabuza Chairperson 930 1 057Ms LJ Bethlehem 1 262 364Mr BA Dames 427 416Mr RM Godsell 384 206Dr SM Magwentshu-Rensburg 498 414Ms MP Mthethwa 378 365Ms N Mnxasana 541 546Ms NDB Orleyn 421 400Ms M More 282 271Mr A Kriel 422 208Mr NE Zalk 2 - -

4 545 4 247

1. Ms L Bethlehem does not derive any financial benefit for services rendered to the IDC. Her fees are paid directly to HCI Limited2. Mr NE Zalk is employed by the DTI and does not earn director’s fees for services rendered to the IDC

Executive

2018

Figures in Rand thousand

Emoluments Long-term incentive

bonus*

Non-pensionable

allowance

Short-term incentive*

Contributions to medical

aid, retirement

benefits and other

TotalR’000

IDC 34 824 3 933 4 479 1 807 7 090 52 133MG Qhena 6 410 1 191 974 - 863 9 438GS Gouws 4 554 724 540 403 790 7 011SAU Meer 2 855 450 338 84 538 4 265AP Malinga 2 191 372 253 126 1 081 4 023PB Makwane 2 635 383 322 160 445 3 945RJ Gaveni 1 874 233 257 64 517 2 945DA Jarvis 2 171 83 274 204 460 3 192MP Mainganya 2 664 38 327 245 392 3 666Z Luthuli 2 404 0 294 73 400 3 171NS Dlamini 2 886 0 350 174 528 3 938VL Matshekga 2 186 191 275 68 502 3 222WH Smith 1 994 268 275 206 574 3 317

34 824 3 933 4 479 1 807 7 090 52 133




2017

Figures in Rand thousand

Emoluments Long-term incentive

bonus*

Non-pensionable

allowance

Contributions to medical

aid, retirement

benefits and other

TotalR’000

IDC 32 821 4 690 4 019 8 052 49 582MG Qhena 6 096 1 156 859 1 169 9 280GS Gouws 4 291 702 477 742 6 212SAU Meer 2 667 437 299 313 3 716K Schumann 193 873 - 826 1 892AP Malinga 2 093 361 292 1 208 3 954PB Makwane 2 501 372 285 413 3 571RJ Gaveni 1 766 226 225 688 2 905DA Jarvis 2 034 81 239 424 2 778KC Morolo 144 - - 120 264PM Mainganya 2 513 37 289 361 3 200PZ Luthuli 2 272 - 262 465 2 999NS Dlamini 2 679 - 309 361 3 349VL Matshekga 1 865 185 241 441 2 732WH Smith 1 707 260 242 521 2 730

32 821 4 690 4 019 8 052 49 582

* Represents amounts payable to executive members for achieving certain objectives that are aligned to the corporate objectives (targets). These objectives are approved by the board at the beginning of each period. The amount paid is based on the corporate, team and individuals’ performance.

35. Nature and purpose of reserves

Foreign currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as the effective portion of any foreign currency differences arising from hedges of a net investment in a foreign operation.

Revaluation reserve

The revaluation reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the assets are derecognised or impaired. The revaluation reserve also relates to the revaluation of property, plant and equipment.


The associated entities reserve comprises the cumulative net changes of equity accounted investment, directly to other comprehensive income.



The common control reserve relates to the transfer of Small Enterprise Finance Agency from the Economic Development Department to the IDC. Please refer to Note 38 for further detail.

Share-based payment reserve

The share-based payment reserve relates to the equity-settled portion share-based portion of the Foskor BEE transaction, entered into on 7 July 2009. Please refer to Note 24 for further detail.

36. Financial and operating leases

Finance leases – Group as lessee The Group has leases classified as financial leases principally for property. Future minimum lease payments payable under finance leases, together with the present value of minimum lease payments, are as follows:

Group CompanyFigures in Rand million 2018 2017 2018 2017Land and buildings– due within one year 5 6 - -– due after one year but within five years 11 13 - -– due after five years 1 3 - -Total minimum lease payments 17 22 - -Amount representing finance charges (5) (6) - -Present value of minimum lease payments 12 16 - -

Current portion 3 4 - -Long-term portion 9 10 - -

12 14 - -

Foskor

The finance lease is between Foskor (Pty) Limited and uMhlathuze Water Board for an effluent pipeline.

The lease liability is effectively secured, as the rights to the leased asset revert to the lessor in the event of default. The lease is over a 20-year period with 8 years remaining as at 31 March 2018. Foskor has sole use of the effluent pipeline and pays for the maintenance. The lease is at a fixed rate of 14.4% per annum.

Omega Refrigeration

The company’s obligation under the finance lease have been settled during the current financial year.

Blue Mountain Berries

These loans are repayable in monthly installments of R227 351 which includes interest at rates between. 9.05% and 9.55% per year.

35. Nature and purpose of reserves (continued)




Operating leases – Group as lessee

Certain items of computer and office equipment are leased by the Group.

Group CompanyFigures in Rand million 2018 2017 2018 2017Commitments for future minimum rentals payable under non-cancellable leases are as follows:– due within one year 16 39 4 -– due after one year but within five years 12 99 4 -– due after five years - 245 - -

28 383 8 -

37. Cash (used in)/generated from operations

Group CompanyFigures in Rand million 2018 2017 2018 2017Profit before taxation 3 381 1 941 1 892 1 601Income from equity accounted investments (419) (963) - -Adjustments for:Impairment of goodwill relating to associated entities (1 707) (303) - -Amortisation of intangibles assets 20 43 - -Impairment of property, plant and equipment 232 635 - -Loss/(profit) on sale of assets 1 23 - -Depreciation of property, plant and equipment 517 730 21 14Surplus of revaluation of investment property - - (17) -Net capital gains (2 383) (1 688) (2 383) (1 688)Interest received (3 374) (3 165) (3 445) (2 971)Dividends received (2 651) (1 607) (2 628) (1 121)Dividends received-preference share options (204) (151) (204) (151)Finance costs 2 433 2 607 2 492 2 679Specific and portfolio impairments 2 653 954 4 930 2 086Fair value adjustment on share based payment - - (27) (63)Movements in retirement benefit assets and liabilities (204) (1) 8 22Movements in provisions (249) 369 13 5Other non-cash items - 1 353 - 1 196Changes in working capital:Inventories 1 023 828 - -Trade and other receivables (1 127) 1 081 (648) 305Derivative assets (66) (7) (38) (8)Trade and other payables (672) 325 (392) 544(Increase)/decrease in non-current assets held-for-sale 2 832 (67) 67 (67)

36 2 937 (359) 2 383

38. Tax refunded (paid)

Group CompanyFigures in Rand million 2018 2017 2018 2017Balance at beginning of the year 473 205 471 200Current tax for the year recognised in profit or loss 242 (116) 61 (107)Balance at end of the year (262) (473) (268) (471)

453 (384) 264 (378)


39. Commitments

Group CompanyFigures in Rand million 2018 2017 2018 2017In respect of:Undrawn financing facilities approved

28 002 30 985 27 707 30 914Undrawn guarantee facilities approved 2 527 1 617 2 527 1 617Capital expenditure approved by subsidiaries 16 14 - -– Contracted 16 14 - -Capital expenditure approved by equity-accounted investments 177 185 - -– Contracted 145 157 - -– Not contracted 32 28 - -Total commitments 30 722 32 801 30 234 32 531Less: counter-guarantees obtained from partners in respect of financing and guarantees to be provided to major projects

(182) (201) (182) (201)

Commitments net of counter-guarantees 30 540 32 600 30 052 32 330

Commitments will be financed by loans and internally generated funds.

40. Guarantees

Group CompanyFigures in Rand million 2018 2017 2018 2017Guarantees issued in favour of third parties in respect of finance provided to industrialists

3 624 1 688 3 449 1 617

Total industrial financing guarantees 3 624 1 688 3 449 1 6173 624 1 688 3 449 1 617

Sundry guarantees issued by subsidiaries 333 570 - -Guarantees issued by equity-accounted investments 467 2 - -Guarantees 4 424 2 260 3 449 1 617

41. Contingencies

Contingent liabilities of subsidiaries

Foskor (Pty) Limited

The company had mine rehabilitation guarantees amounting to R499 million (2017: R495 million) at year end. In line with the requirements set out by the Department of Mineral Resources (DMR), this guarantee amount was in place at 31 March 2018.

These guarantees and the agreement reached with the DMR were based on the environmental rehabilitation and closure costs assessment that was performed during the 2016 financial year. The assessments are performed on a three-year rolling basis, with the next assessment due in 2019. Estimated scheduled closure costs for the mine are R589 million.

For unscheduled or premature closure, the DMR, in accordance with Minerals and Petroleum Resources Development Act, requires Foskor (Pty) Ltd to provide for the liability of R684 million in the form of guarantees and cash. The R619 million is covered by guarantees totalling R499 million and investment assets totalling R201 million, resulting in an over provision of R11 million.




42. Related parties

Shareholder: The Government of South Africa through the Economic Development Department

Directors’ interests Financing balance

R’m Company Financing approved

2018 2017 Interest/ funding rate

Type of financing/ repayment terms

Director’s interest Year of approval

Ms LJBethlehem

Cape Town FilmStudio (Pty) Ltd

84 34 42 Prime + 1%

Normal loan The controlling shareholders of Cape Town Studio is Sabido Investments (Pty) Ltd (Sabido). Sabido is a part of HCI. Ms Bethlehem is a senior manager at HCI

2010

Ilangalethu (Pty)Ltd

1 000 60 60 R186 + (3.2% to 3.4%)

Senior Debt Loan

Hosken ConsolidatedInvestments Limited (HCI) has a 10% stake in Ilangalethu (Pty) Ltd. Ms Bethlehem is a senior manager at HCI

2013

1 484 - - RATIRR of 7.04%

Redeemable preference shares

Kai Garib Solar SPV

922 609 609 RATIRR of 10%

Normal loan HCI holds 12.5% stake in Kai Garib Solar SPV. Ms Bethlehem is a senior manager at HCI

2015

720 - - 25% stake Ordinary shares 2015

Formex Industries (Pty) Ltd

80 - 30 RATIRR of 8%

Redeemable preference shares

HCI is a 100% shareholder of Formex. Ms Bethlehem is a senior manager at HCI

2010

Mr AndreKriel

Trade CallInvestmentsApparel(Pty) Ltd

18 - - Grant funding Mr Andre Kriel is a director of Southern African Clothing andTextile Workers’ Union(SACTWU), which has a 32.8% Shareholding in HCI.

2010

Cape Town FilmStudios (Pty) Ltd

84 34 42 Prime + 1%

Normal loan The controlling shareholders of Cape Town Studio are SabidoInvestments (Pty) Ltd (Sabido) and Videovision Dreamworld. Sabido is part of the JSE-listed group Hosken Consolidated investments Limited (HCI). Mr Andre Kriel is a director of SACTWU which has a 32.8% shareholding in HCI.

2017

Ms PatienceNomavuso Mnxasana

Noma NamhuhlaTrading andProjects(Pty) Ltd

3 - - Quasi-EquityLoan

Ms Patience Nomavuso Mnxasana owns 100% in Noma Namuhla Trading and Projects (Pty) Ltd

2017

Ms Thandi Orleyn Le Sel Research (Pty) Ltd

165 165 165 Prime + 1%

Normal Loan Ms Orleyn is a shareholder in Peotona Group Holdings via the Mamaswa Family Trust. Peotona Private Equity is a subsidiary of Peotona Group Holdings. Indirect shareholder in Le-Sel via Trinitas Fund General Partner (Trinitas). Trinitas has a 37.5% equity interest in Le-Sel.

2015

National sphere of governmentThe Land & Agricultural Development bank of SA Ltd

86 86 86 0% Loan repayable on 31 March 2022

The Land & Agricultural Development bank of SA Ltd

650 317 141 0% Loan repayable on 31 March 2025


Group CompanyFigures in Rand million 2018 2017 2018 2017Related party transactionsNon-financing transactions - Rendering of servicesEskom Limited 798 754 - -Transnet Limited 1 065 926 - -South African Airways (Pty) Limited 11 7 4 4Telkom Limited 6 6 2 1National Ports Authority 63 55 - -Rand Water - 2 - -

1 943 1 750 6 5



42. Related parties (continued)

www.idc.co.za

C O N T E N T SConfirmation of Accuracy and Fair Presentation .......................... 1Accounting Officer’s Statement of Responsibility for Annual Financial Statements ............................................................................... 2Independent Assurance Providers’ Limited Assurance Report on Selected Performance Information .............................. 3Independent Auditor’s Report to Parliament ................................. 6Report of the Board Audit Committee ............................................. 13Directors’ Report ....................................................................................... 16Statement of Financial Position .......................................................... 24Statement of Profit or Loss and Other ComprehensiveIncome ......................................................................................................... 25Statement of Changes in Equity ......................................................... 26Statement of Cash Flows ....................................................................... 27Reportable Segments ............................................................................. 28Geographical Segments ........................................................................ 30IDC Accounting Policies ......................................................................... 31Notes to the Financial Statements ..................................................... 48




2018A N N U A L F I N A N C I A LS T A T E M E N T S


RP324/2018ISBN: 978-0-621-46655-3

www.idc.co.za

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INDUSTRIAL DEVELOPMENT CORPORATION · INTEGRATED REPORT 2018 INTEGRATED REPORT. ... 2015. With two years remaining, ... During 2017, the IDC was in the news for its loan to Oakbay