Upload
vuthu
View
221
Download
3
Embed Size (px)
Citation preview
Leading industrial capacity development in agro-industries
Rian Coetzee
Head: Agro-Industries
October 2013
2
IDC - Corporate profile
• Established:
• Corporate type
• Shareholding
• Reporting:
• Funding:
• Objective:
• Activities:
• Regional mandate:
• Financial base (FY’12):
• Funding
• Governance
• B-BBEE score
• Values
October 1940
Development finance institution, mandated by Act
Government of South Africa = 100% shareholder
SA Ministry of Economic Development
100% self-financing
Lead industrial capacity development
Provide risk capital (industrial finance or project finance)
South Africa & the rest of Africa (since 1998)
Total equity = ZAR 92 bn ( = USD 11bn);
profit = R3,3 bn (= USD 398m)
Debt/Equity ratio = 11%
R13,5bn (= USD 1,6 bn) funding to 293 companies / projects
Follows normal company policy and procedures
Level 2 B-BBEE contributor (score = 89,7)
Partnerships, Professionalism & Passion
3
IDC - Objectives and the outcomes that we aim to achieve
Facilitate sustainable direct and indirect employment
Regional equity (including development of the rest of Africa)
Growing the entrepreneur and SME sector
Expansionary and/or broad-based black economic empowerment
Environmentally sustainable growth
Grow sectoral diversity and increase localisation
Support for industrial capacity development By focussing on...
We will contribute to...
3
The IDC is a catalyst in driving industrial development:
• We proactively identify and fund high-impact projects
• We lead the creation of viable new industries
• Using our diverse industry expertise to drive growth in priority sectors
• Taking up higher-risk funding in early-stage and high-impact projects
We differentiate
ourselves by...
Main business & funding activities
5
IDC Strategy: Sector allocations for the next 5 years
Green and
energy saving
industries
Bio fuels
Agro-
processing
Touris
m
Business process
services
Craft and film
ICT
Healthcare Mining related
technologies
Biotechnology
Downstream mineral
beneficiation
Mining
Industrial
infrastructur
e
Logistics
Metals
fabrication,
capital and
transport
equipment
Automotives,
components,
medium and heavy
commercial vehicles
Plastics and
chemicals Clothing,
textiles,
footwear, leather
Forestry, paper
& pulp, furniture
Advanced
manufacturing
Pharmaceuti-
cals
Oil and gas
Grreen industry
components
Other funding areas :
Venture Capital: R500 million
Funding to distressed companies: R2.5 billion
R22.4 billion
R7.7 billion
R20.8 billion
R22.1 billion
R11.1 billion
R14.8 billion
6
IDC vis-à-vis commercial financiers
Risk assessment• Based on historical performance of the business
Structuring• Long-term funding generally not remaining
Pricing• Pricing based on risk
Security, sureties and owners’ contribution• Banks’ exposure covered multiple times
Risk assessment• Based on expectations for the future of the business –
i.e. business plan• In depth due-diligence to identify and mitigate risks
Structuring• Short, medium and long-term funding remaining•Moratoria on capital and interest repayments
Pricing•Development impact taken into account along with
cost of funding and risk when determining pricing • Subsidised schemes remaining to achieve specific
objectives
Security, sureties and owners’ contribution• Takes security where remaining• Sureties and owners’ contribution depending on the
ability of the entrepreneur – entrepreneur needs to show commitment to the business•Generally securities etc. does not cover IDC’s exposure
IDCCommercial financiers
7
IDC vis-à-vis commercial financiers (continue)
Post-investment• Focussed on ensuring maximum recovery of funds in
cases where the business experience difficulty
Industry involvement•Generally only becomes involved in established industries
Project development and funding• Seeks involvement from development banks or
government to fund large projects
Business support• Pre- and post-investment support remaining to entrepreneurs
Post-investment• Focussed on ensuring business sustainability in cases where
the business experience difficulty
Industry involvement• Support for new industries with growth potential
• Provides funding for unproven technology through venture capital funding
Project development and funding• Conceptualises projects and develops them to a
bankable stage• Invests in early stage projects• Shares risk with commercial financiers to leverage
private sector investment
IDC
Commercial financiers
TWO WAYS OF DOING BUSINESS WITH THE IDC
(1) PROJECT DEVELOPMENT
TWO WAYS OF DOING BUSINESS WITH THE IDC
(2) CREDIT APPLICATIONS
10
AGRO-PROCESSING – value chain
Sector map
Biotechnology
Intermediate inputs
Energy; Water
Irrigation equipment
Fertilizer; Implements
Packaging; Fencing
Structures; Tools
Pumps & generators;
Medicine
Maize
Wheat
Hay
Grain sorghum
Sugar cane
Ground nuts
Tobacco
Sunflower seed
Cotton
Viticulture
Citrus
Subtropical fruit
Vegetables
Deciduous fruit
Tea
Coffee
Flower
Game
Ostriches
Pigs
Goats
Sheep
Cattle
Poultry
Beans
Nuts
Field crops Horticulture Livestock
Agriculture
Evergreen
Fishing
Aquaculture
Fishing
Meat processing
Dairy products
Fruit & vegetable
products
Fish products
Oils & fats
Grain mill products
Bakery products
Sugar & related
Confectionary products
Other food
Animal feed
Agro -processing
Distilleries
Malt Beverages
Soft drinks
Beverages
Wineries
Other non - food
Essential oils
Fibres
Starch
Bio -fuels
Medicinal / Biotech
Household
Expenditure
Fragrance
Textiles
Fuel
Pharmaceutical
Feeding into other
value chains
Foodservices
(hotel;
restaurant;
caterers)
Wholesale
Retail
Logistics
Tourism
ExportsAgents
Logistics
Automotive
Government
Expenditure
Chemicals
Other …
PR
IMA
RY
SEC
TO
R
SEC
ON
DA
RY
SEC
TO
R
Sector map
Biotechnology
Intermediate inputs
Energy; Water
Irrigation equipment
Fertilizer; Implements
Packaging; Fencing
Structures; Tools
Pumps & generators;
Medicine
Maize
Wheat
Hay
Grain sorghum
Sugar cane
Ground nuts
Tobacco
Sunflower seed
Cotton
Viticulture
Citrus
Subtropical fruit
Vegetables
Deciduous fruit
Tea
Coffee
Flower
Game
Ostriches
Pigs
Goats
Sheep
Cattle
Poultry
Beans
Nuts
Field crops Horticulture Livestock
Agriculture
Evergreen
Fishing
Aquaculture
Fishing
Meat processing
Dairy products
Fruit & vegetable
products
Fish products
Oils & fats
Grain mill products
Bakery products
Sugar & related
Confectionary products
Other food
Animal feed
Agro -processing
Distilleries
Malt Beverages
Soft drinks
Beverages
Wineries
Other non - food
Essential oils
Fibres
Starch
Bio -fuels
Medicinal / Biotech
Household
Expenditure
Fragrance
Textiles
Fuel
Pharmaceutical
Feeding into other
value chains
Foodservices
(hotel;
restaurant;
caterers)
Wholesale
Retail
Logistics
Tourism
ExportsAgents
Logistics
Automotive
Government
Expenditure
Chemicals
Other …
PR
IMA
RY
SEC
TO
R
SEC
ON
DA
RY
SEC
TO
R
11
AGRO-PROCESSING – value chain
Agric Input
Agricultural production
Primary processing
Advanced processing
Wholesale & distribution
Retail Consum
er Basic
processing
• Sterilising
• Pulping
• Drying
• Canning
• Milling and
grinding
• Pressing
• Chilling
• Freezing
• Heating
• Fermentation
• Preservation in
oil/vinegar/brine
• Sugar-based
preservation
• Packaging and
labelling
• Extraction
• Mixing/combinin
g to recipe
• Flavouring
• Extrusion
• Baking and
cooking
• Preservation
• Packaging and
• labelling
• Sorting & grading
• Cutting & peeling
• Chilling
• Packaging &
labelling
Agro-processing
12
AGRO-PROCESSING – value chain composition
• Livestock = 47,5%
• Field crops = 28,2%
• Horticulture = 24,2%
• Meat = 28%
• Grain milling = 14%
• Dairy = 11%
• Bakery = 8%
• Fruit & = 8%
• Sugar = 6%
• Oils & fats = 6%
• Animal feed = 6%
• Fish = 3%
• Confectionary = 3%
• Commercial farmers =
40,000 (95% of output)
• Resource-poor
farmers = 450,000 (5%
of output)
• Around 4,000 food
production companies
• Top 10 responsible for
70% of turnover
• 95% of food
retail is
controlled by 4
retailers
• Sales to
households =
72%
Agric Input
Agricultural production
Primary processing
Advanced processing
Wholesale &
distribution Retail Consumer
Basic processing
• Large retailers
• Independent
retailers
• Informal sector
13
AGRO-PROCESSING – cyclical trends
0
50
100
150
200
1993 1996 1999 2002 2005 2008 2011
Inde
x 2
00
5 =
100
Employment
0
50
100
150
1993 1996 1999 2002 2005 2008 2011
Inde
x 2
00
5 =
100
Gross Domestic Product
0
50
100
150
1993 1996 1999 2002 2005 2008 2011
Inde
x 2
00
5 =
100
Gross Domestic Product
0
50
100
150
1993 1996 1999 2002 2005 2008 2011In
dex 2
005 =
100
Employment
1. Direct share of national GDP = equals 2.4%
2. Real GDP growth at 1.9% p.a., on average,
between ‘03 & ‘12.
1. Direct share of national GDP = equals 1.9%
(11.2% of manufacturing GDP)
2. Real GDP growth at 4.6% p.a., on average,
between ‘03 & ‘12. (manuf = 2.5%)
3. 13.7% of all jobs in manufacturing
14
AGRO-PROCESSING – trade flows
Trade balance
Trade Flow HS4 code: Product category
Value Rm
(sum of 5 year
average)
Exp
ort
s
H0805: Citrus fruit, fresh or dried 6393
H1005: Maize (corn) 3952
H0806: Grapes, fresh or dried 3520
H0808: Apples, pears and quinces, fresh 3251
H5101: Wool, not carded or combed 1587
H0802: Nuts except coconut, fresh/dried brazil &
cashew 779
H0809: Stone fruit, fresh (apricot, cherry, plum, etc) 666
H0804: Dates, figs, pineapple, avocado, etc, fresh/
dried 438
H1201: Soya beans 381
H0810: Fruits nes, fresh 303
Imp
ort
s
H1001: Wheat and meslin 3155
H4001: Natural rubber & gums, in primary form,
plates, etc 1332
H2401: Tobacco unmanufactured, tobacco refuse 1226
H0713: Vegetables, leguminous dried, shelled 634
H5201: Cotton, not carded or combed 497
H0901: Coffee, coffee husks & skins & coffee
substitutes 450
H1209: Seed, fruit and spores, for sowing 323
H0902: Tea 317
H1005: Maize (corn) 262
H0801: Coconuts, Brazil nuts & cashew nuts,
fresh/dried 195
Top traded agricultural products Top traded agro-food products
Trade Flow HS4 code: Product category
Value Rm
(sum of 5 year
average)
Exp
ort
s
H1701: Solid cane/ beet sugar & chemically pure sucrose 1897
H2009: Fruit and vegetable juices, not fermented/ spirited 1576
H2008: Fruit, edible plant parts nes, prepared/preserved 1474
H2106: Food preparations, nes 916
H1512: Safflower, sunflower & cotton-seed oil, fractions 650
H4102: Raw skins of sheep or lambs 454
H1103: Cereal grouts, meal and pellets 405
H2103: Sauce, condiments, mixed seasoning & mustard 389
H1507: Soya-bean oil, fractions, not chemically modified 365
H1806: Chocolate and other foods containing cocoa 358
Imp
ort
s
H1006: Rice 3979
H2304: Soya-bean oil-cake and other solid residues 2591
H1511: Palm oil and its fractions, not chemically modified 2584
H0207: Meat, edible offal of domestic poultry 2230
H1507: Soya-bean oil, fractions, not chemically modified 2039
H2106: Food preparations, nes 1184
H1512: Safflower, sunflower & cotton-seed oil, fractions 996
H2309: Animal feed preparations 691
H1701: Solid cane/ beet sugar & chemically pure sucrose 617
H2009: Fruit and vegetable juices, not fermented/ spirited 575
Trade balance
15
AGRO-PROCESSING – sub-sectors opportunities
Livestock Grain Sugar Beverage Oils and fats &
other
Fish
Horticulture
• Processing and
preserving of fish and
fish products
• Processing and
preserving of fruit and
vegetables
• Meat and meat products
• Dairy products
• Prepared animal feeds
• Grain mill products
• Starches and starch
products
• Macaroni, noodles,
couscous and similar
• Bakery products
• Sugar, including golden
syrup and castor sugar
• Cocoa, chocolate and
sugar confectionery
• Spirits & wine
• Beer and other malt
liquors and malt
• Soft drinks; Mineral
waters
• Vegetable and animal
oils and fats
• Other food products
n.e.c.
• Value addition to meat
products
• Livestock
massification
• Localise high value
dairy production –
butter, whey, etc.
• Dairy exports to Africa
• Higher value cheeses
• Animal feed
production close to
source
• Poultry in the rest of
Africa
• Increased competition
in value chain
• Exploit milling
potential, in areas with
logistical advantages
• Rice production in
Africa
• Increase animal feed &
integrated poultry
production
• Higher value starch
production
• Innovation in bakery
products , non-wheat
bread & pastas
• Non-wheat bread
• Co-generation &
biofuels
• Improved capacity
utilisation of existing
mills
• Support drive into
Africa
• Sweets - Brand
extension into Africa
• Localisation of foreign
brands - confectionary
• Rooibos & Honey
bush value addition
• Develop new wine
areas
• Consolidation of wine
labels
• Localise malt
production
• Local production of
foreign brands
• Localise soya related
products
• Higher value, healthier
oil products
• Expand marine
aquaculture
• Canning re-orientation
• Higher value products
– organics, salads, oil
extraction
• Import replacement –
juices
• Internationalisation
Value chain
• Sub-sectors
• Potential interventions
16
Agro-processor
Agriculture
• Access to Markets
• Access to Finance
• Access to Information
• Access to Skills
Operating partner(s) & IDC
Broad-based BEE farming
Government grants
NGO’s
Commodity organizations
Agri-businesses input supply
Water rights
Land tenure security
Social facilitation
Farmer aggregation
Infrastructure
Training
Extension support
Government alignment
Mechanization
Project management
Comm. & DFI funding
IT solutions
Agro-processing rural development model
RURAL DEVELOPMENT & agro-processing
Value chain integration
Community/industry/ Compact
Incubation Policy co-ordination
R&D + trials
17
Agro-Industries
Strategic Business Unit (SBU)
18
Our sectoral focus areas
1. Agro-processing (food and non-food)
• It can include on-farm, first-tier
processing (such as packing & sorting).
• It can also include backward integrated
agro-processing projects
2. Beverages (alcoholic and non-alcoholic)
3. Aquaculture
Processing and preserving of meat and meat products
Processing and preserving of fish and fish products
Processing and preserving of fruit and vegetables
Manufacture of vegetable and animal oils and fats
Manufacture of dairy products
Manufacture of grain mill products
Manufacture of starches and starch products
Manufacture of prepared animal feeds
Manufacture of bakery products
Manufacture of sugar
Manufacture of cocoa, chocolate and sugar confectionery
Manufacture of pasta products
Manufacture of other food products n.e.c.
Distilling, rectifying and blending of spirits; ethyl alcohol production
from fermented materials; manufacture of wine
Manufacture of beer and other malt liquors and malt
Manufacture of soft drinks; production of mineral waters
19
Refocus … we do not fund
• Pure primary agricultural projects/applications (will be referred
to the Landbank)
• Pure land-based transactions/acquisitions
• Hard liquor includes any drink with proportion of alcohol
exceeding 12 per cent vol
• Any tobacco and tobacco products
• Biofuels (to be dealt with by Green Industries SBU)
• Wholesale & retail activities
• Refinancing of existing activities
• Pure sale of shares for empowerment purposes (to be referred
to the NEF)
• Funding of less than R1m (refer to Khula)
• Pure overdraft facilities
20
Investment guidelines
In South Africa
• The project must facilitate the creation of new industrial capacity (create jobs)
• The funding request must be for at least R1-million (for debt) and R5million (for equity and/or
quasi-equity) (not more than R1bn)
• Risk-sharing from operating private-sector investment partners is non-negotiable.
• Equity-related funding:
• IDC will only provide an equity-related instrument if it views it of strategic importance
• IDC will never take up a majority stake in a business
• IDC not to fund more than 60% of the total funding requirement (for start-ups)
• We can fund a full expansion if the equity structure at peak is around 35%
• For start-up we prefer an equity structure of 50% at peak
Conditionalities – broad-based Black economic empowerment
• Pure acquisitions - If it is a pure acquisition, with a mere
sale of shares, then our funding is not directly linked to
new capacity and IDC cannot participate in a transaction.
The National Empowerment Fund provides funding for
pure BBBEE acquisition transactions
• Expansionary acquisitions - If the transaction is an issue
of shares and at least 50% of the IDC's funds are used
within the business for expansion purposes, then the
IDC can consider such funding
• Prior to funding
• all business partners are encouraged to do at least
an own BBBEE rating on the dti-website
• After funding
• all business partners needs to do an annual
BBBEE accreditation on an annual basis
• A BBBEE plan needs to be put in place if a BBBEE
rating is below 5
BALANCED SCORECARD APPROACH
GENERIC SCORECARD
• Direct Empowerment Ownership : 20% weighting
Management : 10%
• Human Resources Development Employment Equity : 15%
Skills Development : 15%
• Indirect Empowerment Preferential Procurement: 20%
Enterprise Development : 15%
Socio Economic Dev : 5%
Total 100%
Investment guidelines
In the rest of the African continent
• The project must be of direct benefit to South Africa
• Promoting South African capital goods exports
• Development and integration of value chains (inputs/raw materials from SA, intermediary
goods to be exported to SA,
• Promoting South African ownership (25% or more) on the Continent
(These conditionality is relaxed for neighboring countries)
• The size of the project (total funding requirement) must be at least:
• ZAR 5-million SACU investments
• USD 3-million for SADC investments
• USD10-million for countries outside SADC.
• IDC not to fund more than 50% of the total funding requirement (for expansions
not more than the existing asset base) – the funding amount will be a factor of
South African involvement
23
Financial products
• Debt products
• Long-term, capital/interest moratoriums, sculpted
repayments
• Mezzanine funding
• Cash flow and not security linked
• Equity instruments
• For own account & share warehousing options –
mainly strategic reasons
• Bridging finance against contract
• Wholesale finance
• Other products – guarantees, trade finance, etc.
Customised
structuring of
each transaction
24
Special IDC Schemes - generic
Gro-E Scheme
• R10 billion available for 5 years
• Loans @ Prime - 3% for the first 5
years
• Equity @ 5% RATIRR
• Capital and interest payment holidays
as per financial needs of the business
• Minimum = R1 million & Maximum of
R1 billion per project
• Business must have prospects of
acceptable profitability to service its
obligations
• Cost per job created should not
exceed R500 000
• B-BBEE certification from an
accredited verification agency is
required
• R2 billion unsecured 5-year listed
private placement bond
• Cost per job of up to 450,000 will be
eligible
• Pricing @ approximately 6.0% - 10.0%
fixed;
• Extent of discount is based on the risk
and developmental impact
• Maximum = R100m
• Only senior debt instruments
• Client is expected to drawdown within
7 months after approval
• Women Entrepreneurial Fund (R400
million)
• People with Disabilities Fund (R50
million)
• Development Fund (R250 million)
• Equity Contribution Fund (R150
million)
• Community Fund (R150 million)
UIF Job Creation
Fund
Transformation and
Entrepreneurial Scheme
(TES)
25
Special IDC Schemes – specific to agro-industries
Agro-Processing
LINKAGE Scheme
• Fund size = R100m Target = Agro-
processing entities that source or intend
sourcing raw materials from small-scale,
resource-poor farmers
• 50:50 risk sharing arrangement between
IDC and processor
• Debt pricing at prime minus 3
• Maximum amount = R20m
• Matching grants for extension support up
to R1m
• Funding to be used for expansions, new
capacity, improved capacity utilisation or
on-lending to contract farmers
Agro-Processing
COMPETITIVENESS
Scheme
• Fund size = R250m
• Objective = to facilitate increased
competition in the agro-processing
sector through the provision of finance
to non-dominant players
• Investment, business support &
research support components
• Maximum finance = R30m and
minimum R250,000.
• Funding provide at highly
concessionary terms
• Almost fully committed
AGRO-INDUSTRIES SBU – Current sectoral portfolio
- 100 200 300 400 500 600 700 800
Biotech
Farm services
Pasta products
Vegetable products
Mushrooms
Flowers
Sweets & honey
Wholesale finance
Other processing
Soya processing
Starch products
Various other fruit
Stone fruit
Fish farming & processing
Fibre products
Tea
Dairy products
Beverages
Fruit processing
Subtropical fruit
Berries
Meat processing
Disaster relief
Nuts & nut processing
Grapes
Citrus
Sugar products
• Total exposure & commitments =
R5,5bn
• 115 investments
• 50% of exposure value = equity
investments
• Rest of Africa (excl. SA) = 28% of
portfolio
27
Existing portfolio – South Africa
22%
32%
10%
9%
3%
7%
2%
8%
8%
• Wine
• Citrus
• Flowers (proteas)
• Persimmon
• Berries
• Stone fruit
• Fishing
• Processing – fish
• Grapes
• Aquaculture (abalone)
• Pastas
• Fruit packing
• Dried fruit products
• Ostrich processing
• Agribusiness
• Fruit – Grapes
• Fibre - cotton
• Fruit - Citrus
• Processing - Meat
• Processing – fruit
• Flood relief
• Nuts
• Fruit processing
• Citrus
• Berries
• Aquaculture (cob)
• Dairy products
• Honey
• Fruit – Stone
• Agribusiness
• Meat - poultry
• Walnuts
• Stone fruit
• Meat processing
• Apples
• Sweets
• Fibre
• Berries
• Dairy products
• Beverages
• Sugar products
• Nuts
• Fruit - Various
• Beverages
• Processing - vegetable
• Processing - Fruit
• Fruit - Subtropical
• Processing - Nuts
• Agribusiness - wholesale
• Fruit – Citrus
• Fruit - Various
• Disaster relief – not only Gauteng
• Beverages
• Biotech
• Dairy products
• Stone fruit & berries
• Sweets
• Pasta products
• Processing – confectionary
• Processing - Soya
• Mushroom products
• Dairy products
28
Existing portfolio – Africa, excl. South Africa
Africa, excl. RSA - 28% of total exposure
Sugar - Mozambique
Tea & Macadamia nuts - Malawi
Table grapes - Namibia
Sugar - Kenya
Sugar - Tanzania
Sub-tropical fruit - Mozambique
Cassava starch - Swaziland
Fruit juice – Ethiopia
Poultry processing - Namibia
29
An agricultural rural development model (start-up)
XYZ (Pty) Ltd Operating / investment
partner/s (experience &
financial capacity)
BEE (Commitment)
• High level
• Workers
• Community
IDC direct
SPV -
IDC,RCF,Dev.Fund
s
IDC & other banks
Equity (50%) – IDC max 49%
Debt (50%)
30
Example - Southern Oil (Pty) Ltd
Other
31%
68%
1%
Producer of value added
canola products, such
as canola oil & canola
oil cake in Swellendam,
WC
SSK
+/- 200 farms
supplying
canola
Facilitated the establishment of the canola industry in the Western Cape
Equity
Debt
• +/- 40 permanent
employees
• Value addition in
agriculture IDC has exited this transaction
31
Grain Field Chickens integrated rural development project
AGRO-INDUSTRIES SBU – successful example
32
AGRO-INDUSTRIES SBU – examples
33
AGRO-INDUSTRIES SBU – examples
Regional presence
• IDC has offices in all provinces;
• Regional offices are fully fledged
operational offices that form part of the
SBU value chain;
• Responsibilities include:
– Dealing with enquiries, applications, basic
assessments and business support in the
province
– Improving IDC stakeholder relations and
stakeholder perceptions and extending
IDC’s reach and footprint.
– Proactive sourcing of deals/projects
– Engaging with provincial development
plans
• Satellite offices do not have permanent
staff and are manned at specific times by
employees from the regional office. These
offices are generally shared with other
DFIs or agencies.
Industrial Development Corporation
19 Fredman Drive, Sandown
PO Box 784055, Sandton, 2146
South Africa
Telephone (011) 269 3000
Facsimile (011) 269 2116
E-mail [email protected]
Thank you