Integrated Annual Report 2012

Description
To be the primary driving force of commercially sustainable industrial development and innovation to the benefi t of South Africa and the rest of Africa.

INTEGRATED ANNUAL REPORT 2012
For the year ended 31 March 2012
Innovation, Growth ... Sustainability

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Contents
Navigation
Read more: This refers to
information found in other
sources
More information:
This guides you to fnd more
information on the IDC website –
www.idc.co.za/IR2012
Financial statements: This refers
to additional details contained
in the annual fnancial statements
Vision and mission 1
Key achievements and challenges for the year under review 2
Corporate pro?le 3
Leadership commentary 12
Stakeholder engagement 20
Our material issues 23
Our strategy 24
Investing in the economy 27
Investing in our customers 61
Investing in our people 64
Environmental impact 71
Governance 72
GRI checklist 82
Assurance statement 85
Annual ?nancial statements 87
Acronyms 176
Contact us IBC
Assurance: This refers
to information that has
been externally assured
(limited assurance)
LA
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 1
Vision and mission
Vision
Mission
The Industrial
Development Corporation
(IDC) is a self-financing, national
development finance institution whose
primary objectives are to contribute to the
generation of balanced, sustainable economic
growth in Africa and to the economic empowerment
of the South African population, thereby promoting the
economic prosperity of all citizens. The IDC achieves this
by promoting entrepreneurship through the building
of competitive industries and enterprises based on
sound business principles.
To be the primary driving force of commercially sustainable industrial development
and innovation to the bene?t of South Africa and the rest of Africa.
Innovation, Growth ... Sustainability
This theme captures the IDC’s focus in the year under review and provides an indication
of the Corporation’s future focus. It is in line with the move towards more sustainable
(greener) ways of doing business, both internally and externally. Sustainable growth will
therefore be the golden thread that runs throughout the IDC’s frst integrated report.
In addition, the 2012 report will focus on innovation within IDC and in its relationship
with clients and other stakeholders.
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 2
Key achievements and challenges for the year under review
This integrated annual report covers our ?nancial and non-?nancial strategy
and performance for the ?nancial year 1 April 2011 to 31 March 2012 and
prospects going forward. When we refer to “IDC”, “we” or “our”, we mean the
Industrial Development Corporation and its ?nancing subsidiaries. The non-
?nancial part of the report excludes IDC’s operating subsidiaries, joint ventures,
leased facilities and outsourced operations. In areas where the boundary is
di?erent it has been identi?ed in the report.
In preparing the report, management considered the guidelines on integrated
reporting as provided by the International Integrated Reporting Committee
(IIRC). Financial information was prepared in accordance with the IFRS while
our sustainability-related information has been compiled following the
guidelines of the Global Reporting Initiative (GRI G3.1), supported by internally
developed guidelines. Our GRI index is available at the end of the report.
IDC has declared a B+ application level in terms of the GRI G3.1 guidelines.
External Assurance providers were engaged to provide assurance on
selected sustainability information in this report using the International
Standard on Assurance Engagements (ISAE) 3000: Assurance Engagements
other than Audits and Reviews of Historical Financial Information.
Their report is on pages 85 and 86.
This year we have set out to identify and de?ne our material issues through
stakeholder engagement. As this is our ?rst integrated annual report, there
are no applicable re-statements from previous years and the structure has
changed signi?cantly. Recognising that integrated reporting is a journey,
we plan to improve the materiality of the content in future years and align
our reporting structure with our business strategy.
We appreciate your feedback. Any queries or comments can be sent to
[email protected]
Key achievements
•
Record levels of funding activity:
°
Value of funding approved increased to R13.5 billion from
R8.7 billion
°
293 funding approvals in 2012 compared to 221 in the
previous year
•
Increasing impact on employment:
°
45 900 jobs expected to be created and saved in South
Africa through funding approvals, compared to 39 400
in the previous fnancial year
°
48% of these jobs based in rural areas
•
Emerging as a leader in the development of green industries:
°
Establishment of the Green Industries Strategic Business
Unit
°
Participation in funding for 12 of the projects that
received preferred bidder status during the frst round
of the Renewable Energy Procurement Programme (REPP)
°
Launched the Green Energy Ef ciency Fund (GEEF) to
provide low-cost funding to businesses to implement
energy-saving technologies
•
Lowering the cost of funding for businesses:
°
Sourcing of an additional R2 billion from the
Unemployment Insurance Fund (UIF) to use for funding
more labour-intensive businesses
•
Addressing stakeholder needs:
°
Initiatives implemented to reduce turnaround times
to improve customer satisfaction
°
Maintained high levels of customer service satisfaction
(89% customer satisfaction score for fnancial year 2012)
°
Increased consultation and interaction with internal
and external stakeholders resulting in improved
stakeholder perceptions
•
Financial sustainability underpinned by profts of
R3.3 billion, a 22% increase from previous fnancial year
•
Completed process to establish Small Enterprise Finance
Agency (sefa) as a wholly-owned subsidiary of IDC. This
will improve service delivery to small, medium and micro
enterprises (SMMEs)
About this report
Challenges
•
Infrastructure constraints adding to the cost of projects
•
IDC has been investing in the development of large
projects reducing the direct job creation ef ciency
of our funding
•
Slower economic recovery resulting in lower levels
of business confdence
•
More proactive project development approach results
in increased costs and risk profle in the short term, but
will result in higher development impact over time
•
Attracting and retaining skills
•
Higher incidence of applicants misleading the
Corporation
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 3
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Our values
Corporate pro?le
Our mandate
The Industrial Development
Corporation of South
Africa Limited (IDC) was
established in 1940 by an
Act of Parliament (Industrial
Development Corporation
Act, No. 22 of 1940).
We were established to spearhead the development
of domestic industrial capacity, especially in light of the
shortages of manufactured goods experienced as a result
of the disruption of trade between Europe and South
Africa during the Second World War.
For more than 70 years, we have been instrumental in
implementing South Africa’s industrial policy, establishing
some of the industries that have since become
cornerstones of the country’s manufacturing sector. These
include the petro-chemicals and minerals bene?ciation
industries. Apart from large industrial projects in these
industries, we have also been instrumental in the
establishment of other industries such as fabricated
metals, agro-industries, clothing and textiles.
In the 1990s, our mandate was expanded to allow
investment in the rest of Africa. Our ?rst such venture
was an aluminium smelter in Mozambique, bringing
together investors from around the globe to establish
a major industrial operation in a country plagued by
decades of civil war. The venture illustrated the viability
of large projects on a continent that was often shunned
by investors. Other current investments in the rest of the
continent include mining, agriculture, manufacturing,
tourism and telecommunications.
We rely on funds generated from our loan and equity
investments, exits from mature investments as well as
borrowings from commercial banks, other development
?nance institutions (DFIs) and other lenders, to fund our
activities.
Although our priorities evolved in line with policy
direction over the years, we remain committed to our
objective of developing the country’s industrial capacity
and, in doing so, play a major role in creating jobs.
Our industrial development
role
We are a key implementing agency of industrial policy.
Currently this centres on the New Growth Path (NGP)
and its manufacturing driver, the Industrial Policy
Action Plan (IPAP). We identify opportunities for sector
development in line with policy objectives and play
a catalytic role by developing projects in partnership
with our various stakeholders. Our funding activities are
mainly to the private sector, but we also work closely
with di?erent levels of government, government agencies
and sector organisations to ensure a co-ordinated
approach. In addition, we support government in other
areas related to its development objectives such as
research and fund management.
IDC’s role in the rest of Africa is to proactively develop
and implement strategies that create and integrate value
chains across the continent. By taking advantage of
each individual country’s strengths, a more competitive
industrial base throughout the region can be ensured.
Our B-BBEE score
We are a Level 2 B-BBEE contributor. During the year under
review our score was 89.7.
As a State-owned development ?nancier, the IDC believes
it is our obligation to ensure economic transformation in
the economy and, as such, we will continue to explore ways
through which to improve our score.
B-BBEE SCORE
Management
and Control 16/15
Employment
Equity 13.6/15
Skills
Development 13.5/20
Preferential
Procurement 16.5/20
Enterprise
Development 15/15
Socio-Economic
Development 15/15
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In
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Customer
Passion
Professionalism
Partnership
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 4
Our main business and funding activities
Activities Customers
Business
lifecycle
Sectoral
involvement
Funding
products
Regional
involvement
•
Provision of
development
?nance
•
Project
development
•
Research and
policy inputs
•
Fund
management
•
Non-?nancial
forms of business
support
•
Capacity building
•
Business
•
Government
•
Other DFIs
•
Conceptual
•
Pre-feasibility
•
Feasibility
•
Establishment
•
Product
commercialisation
•
Expansion
•
Mature
•
Agricultural value-add
•
Mining and mineral
bene?ciation
•
Manufacturing
•
Green industries
•
Industrial infrastructure
•
Tourism
•
ICT
•
Media and motion
pictures
•
Healthcare
•
General debt
•
Quasi-equity
•
Equity
•
Export/import ?nance
•
Short-term trade
?nance
•
Bridging ?nance
•
Guarantees
•
Venture capital
•
Wholesale funding
through intermediaries
•
South Africa
•
Rest of Africa
•
Global
imports of
South African
equipment
Satellite ofces
Head ofce
Limpopo
Gauteng
Mpumalanga
North West
Free State
KwaZulu-Natal
Eastern Cape
Western Cape
Northern Cape
East London
Durban
Mbombela
Groblersdal
eMalahleni
Secunda
Port Elizabeth
Cape Town
Kimberley
Upington
Rustenburg
Brits
Polokwane
Tzaneen
Thohoyandou
Bloemfontein
Klerksdorp
Ma?keng
Vryburg
George
Pietermaritzburg
Regional ofces
IDC o? ces in South Africa
Corporate pro?le (continued)
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 5
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Group ?ve-year review
Figures in Rand million 2012 2011 2010 2009 2008
Statement of financial position
Cash and cash equivalents* 7 825 5 828 2 866 5 607 5 370
Loans, advances and investments 96 209 94 024 79 265 61 879 78 931
Property, plant and equipment 4 772 4 587 4 136 3 038 3 002
Other assets 3 424 2 367 2 364 2 853 3 130
Total assets 112 230 106 806 88 631 73 377 90 433
Capital and reserves 91 862 92 726 79 189 64 687 75 803
Non-controlling interest 331 342 366 358 45
Other ?nancial liabilities 9 923 6 677 3 527 5 165 5 825
Other liabilities 10 114 7 061 5 549 3 167 8 760
Total equity and liabilities 112 230 106 806 88 631 73 377 90 433
Statement of comprehensive income
Operating pro?t 3 412 2 285 2 008 5 314 2 155
Income from equity-accounted investments (2) 633 40 1 132 1 950
Profit before taxation 3 410 2 918 2 048 6 446 4 105
Taxation (107) (206) 181 (825) (154)
Pro?t for the year 3 303 2 712 2 229 5 621 3 951
* To be utilised to fund commitments of R34,36 billion.
IDC value-added statement LA
Figures in Rand million 2012 2011
Value created
Net interest income 1 225 1 014
Impairment losses on loans, advances and investments (1 616) (1 026)
Other income from lending activities 413 293
Other investment income 3 541 2 248
Operating expenditure (511) (436)
3 052 2 093
Value allocated
Bene?ts to employees 750 610
Social spending in communities 59 65
To government as taxation and dividends 79 133
Taxation (including deferred tax) 29 83
Dividends to shareholders 50 50
Value reinvested in operations 2 164 1 285
Transfer to reserves (retained earnings) 2 143 1 248
Depreciation and amortisation 21 37
3 052 2 093
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 6
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0
50 000
100 000
150 000
200 000
2012 2011 2010 2009 2008
Financial year
N
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o
f

j
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b
s

Financial year
0
10 000
20 000
30 000
40 000
50 000
2012 2011 2010 2009 2008
Cumulative number of new and saved jobs facilitated Number of new and saved jobs facilitated per year
Flow of funding and development impact
Five-year period 2008 – 2012
R12.6 bn Repayments received
from clients
R3.1 bn Sale of shares
R15.8 bn Income after tax payments
R18.3 bn Borrowings raised Advances to clients
in the form of loans
Borrowings repaid Dividends paid
Advances to clients
in the form of equity
R25.2 bn
R13 bn R0.4 bn
R7.6 bn
Cash infows Cash outfows
V
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(
R
m
)
0
3 000
6 000
9 000
12 000
15 000
2012 2011 2010 2009 2008
N
u
m
b
e
r
0
50
100
150
200
250
300
2012 2011 2010 2009 2008
Value of approvals per year Number of approvals per year
Corporate pro?le (continued)
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 7
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Financial year
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
2012 2011 2010 2009 2008
0
10
20
30
40
50
60
70

V
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(
R
m
)

P
e
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a
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s
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Value
% share of total value approved
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
2012 2011 2010 2009 2008
Financial year
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(
R
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Capacity expansions 29%
37% Projects and new start-ups
8% Expansionary ownership changes
16% Investments outside South Africa
9% Distressed businesses
1% Other
Mpumalanga 4%
Northern Cape 14%
Outside SA 16%
Eastern Cape 8%
Western Cape 8%
KwaZulu-Natal 8%
Free State 1%
Gauteng 23%
Limpopo 7%
North West 11%
Flow of funding and development impact (continued)
Approvals to rural companies (value) per year
Cumulative disbursements
Utilisation of IDC fnancing over fve years (2008 – 2012) Financing approved per region over fve years (2008 – 2012)
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 8
Board of directors
MW HLAHLA (49)
(6)
Chairman
(Non-executive)
BA (Hons) (Economics) (Pomona
College – California);
Masters in Urban and Regional Planning
(University of California, Los Angeles)
Directorships
– Findevco (Pty) Limited
– Royal Bafokeng Holdings Limited
– Praxley Consortium (Pty) Limited
LI BETHLEHEM (44)
(5, 9)
(Non-executive)
BA (Hons) Industrial Sociology (Wits);
Master of Arts (Wits); Certifcate in
Economics and Public Finance (Unisa)
Directorships
– Findevco (Pty) Limited
– Holds 13 other directorships, details available
upon request from the Company Secretary
PM BUTHELEZI (48)
(10)
(Non-executive)
BA (Economics) (University
of the North); MSc (Economics)
(University of Paris); MBA Corporate Finance
(University of Shef eld)
Directorships
– Findevco (Pty) Limited
– Group Five Limited
– Mervana (10 Bene?ciary Family Trust)
– Sanlam Limited
– Sanlam Life Insurance Limited
LL DHLAMINI (38)
(6, 7, 8)
(Non-executive)
BSc (Computer Science) (UCT);
BCom (Conversion) (UCT); CA(SA);
Post-graduate Diploma in Accounting (UCT)
Directorships
– Findevco (Pty) Limited
– Xabiso Consulting
– Nkwenkwezi Investment
– Xabiso CA Inc
MG QHENA (46)
Chief Executive Of cer
(Executive)
BCompt (Hons) (Unisa); CA(SA);
SEP (Wits and Harvard);
Advanced Tax Certifcate (Unisa)
Directorships
– Findevco (Pty) Limited
– Foskor (Pty) Limited (Chairman)
– Acerinox SA
RM GODSELL (59)
(6, 7)
(Non-executive)
BA (Sociology and Philosophy) (University
of Natal); MA (Liberal Ethics) (University of
Cape Town), Post-graduate Studies (Sociology
and Philosophy) (Leiden University)
Directorships
– Findevco (Pty) Limited
– Holds seven other directorships, details
available upon request from the Company
Secretary
BA DAMES (46)
(6, 9)
(Non-executive)
BSc (Hons) (University of Western Cape);
MBA (Stanford University)
Directorships
– Findevco (Pty) Limited
– EPRI – USA
– World Association of Nuclear Editors (WANO)
– World Business Council for Sustainability
Development (WBCSD)
– VGB (Electricity Utility Industry Association)
JA COPELYN (61)
(7, 9)
(Non-executive)
BA (Hons) African Governments (Wits);
BProc (Unisa)
Directorships
– Findevco (Pty) Limited
– Holds 112 other directorships. details available
upon request from the Company Secretary
Legend
(1) Chairman of the Board Human Capital and Nominations Committee
(2) Chairman of Board Audit Committee
(3) Chairman of Governance and Ethics Committee
(4) Chairman of Board Risk and Sustainability Committee
(5) Chairman of Board Investment Committee
(6) Member of Board Human Capital and Nominations Committee
(7) Member of Board Audit Committee
(8) Member of Governance and Ethics Committee
(9) Member of Board Risk and Sustainability Committee
(10) Member of Board Investment Committee
Corporate pro?le (continued)
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 9
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LR PITOT (65)
(2, 3, 9, 10)
(Non-executive)
CA(SA)
Directorships
– Findevco (Pty) Limited
NE ZALK (43)
(10)
(Non-executive)
BA (English and Private Law) (Unisa); Post-
grad Diploma in Economics (Development)
(School of Oriental and African Studies,
London University); MSc Economics
(School of Oriental and African Studies,
London University)
Directorships
– Findevco (Pty) Limited
GS GOUWS (53)
Chief Financial Of cer
(Alternate)
BCom (Law); BCom (Hons) (UJ);
CA(SA); FCMA, Advanced
Management Programme (Insead)
Directorships
– Kumba Iron Ore Limited
– Pebble Bed Modular Reactor (PBMR)
– Atlantis Business Park (Pty) Limited
– The Export-Import Finance Corporation
of South Africa (Pty) Limited
– Herdmans (Pty) Limited
– Impo?n (Pty) Limited
– Konbel (Pty) Limited
– Konoil (Pty) Limited
– Kindoc Nominees (Pty) Limited
– Findevco (Pty) Limited
During the period under
review, the following
directors retired:
JR Barton
SM Moloko
JC Mtshali
NG Nika
MC Nkuhlu
NN Nokwe
SK MAPETLA (61)
(1, 10)
(Non-executive)
BSc Chemistry (Lesotho);
MSc Analytical Chemistry (USA); Business
Management Diploma (Dublin);
EDP (Wits); Certifcate in Financial Analysis (Wits)
Directorships
– Findevco (Pty) Limited
– Afrika Biopharma Investment (Pty) Limited
(Chairman)
– Biotech Labs (Pty) Limited
BA MABUZA (48)
(4, 10)
(Non-executive)
BA (Mathematics and Computer Science)
(Hunter College, City University of NY);
MBA (Finance and Information Systems)
(Leonard Stern School of Business, NYU)
Directorships
– Findevco (Pty) Limited
– Afgri Limited
– Africa Business News (Pty) Limited
– Development Bank of Southern Africa
– Airports Company South Africa SOC Limited
– Lehumo Women’s Investment Holdings
ZJ VAVI (49)
(6, 8, 9)
(Non-executive)
General Secretary COSATU
Directorships
– Findevco (Pty) Limited
SM RENSBURG (53)
(7, 10)
(Non-executive)
BA (Management – Accounting and Business
Administration)
(Webster University, Vienna);
MBA (Webster University, London)
Directorships
– Findevco (Pty) Limited
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 10
Executive management
MG QHENA (46)
Chief Executive Of cer
BCompt (Hons) (Unisa); CA(SA), Advanced
Taxation Certifcate (Unisa); SEP (Harvard, Wits)
GS GOUWS (53)
Chief Financial Of cer
BCom (Law) (UJ); BCom (Hons) (UJ) CA(SA);
FCMA; Advanced Management Programme
(Insead)
AP MALINGA (47)
Divisional Executive:
Mining and Manufacturing
Industries
BSc (Geology) (UCT); MBL (Unisa)
PB MAKWANE (46)
General Counsel and
Divisional Executive:
Legal Services
BJuris, LLB (Western Cape)
K SCHUMANN (43)
Divisional Executive:
Services Industries
and Regions
BHome Economics, MBA (Stellenbosch);
Advanced Management Programme (Insead)
JM MODISE (49)
Divisional Executive:
Human Capital
and Support Services
Diploma in General Nursing; BCom (Unisa);
Management Development Programme;
Senior Executive Programme;
Master in Business Leadership (Unisa)
Corporate pro?le (continued)
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 11
SAU MEER (49)
Divisional Executive:
Corporate Strategy
BSc (Mechanical Engineering) (University of
Natal); MBL (Unisa); Advanced Management
Programme (Insead)
U KHUMALO (46)
Divisional Executive:
Agro and New Industries
BSc Engineering (Electrical and Electronic)
(UCT); MSc Engineering (Electrical Engineering)
(UCT); Management Advancement Programme
(MAP) (Wits); SEP (Harvard), Advanced
Management Programme (Insead)
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NV MOKHESI (51)
Divisional Executive:
Marketing and Corporate
Afairs
BCom (Lesotho); Management Advancement
Programme (MAP) (Wits); Advanced
Management Programme (Insead)
LP MONDI (49)
Chief Economist and
Divisional Executive:
Professional Services
BCom (Hons) (Wits); MA Economics (Illinois
University); Management Advancement
Programme (MAP); Advanced Management
Programme (Insead)
G VAN WYK (52)
Chief Risk Of cer
BCom (Hons); MCom; MBL (Unisa); Advanced
Management Programme (Insead)
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 12
The IDC has taken the ?rst step in the journey towards
integrated reporting. The issues deemed material through
stakeholder engagement are articulated in this report and
we also set out salient elements of our business strategy,
both ?nancial and non-?nancial. Beyond the traditional
performance review, we share our medium- to long-term
plans with our stakeholders.
The South African economy, like many others, continued
to recover from the after-shocks of the global economic
and ?nancial crises during the course of calendar year
2011. However, its goods-producing sectors reported
lower output growth as global demand conditions
deteriorated gradually.
The intensifying sovereign debt crisis and austerity
measures in a number of countries on the Eurozone’s
periphery, coupled with the natural disasters in Japan early
in the year, had a profound impact on economic growth
in major parts of the advanced world. Emerging and
developing economies were adversely impacted by falling
or subdued export demand, a situation often exacerbated
by weakening domestic consumption. Consequently,
the rate of increase in global export trade slowed sharply,
commodity prices either moderated or declined and
industrial production was severely constrained in the latter
part of the year.
South Africa’s manufacturing sector saw its output growth
more than halved as key sub-sectors found it increasingly
challenging to maintain higher production activity. In
turn, the mining sector’s output was only marginally
higher than in 2010, with industrial action in the platinum
industry over the ?nal quarter of the year having had a
considerable impact on overall production.
Domestic ?xed investment activity rebounded after two
consecutive years of contraction although still falling short
of pre-crisis levels. South Africa also managed to attract
a substantial in?ow of foreign direct investment. Business
con?dence remained relatively weak throughout calendar
year 2011, experiencing a sharp decline in the second half
of the year but recovering in the ?rst quarter of 2012. The
low levels of con?dence prevailing among manufacturers
were clearly re?ective of di? cult trading conditions in
both local and export markets. On the labour front, some
encouraging signs of improvement were visible during
the year, although there is still hesitant demand for higher
employment in many sectors of the economy.
Chairman’s statement Chairman’s st
Leadership commentary
Notwithstanding a challenging
operating environment,
the IDC recorded an
unprecedented level
of funding activity.
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 13
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Notwithstanding a challenging operating environment,
the IDC recorded an unprecedented level of funding
activity, having approved R13.5 billion in 293 transactions
over the course of the ?nancial year. A signi?cantly
larger entrepreneurial base was served, many of whom
are new clients. Our proactive e?orts in support of the
economic recovery and the development of industrial
capacity include the o?er of special schemes, catalytic
?nancial support for participants in the nascent renewable
energy segment, increased project development and
the continued provision of funding to companies in
distress. These e?orts have come at a cost to investment
performance as re?ected by the steady increase in
impairment ratios. This underlines the importance of our
solid due diligence and risk management practices so as
to ensure the ?nancial viability of investments and the
long-term sustainability of the IDC.
Financial year 2012 was the ?rst year we implemented
our Leadership in Industrial Development strategy. This
required an alignment of our operational activities with
the priority sectors and respective objectives as set out
in Government’s New Growth Path (NGP) and Industrial
Policy Action Plan (IPAP). We reviewed and restructured
our funding divisions and established a business unit
dedicated to the development of green industries.
The IDC has earmarked R25 billion over ?ve years towards
the development of green industries in South Africa,
demonstrating our resolve to contribute catalytically
to our economy’s transition to a greener growth path.
The Green Industries SBU has already made signi?cant
investments in one year of existence.
We concluded the process of merging Khula, the South
African Micro Finance Apex Fund (SAMAF) and the IDC’s
small business funding into a single unit. As a result, in
April 2012 we launched sefa, a wholly-owned subsidiary
of the IDC focused on the ?nancing of survivalist, small,
micro- and medium-sized enterprises.
The important role of the State in economic development
is being increasingly recognised. Considering the societal
risks of allowing unregulated market forces to guide
a country’s economic trajectory, industrial policy is
re-emerging as a key policy tool both in developing and
developed economies. The IDC’s continued existence and
impact over more than 70 years is, in itself, a manifestation
of State intervention and a sustained recognition of its
relevance. The Corporation continued to shape and
in?uence national policy during the year by providing
advisory and research support speci?cally oriented
IDC has earmarked
R25 billion over ?ve years
towards the development
of green industries within
South Africa.
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 14
towards securing an enabling environment for industrial
development and funding, as well as identifying factors
impeding industry development.
Backed by our research skills and the expertise
accumulated over the years in numerous industries,
we have been developing and implementing, in
collaboration with other stakeholders, speci?c
development strategies in priority sectors to which IDC
provides funding. In addition to the abovementioned
emphasis on green industries, further examples include:
expanding the fabricated metals, capital and transport
equipment industries on the back of the capital
expenditure programmes of State-owned companies and
other public sector entities; the development of the anti-
retroviral (ARV) pharmaceuticals industry; the expansion of
the motor vehicles and components industry; and value
addition in the agricultural and mineral value chains. Some
of these sector development strategies transcend national
borders so as to leverage our continent’s enviable natural
and human resource base and maximise the bene?ts
associated with regional integration.
Adverse global developments, particularly the sovereign
debt and banking sector crises in several industrialised
economies, are constraining public sector spending
and leading to a renewed liquidity squeeze in many
countries, whilst impacting negatively on consumer and
business sentiment. A more moderate pace of growth is
expected in the United States, unless a further quantitative
stimulus is forthcoming, while the anticipated slowdown
in the Chinese economy is starting to materialise. Both
international investment and trading activity are being
detrimentally a?ected in the process, with the outlook for
economic growth and employment creation deteriorating
in many parts of the world.
Downside risks thus abound for the domestic economy.
Signs of weakness are already emerging and rather
modest growth is anticipated for calendar year 2012.
Strong counter-cyclical action is therefore warranted.
The revised IPAP for the period 2012/13 to 2014/15 scales
up interventions to retain, grow and diversify South Africa’s
industrial base. The wide range of complementary and
integrated measures should assist the IDC in ful?lling its
Leadership commentary (continued)
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 15
mandate. These include further industry designations for
local procurement; the Manufacturing Competitiveness
Enhancement Programme, which will complement
and leverage o? the industrial ?nancing packages
made available by IDC; the impetus provided by Special
Economic Zones to the clustering and competitiveness
enhancement of value-adding and labour-absorbing
manufacturing operations; and, from the broader regional
perspective, a range of programmes that will assist us
in promoting economic development and integration
in southern Africa and further a?eld.
The massive infrastructure investment programme
being rolled out by South Africa’s public sector will
improve the competitiveness of local industry through
enhanced service provision and cost e?ectiveness. It will
also unlock the economic potential of several regions,
some of which have a wealth of resources, and create
numerous opportunities for localisation. The IDC is
contributing considerably to the work of the Presidential
Infrastructure Co-ordinating Commission (PICC) as well as
to the development of the respective Strategic Integrated
Projects (SIPs).
South Africa is also building strong ties with a grouping
of dynamic, rapidly growing and populous emerging
economies that are ?exing their muscles and altering the
balance of economic power globally. The IDC has been
engaging constructively with key stakeholders within
the BRICS, aiming to develop strong partnerships on the
?nancing, investment and technological fronts. Closer
to home, the IDC is actively pursuing its Africa-wide
mandate, contributing to the development of competitive
value chains, the regional integration drive, and expanding
markets for local goods and services.
The IDC has been gearing itself to amplify its e?ectiveness
as a contributor to industrial capacity development with
the creation of sustainable employment opportunities as
a critical outcome. We have already substantially increased
the range and levels of our funding and investment
activities in ?nancial year 2012. The road ahead may be
fraught with challenges and threats, but our human
capital wealth, solid ?nancial position and undeniable
resolve will make an increasingly visible mark on our
country’s and continent’s sustainable development
trajectories.
Acknowledgements
The achievements of the past year would not have
materialised without the commitment and e?orts of
the IDC management and sta?, who are shaping the
Corporation into an indispensable agent for industrial
capacity development in South Africa and the continent
at large. I express my gratitude for their vital contributions,
congratulating the Chief Executive O? cer and his
executive team for their leadership and for living up to
the signi?cant challenges faced during the year in a most
e?ective manner.
The strategic stewardship provided by the IDC Board has
been invaluable and for this I thank my fellow directors.
During the year, we welcomed Ms Buthelezi, Mr Copelyn,
Mr Dames, Mr Godsell, Ms Mabuza, Ms Rensburg and
Mr Vavi as new members of the Board. Their wisdom
and insights have already strengthened the collective
depth and breadth of our Board. We also bid farewell to
Mr Barton, Mr Moloko, Mr Mtshali, Mr Nika, Mr Nkuhlu
and Ms Nokwe, who diligently served the Board for several
years and contributed to making the IDC the remarkable
institution that it is.
Our utmost appreciation is extended to Minister Ebrahim
Patel for his invaluable guidance, con?dence in and high
regard for IDC as a key contributor to placing South Africa
on a New Growth Path, and to Minister Rob Davies for
making the Corporation a true partner of his department
in the implementation of the Industrial Policy Action Plan.
Ms MW Hlahla
26 June 2012
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The IDC has been
gearing itself to amplify
its efectiveness as a
contributor to industrial
capacity development with
the creation of sustainable
employment opportunities
as a critical outcome.
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 16
Introduction
Post-recession, the global economy remains fragile.
Forecasts indicate that the economic recovery continues
to be burdened by the persistent Eurozone debt crisis.
In turn, this has impacted signi?cantly on the local
economy.
The Eurozone remains one of South Africa’s principal
trading partners and, therefore, reduced demand in this
monetary union has been a?ecting our export-oriented
sectors, particularly manufacturing. The Asian region, in
turn, has been experiencing a slowdown in growth, with
adverse implications for our exports of minerals as well as
other value-added products.
Naturally, such prevailing conditions would impact on
IDC’s business and its clients. Against the backdrop of such
persistent economic uncertainty, especially in markets that
are critical to South Africa’s economic growth prospects,
the 2011/12 ?nancial year proved challenging.
As a result, the period under review was characterised
by immense resilience as we consolidated our e?orts
to implement IDC’s short- to long-term developmental
goals aligned to those of the shareholder, the South
African Government. Our steely resolve to further
strengthen investment in the economy despite persistent
challenges demonstrates our commitment to growing
South Africa’s industrial capacity. This report acknowledges
our achievements and challenges. It also re?ects on the
environment in which the IDC operated in the period
under review.
Implementing the Leadership
in Industrial Development
Strategy
The Leadership in Development strategy implemented
in the period under review is beginning to impact on the
Corporation’s activities. It has already led to an increased
number of funding approvals with a large portion of
our funding going towards green-related industries.
As part of our objective to establish the IDC as a driver of
a thriving local green industry, our Green Industries SBU
proactively sought and identi?ed projects that required
both development and growth assistance in this sector.
We remain focused on developing a pipeline of projects
in this sector so that we can build on this momentum.
Despite the challenging economic environment, the
IDC continued to play a counter-cyclical role by further
Chief Executive’s review
Leadership commentary (continued)
Our proactive pursuit of
strategic investments
in 2012 resulted in a
marked increase in our
approvals to R13.5 billion.
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 17
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strengthening its investment in the economy as shown
in the increase in funding approvals. Given the competing
interest for highly specialised skills required to drive the
Corporation’s development goals, the IDC recognises
the need for a strong human capital base as shown
in initiatives such as its talent management, succession
planning, employee wellness and management skills
training programmes. In addition, the Innovation
Department continues to formulate ideas to improve
client experience. Our relationship with the Economic
Development Department (EDD) has enabled us to
identify bottlenecks a?ecting the implementation of
speci?c projects hampering economic and industrial
growth. Consequently, we have experienced an
improvement in a number of areas, notably on the
issuance of water licences for projects. This has resulted
in improved turnaround times for project implementation
and development.
To further stimulate industrial development, our focus has
been on capacitating other ?nancial institutions. One such
example is the establishment of Small Enterprise Finance
Agency (sefa) – a wholly-owned subsidiary of the IDC
primarily focused on developing Small, Medium and Micro
Enterprises (SMMEs).
Going forward, the focus will be on ensuring that sefa
remains e?ective, e? cient and relevant to the needs of
SMMEs. Through the introduction of direct lending and
planned improvements in its product o?ering, we expect
that sefa will play a critical part in supporting the small
business environment – a segment that has the potential
to alleviate the country’s high levels of unemployment.
Ensuring that cost-e?ective funding for businesses
remains our priority, we continue to seek alternative,
cheaper sources of funding. In the year under review,
we concluded a R2 billion agreement with the
Department of Labour aimed at both creating and saving
jobs. We also secured R500 million low-cost funding
from KfW, a German development bank, to encourage
and promote investments in both energy e? ciency
and renewable energy in South Africa.
These funding initiatives complement our ring-fenced
funds such as the Gro-e scheme, which was structured
to create jobs.
To better understand our client needs, we embarked
on a series of roadshows where we engaged with
entrepreneurs and other stakeholders across the
country. One of the major concerns that emerged out
Ensuring that cost-e?ective
funding for businesses
remains our priority,
we continue to seek
alternative, cheaper
sources of funding.
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 18
of the exercise was the need for the IDC to improve on
its response times, particularly to requests for funding.
We have since reviewed our processes and identi?ed
key areas where we could improve without impeding
on our risk assessment capabilities. The results of our
interventions are indicative of much improved e? ciencies
including reduced turnaround times.
We have also implemented tools such as an internet-
based application tool, making it easier for businesses
to access funding. Face-to-face assistance to prospective
clients has been improved through the establishment
of a pre-investment business centre at our head o? ce as
well as setting up additional satellite o? ces in the di?erent
provinces (see map on page 4).
While we a? rm our commitment to improve on our
service levels, we have noted with great concern a
worrying trend in incidences of misrepresentation by some
businesses seeking funding. Such practices only serve to
sti?e lending even to genuine businesses. The IDC won’t
condone such practices.
Although there has been an improvement in our
electricity and water consumption (see page 71), we
are implementing a project that will further reduce our
operation’s impact on the environment. By utilising
the Green Energy E? ciency Fund (GEEF), we will assist
other businesses to also reduce their impact on the
environment thereby making a real di?erence in lowering
the local economy’s carbon footprint.
Investment performance
The developmental needs of the country and the
direction taken by our government’s policies provide us
with the challenge to take the lead in industrial capacity
development. In this regard, our in-depth industry
knowledge and interaction with key stakeholders has
enabled us to play a signi?cant role in contributing to
policy development. We continue to align our activities
with objectives of the New Growth Path and the Industrial
Policy Action Plan.
Our proactive pursuit of strategic investments in 2011/12
resulted in a marked increase in our approvals to
R13.5 billion, from R8.7 billion recorded in the previous
year, made up of 293 transactions compared to 221 in
the previous year. Critically, this enabled us to continue
enhancing our impact on employment with approved
?nancing expected to result in the creation and saving
of 45 900 jobs compared to 39 400 in 2011.
It is particularly notable that in the year under review,
48% of our employment impact is mainly concentrated
in rural areas. This relatively disproportionate impact on
rural areas emanated largely from our investments in
the mining and renewable energy sectors, while we also
saved jobs in the agricultural sector hard hit by ?oods.
A number of the IDC’s initiatives and projects have been
aimed at improving backward and forward linkages within
or between industries, as well as the formation of higher
value-added opportunities.
Financial performance
In the year under review, the Group’s pro?tability increased
by 22% to R3.3 billion. This is largely as a result of increased
dividend income and increased gains from the disposal of
investments, o?set to an extent by reduced pro?tability
from our subsidiaries, mainly Foskor, and losses from
equity-accounted investments.
The fair value of investments decreased by R902 million
in the 2011/12 ?nancial year compared to an increase
of R12.6 billion in the previous year, largely due to a
decline in the value of listed investments during the
year. The total assets of the Group have increased from
R106.8 billion to R112.2 billion, mainly as a result of an
increase in loans and advances of 33% to R15.9 billion.
This has been funded mainly by borrowings, which
increased by 49% to R9.9 billion. Our balance sheet
remains strong and provides a suitable base from which
to deliver on our future objectives.
Future prospects
Moving forward, we will continue to deepen our
commitment to developing South Africa’s industrial
capacity. It is also encouraging that economic
infrastructure and public investment remains at the core
of government’s economic growth priorities.
Our participation in various strategic infrastructure
projects (SIPs), spearheaded by the Presidential
Infrastructure Co-ordinating Commission (PICC), creates
the opportunity for us not only to rejuvenate South Africa’s
industrial base but to also promote localisation.
Leadership commentary (continued)
It is particularly notable
that in the year under
review, 48% of our
employment impact
is mainly concentrated
in rural areas.
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 19
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Acknowledgements
This is the ?rst time that we have produced an integrated
annual report – a signi?cant milestone in over 70 years
of our existence. This achievement, including the
establishment of our new subsidiary sefa, would not
have been possible without commitment from IDC
management and our talented sta? that continue to
live up to our core values of Passion, Professionalism
and Partnership.
I am encouraged by our contribution to improving the
socio-economic conditions of marginalised communities
through our CSI initiatives. These CSI initiatives
demonstrate our commitment to ideals that seek to
promote good corporate citizenship.
I am enormously appreciative of the generous support
provided by the IDC Board of Directors through the
leadership of Ms Monhla Hlahla. Their unwavering support
is best demonstrated by the performance of the IDC in the
period under review. In welcoming new Board members,
I also extend my best wishes and gratitude to all Board
members who retired during the year under review. Their
contributions largely helped to develop and strengthen
the growth of the IDC.
I am grateful to the Honourable Minister Ebrahim Patel
for his leadership, guidance and wisdom. Accolades
also go to the Honourable Minister Rob Davies and to
honourable members of the Economic Development
Portfolio Committee under the guidance of the Chairman,
Honourable Ms Elsie Coleman, and other portfolio and
select committees that we engaged with during the year
under review. Your generous support and interest in the
activities of the IDC is greatly appreciated.
Mr MG Qhena
26 June 2012
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 20
Stakeholder engagement
Every two years we measure our corporate reputation
using the proprietary Global REPTRACK tool of the
Reputation Institute. The most recent study, completed
in 2011, revealed that the IDC’s emotional connection
amongst its key stakeholders is considered strong at
73 index points, above the global mean for ?nancial
services. Further, the IDC has a strong following with
87% of stakeholders trusting the organisation to “do
the right thing”.
Stakeholders de?ned the most important of the IDC’s
attributes as “o?ering high-quality products and services”,
“being ?nancially sustainable” and “having a clear vision for
the future”. To improve reputation and mitigate risks, the
IDC needs to focus on “having excellent managers”, “being
a well-organised organisation”, “employee wellbeing”,
“o?ering value for money products and services”, “meeting
customer needs” and “having a positive in?uence on
society”.
Broader society, as well as applicants for funding, often
have di? culty in understanding the role of the IDC and
its mandate for adding value in the economy.
Indeed, less than two-thirds of our stakeholders are
aware that the IDC’s purpose is to provide funding and
to support business development.
Considering this challenge, we embarked on a campaign
to proactively engage our stakeholders, establish their
concerns and expectations, and put forward a clear and
feasible strategy for achieving our organisation’s mandate.
In addition to various direct stakeholder engagement
events during this ?nancial year, we contracted a third
party to conduct various surveys, including customer
satisfaction, stakeholder and employee engagement
surveys.
We plan to continue building our understanding of the
key concerns of our stakeholders and ensure that we
maintain a high level of transparency and accountability
in our reporting. This will enable us to not only become
more e?ective in managing stakeholder expectations, but
also maximise the development impact we can deliver.
The criteria for identifying the IDC stakeholders listed in
this report was based on three factors, namely:
•
Their power to in?uence perceptions about the IDC
•
The legitimacy of their engagement with the IDC
•
The urgency with which the IDC needs to engage
them
The following table provides a brief overview of our
stakeholders, their expectations and concerns:
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 21
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Stakeholder
category How we engage with our stakeholders Expectations and concerns
Shareholder
•
Economic
Development
Department
(EDD)
•
Parliamentary
portfolio
committees
•
Three spheres
of government
(national,
provincial
and local)
•
Board meetings
•
Meetings between government
ministries and IDC executive and senior
managers
•
Presentations to parliamentary portfolio
committee: economic cluster
•
Presentations to provincial executive
committees
•
Increase impact on job creation
•
Increase impact of levels of industrial
?nancing
•
Be more proactive in identifying opportunities
•
Finding ways to lower cost of funding
•
Need to provide a quick service to customers
•
Investment has to contribute to industrial
development
•
Need to assist in moving South Africa to a less
carbon-intensive economy and maximise job
creation in green industries
•
Need to incorporate black economic
empowerment and SMME development into
industrial development activities
•
Co-operate with other spheres of government
including government agencies and
enterprises to stimulate economic activity in
under-developed regions
•
Need to consider the impact on women and
youth in our development activities
Employees
•
Board feedback and CEO updates
•
Meetings hosted by divisional
executives or heads of strategic
business units (SBUs) and departments
•
Internal newsletter
•
Internal events and activities
•
Corporate strategy presentations
•
e-mail
•
Performance reviews
•
Targeted presentations on various
initiatives
•
Quality of leadership
•
Communication of strategy
•
Work satisfaction and working environment
•
Career development, training and
advancement
•
Reward and recognition
•
Fair labour practice
•
Open communication and a positive
corporate culture
Customers
•
Existing IDC
clients
•
New applicants
•
Potential clients
•
Website
•
Brochures
•
Research publications
•
Hospitality events
•
Annual report
•
Existing clients:
°
Client visits by SBUs, regional of ces
and Post Investment Monitoring
Department
°
Stakeholder newsletter
°
Direct communication with, and
face-to-face visits by SBUs and
departments representatives
°
Regional roadshows and site visits
•
Potential clients:
°
Walk-ins, call centre
°
Advertising, media releases
°
Sector workshops
°
CEO roadshows
°
Presentations by regional managers
to business associations/chambers
°
Exhibitions/conferences
•
Relevant products and services
•
Competitive pricing
•
Quality of after-care services
•
Expertise in all areas where IDC operates
•
Excellent customer service:
°
Simplicity of application processes
°
Speed of approval process
°
Responsiveness
°
Legal agreements
•
Credibility and sound reputation in the market
•
Open communication
•
Good governance and leadership
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 22
Stakeholder engagement (continued)
Stakeholder
category How we engage with our stakeholders Expectations and concerns
Infuencers
•
Regulators
•
Media
•
Unions and
activist bodies
•
Media statements
•
Annual report
•
Presentations by IDC Executive and
senior management
•
Developmental impact
•
Long-term ?nancial viability
•
Meet IDC’s mandate
•
Adherence to good corporate governance
•
Transparency towards all stakeholders
•
Ability to innovate
Partners
•
Commercial
banks
•
Co-funders
•
DFIs
•
State-owned
enterprises
•
Corporates
•
Project
developers
•
Government
agencies
•
Rating agencies
•
Suppliers
•
Researchers
•
Media statements
•
Annual report
•
Direct communication
•
Engagement sessions with IDC
executive and management
•
Presentations on speci?c issues
•
Relevance of products and services
•
Sharing expertise in key areas
•
Financial performance
•
Good governance and leadership
•
Positive impact on the economy and society
Business
•
Business
associations
(local and
international)
•
Chambers of
commerce
•
Media statements
•
Annual report
•
Direct communication
•
Engagement sessions with IDC
executive and management
•
Presentations on speci?c issues
•
Relevance of products and services
•
Positive impact on society
•
IDC’s in?uence on government policy
•
Have experts in the business sector
•
Ability to innovate
•
Governance and leadership
Communities
•
Workers
•
NGOs
•
Bene?ciaries of
IDC activities
(e.g. CSI)
•
Higher
education
institutions
•
General public
•
Media statements
•
Annual report
•
Engagement through projects
•
IDC to be a good corporate citizen
•
Expect IDC to be innovative
•
Leadership and governance
•
Impact on society
•
A good employer
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This year, we set out to identify and select our ?nancial and non-?nancial material issues through stakeholder
engagement. In addition, we consulted the IDC Corporate Plan and the Risk Universe documents. These
documents outline the Corporation's mandate and main risks, respectively. From this process we identi?ed
those issues that are material to the Corporation’s sustainability, and were approved by the Board. We plan to
review our identi?cation and prioritisation process over time.
Material issues Section Page
Align our activities with government’s industrial development mandate Strategy 24–26
Improve the socio-economic impact of our activities Client monitoring
Responsible funding
62–63
71
Strengthen our engagement with stakeholders Stakeholder engagement 20–22
Maintain our long-term ?nancial viability Directors’ report 92–97
Identify suitable development opportunities that require investment Investing in the economy 27–60
Mitigate the risk associated with investments Enterprise risk management 76–79
Play a proactive role in easing bottlenecks and barriers to development Strategy 24–26
Maintain robust governance to safeguard against fraud and inappropriate
investment
Governance
Fraud prevention
72–76
75
Streamline our organisation to ensure e? cient customer service Strategic business units 27
Ensure that we posses the right skills and human resource capacity Investing in our people 64–68
Entrench innovation in all aspects of the organisation Investing in our customers
Innovation
61–63
61
Our material issues
More
information
is available on
the web at
www.idc.co.za/
IR2012
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 24
Our strategy
More
information
is available on
the web at
www.idc.co.za/
IR2012
Objective
Support industrial capacity development
Outcomes that will be achieved
Facilitate sustainable
direct and indirect
employment
Regional equity
(including development
of the rest of Africa)
Growing the
entrepreneurial and SME
segments
Expansionary
and/or broad-based black
economic empowerment
Environmentally sustainable
growth
Grow sectoral diversity and
increase localisation
Four strategic pillars and initiatives
Industrial development
Contributing to an
enabling environment
Leveraging IDC’s
portfolio for maximum
impact
Customer service and
environmental impact
•
Sector focus in line
with NGP and IPAP
•
Project development
•
Industrial ?nance
•
Sector development
strategies
•
Regional industrial
integration
•
Proactive role
in shaping and
in?uencing policy
•
Address factors
impeding industry
development
•
Role clari?cation,
partnership with and
support for other DFIs
•
Segmenting
IDC’s portfolio
and designing
customised
funding schemes
as an enabler for
development
•
IDC’s funding
model
•
Improved customer
service
•
Improved e? ciencies
•
Reducing IDC’s impact
on the environment
•
Reducing industries/
IDC client impact
on environment
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IDC’s Leadership in Industrial Development strategy is
designed to allow it to achieve its objective of industrial
capacity development and the outcomes that we want
to achieve.
The strategy was developed during the previous year
and is built on the following four pillars:
•
Industrial development
•
Contributing to an enabling environment
•
Leveraging IDC’s portfolio for maximum impact
•
Customer service and environmental impact
Industrial Development
To achieve our vision of being the primary driving force
of commercially sustainable industrial development,
both locally and in the rest of the continent, we have to
increase the role that we play in industrial development.
To this end we have the following key focus areas:
•
Sector focus in line with the NGP and IPAP –
By focusing our operational activities on the sectors
prioritised by these policy documents, IDC can utilise its
resources more e?ectively. As a result of this initiative,
IDC phased out funding towards certain industries
during the year while increasing its focus on others
•
Project development – One of our key strengths is
the skills and experience within IDC to develop and
implement industrial projects. We aim to increase IDC’s
early-stage project development activities. This takes
place particularly in those areas where opportunities
exist, but remains under-utilised for various reasons.
Increased assistance to project promoters during early
project development is also envisaged
•
Industrial fnance – The strength of our balance sheet
enables us to fund activities that expand industrial
capacity in the country and beyond. We aim to grow
the level of funding towards those areas where
opportunities exist, but do not readily attract funding
from commercial banks
•
Sector development strategies – Sector-speci?c
strategies are being developed to channel funding
and activity towards the most appropriate areas.
These strategies are based on thorough analyses
of each industry to ensure that opportunities and
constraints are well understood. Strategies are broken
down into action plans with clear milestones and
responsibilities
•
Regional industrial integration – For South Africa
to achieve its full economic potential, it will have to
intensify co-operation and integration with the rest of
the continent. IDC’s role in this will be to proactively
develop and implement strategies that develop value
chains across the continent by taking advantage of
individual country’s strengths. This will ensure a more
competitive industrial base throughout the region
Contributing to an
Enabling Environment
Whereas the ?rst pillar of our strategy talks primarily to
how we envisage implementing policies, the second pillar
addresses the role that we play in assisting government to
strengthen policies and other agencies that will improve
the region’s ability to develop. Three areas are addressed:
•
Proactive role in shaping and infuencing policy –
We have signi?cant industry expertise and insight into
the productive side of the economy built on our research
activities and constant engagement with government
and the private sector. This expertise is being utilised to
inform policy makers on potential changes across a wide
range of policies and policy instruments that are needed
to increase industrial development
•
Factors impeding industry development –
Through our involvement in project development and
implementation, as well as through our interactions
with entrepreneurs, we identify obstacles that hinder
industry development. These include disruptive policies
and bureaucratic ine? ciencies. In partnership with the
Economic Development Department (EDD), we are
bringing these obstacles to the attention of the relevant
government departments, with EDD monitoring
progress on the removal of these impediments
•
Role clarifcation, partnership with and support for
other DFIs – As we bring our investment focus in line with
our strategy, the risk exists that certain market segments
will lose vital support. To counter this, we embarked on a
process to assist other DFIs to successfully service these
segments, with the priority given to those tasked with
developing the small business sector
Leveraging IDC’s Portfolio for
Maximum Impact
Our third pillar relates to the e?ective utilisation of our
balance sheet to realise our development mandate:
•
Segmenting IDC’s portfolio and designing customised
funding schemes as an enabler for development –
Our balance sheet not only allows us to increase the
levels of our funding, but the income generated from
legacy investments also permits us to re-invest in targeted
projects with a higher development impact. This initiative
allows for the Corporation to design customised funding
schemes to act as very speci?c interventions aimed at
achieving pre-determined objectives. These schemes
will typically provide funding at terms that are more
favourable than our normal funding
•
IDC’s funding model – In order to meet the development
goals of the NGP and IPAP, we have to raise our investment
activities substantially over the next few years. This requires
us to secure alternative sources of funding at competitive
rates beyond what we can draw from our existing sources.
This initiative is aimed at reviewing IDC’s sources of
funding and exploring alternatives, especially those where
funding can be sourced at more competitive rates
Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 26
Our strategy (continued)
Customer Service and Environmental
Impact
The fourth pillar is concerned with improving our customer service
delivery and reducing our impact, as well as the impact of our
investments, on the environment:
•
Improved customer service and ef ciencies – A notable area
of improvement in terms of customer service is turnaround
times. This initiative aims to reduce turnaround times and
increase our e? ciencies through innovative processes to
improve service delivery
•
Reducing our impact on the environment – This initiative
focuses on reducing IDC’s carbon and water footprints
•
Reducing industries/IDC clients’ impact on environment –
The focus of this initiative is to assist companies to reduce
their environmental impact. Our initial focus will be to provide
funding to companies that are implementing plans to improve
energy e? ciency
Supporting Factors
The implementation of the strategy relies on several other factors
in the Corporation being in place, including:
•
Cementing good governance and risk management structures
•
Continually assessing and optimising our risk appetite
•
Being prudent in the management of our ?nances
•
Maintaining a motivated, diversi?ed and skilled team
of employees
Corporate targets

2012/13
2012/13
Perspective Indicator Target Stretch target
Industrial capacity
development
Implementing projects 70% of projects start
production
100% of projects start
production
Value of transactions signed R15 billion R22 billion
(disburse at least R8 billion)
Development impact Jobs expected to be created/saved in South Africa 30 000 41 000
(at least 7 000 in rural areas)
Actual jobs expected to be created/saved in South Africa 20 000 25 000
Financial ef ciency Cost to net ?nancing income (excluding impact of mature
listed investments)
61% 54%
Stakeholder relations
and customer
satisfaction
Turnaround time on non-complex transactions 17 working days 15 working days
Industrial capacity
development
Achievement of industry development milestones Milestones for 80% of
initiatives achieved
Milestones for 90% of
initiatives achieved
Financial sustainability Five-year growth in reserves CPI + 2% CPI + 4%
Level of impairments 50 30-50 50 30-50