Sustaining development in extraordinary times Annual ...Industrial Development Corporation of South Africa Annual Report 2009| 5 • Funding will facilitate creation of24 200new direct

Sustaining development in extraordinary times

Annual Report 2009

Sustaining development in extraordinary times

IDC front Final.qxd 8/18/09 2:09 PM Page a

Industrial Development Corporation of South Africa Annual Report 2009 | 1

Corporate Profile 2

– Vision 2

– Mission 2

– Objectives 3

– Outcomes 3

– Values 3

Highlights for the Year 4

Five-year Statistical Review 6

The Board of Directors 8

Chairman’s Statement 12

Executive Management 20

IDC at a Glance 22

Chief Executive’s Report 24

Operational Review 30

– New Business 30

– Division: Industrial Sectors 33

– Division: Resources Sectors 47

– Division: Services Sectors 59

Significant Investments 72

Operations support and sustainability departments 76

Group Annual Financial Statements 87

Abbreviations 174

Administration 176

Contents

IDC front Final.qxd 8/18/09 2:09 PM Page 1

Corporate Profile

2 | Industrial Development Corporation of South Africa Annual Report 2009

VisionTo be the primary driving force of commercially sustainable industrial

development and innovation to the benefit of South Africa and the rest of the

African continent.

MissionThe Industrial Development Corporation 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.



Objectives• Supporting industrial capacity development

• Promoting entrepreneurship

Outcomes• Sustainable employment

• Growing sectoral diversity

• Regional equity

• Growing small and medium enterprise (SME) sector

• Industrialisation in the rest of Africa

• Broad-based Black Economic Empowerment (B-BBEE)

• Environmentally sustainable growth

• New entrepreneurs

Values• Professionalism

• Partnership

• Passion


Highlights for the Year


• Increasing demand for IDC funding:

– 27% increase in value of funding approvals to

R10,8 billion.

– 39% increase in the number of funding approvals to 231.

– 38% increase in funding approvals of investment in the rest

of Africa to R2,9 billion.

– 69% increase in number of approvals to SMEs.

• Integrated approach to assist companies to withstand the

impact of the economic crisis:

– Funding of R500 million approved to assist distressed

companies.

– 2 500 jobs expected to be saved by the assistance to

distressed companies.

– R6,1 billion set aside to assist distressed businesses over the

next two years.



• Funding will facilitate creation of 24 200 new direct jobs in

South Africa and 5 000 in the rest of Africa.

• Largest portion (52%) of funding approvals for start-ups and

expansions in South Africa.

• Launch and extension of several schemes to support industrial

and entrepreneurial development:

– Transformation and Entrepreneurial Scheme (R1 billion).

– Textiles, Clothing, Leather and Footwear Competitiveness

Scheme (R250 million).

– Pro-Forestry Scheme (R100 million).

– Pro-Orchard II Scheme (R200 million).

• Value of business support grants approved increased by

270% to R8,9 million.


Five-year Statistical Review


(R’m) 2009 2008 2007 2006 2005*

Balance sheet

Cash and cash equivalents 5 607 5 370 4 466 3 558 2 081

Loans, advances and investments 61 879 78 931 54 951 40 613 30 549

Property, plant and equipment 3 038 3 002 2 383 2 414 2 491

Other assets 2 853 3 130 1 815 1 570 1 829

Total assets 73 377 90 433 63 615 48 155 36 950

Capital and reserves 64 687 75 803 52 536 38 959 30 089

Outside shareholders’ interest 358 45 38 25 2

Loans 5 165 5 825 5 716 5 525 4 840

Other liabilities 3 167 8 760 5 325 3 646 2 019

Total equity and liabilities 73 377 90 433 63 615 48 155 36 950

Income statement

Net operating income/(loss) 5 314 2 155 2 645 378 1 037

Share of equity-accounted investments

Profits from ordinary operations 1 132 1 950 1 673 417 266

Profit before tax 6 446 4 105 4 318 795 1 303

Taxation 825 154 (27) 42 117

Profit for the year 5 621 3 951 4 345 753 1 186

* The amounts for 2005 are in respect of the 9 months ended 31 March 2005.

Composition of revenue:2005 – 2009

Sales revenue

Dividends

Interest, rentals and other

20,8%

61,5%

17,7%

Regional distribution of IDCapprovals, by Rand value:

2005 – 2009

South Africa

Rest of Africa

19,3%

80,7%


Cumulative value offinancing approvals

R b

illio

n

’05 ’06 ’07 ’08 ’090

5

10

15

20

25

30

35

Approvals to SMEs (value)

0

5

10

15

20

25

30

Value of approvals

Share in value

R m

illio

n

Perc

enta

ge

’05 ’06 ’07 ’08 ’090

500

1 000

1 500

2 000

2 500

3 000

Approvals to SMEs (number)

0102030405060708090100

Number of approvals

Share in number

Nu

mb

er

Perc

enta

ge

’05 ’06 ’07 ’08 ’090

20406080

100120140160180200

Cumulative number ofjobs created/saved*

Nu

mb

er

’05 ’06 ’07 ’08 ’090

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

* Includes rest of Africa.

Approvals to black-empoweredcompanies (value)

R m

illio

n

Perc

enta

ge

0

15

30

45

60

75

90

’05 ’06 ’07 ’08 ’090

1 000

2 000

3 000

4 000

5 000

6 000

Value of approvals

Share in value

0

10

20

30

40

50

60

70

80

90

Number of approvals

Share in number

Nu

mb

er

Perc

enta

ge

’05 ’06 ’07 ’08 ’090

20

40

60

80

100

120

140

160

180

Approvals to black-empoweredcompanies (number)

’05 ’06 ’07 ’08 ’090

1 000

2 000

3 000

4 000

5 000

6 000

7 000

Profit before taxfor the year

R b

illio

n

Capital and reserves

R b

illio

n

’05 ’06 ’07 ’08 ’090

10

20

30

40

50

60

70

80

Debt/Equity ratio

Perc

enta

ge

’05 ’06 ’07 ’08 ’090

2

4

6

8

10

12

14

16

18


The Board of Directors

MC NKUHLU (5, 6, 9)

Deputy Chairman(Non-Executive)BA (Hons) (Western Cape);

Strategic Management in Banking (Insead);

AMP (Harvard)

Managing Director:

Nedbank Corporate Banking

Directorship:

– Findevco (Pty) Limited

MG QHENA (6, 7, 10)

Chief Executive Officer(Executive)BCompt (Hons) (Unisa); CA(SA);

SEP (Wits and Harvard);

Advanced Tax Certificate (Unisa)

Chairman of:

– Foskor (Pty) Limited

Directorships:


– Acerinox SA

GS GOUWS**Chief Financial Officer(Executive) BCom (Law); BCom (Hons) (UJ); CA(SA);

FCMA; Advanced Management

Programme (Insead)

Directorships:

– Hernic Ferrochrome (Pty)

Limited

– Kumba Iron Ore Limited

– Pebble Bed Modular

Reactor (PBMR)

– Atlantis Business Park (Pty)

Limited

– The Export-Import Finance

Corporation of South

Africa (Pty) Limited

– Impofin (Pty) Limited

– Konbel (Pty) Limited

– Konoil (Pty) Limited

– Kindoc Nominees (Pty)

Limited


WYN LUHABE (6)

Chairman (Non-Executive)BCom (University of Lesotho);

Management Advancement Programme

(MAP) VI (Wits Business School)

Chairman of:

– International Marketing

Council of South Africa

– Vendome SA (Pty) Limited

– Women Private Equity

Fund Trust

Directorships:


– JSE Limited

– Glenhove Fund Managers

– BMW (South Africa) (Pty)

Limited

– International Institute of

Management

Development (IMD)

Trustee of:

– The Duke of Edinburgh’s

Award International

Foundation



LR PITOT (7, 9)

(Non-Executive)CA(SA)

Executive Director of:

The National Association of

Automotive Component

Manufacturers.

Directorships:


– SABS Commercial (Pty)

Limited

LI BETHLEHEM (8, 9)

(Non-Executive)BA (Hons); Industrial Sociology; Master of

Arts; Certificate in Economics and Public

Finance (Unisa); Short course in economic

policy; Current Issues In Economic Policy

(Economic Policy Institute, New York)

Managing Director:

Johannesburg Development

Agency

Directorships:


– Hans Merensky

Foundation

– Wits Enterprise

– Johannesburg

Development Agency

MW HLAHLA (7)

(Non-Executive)BA (Hons) (Economics) (Pomona College –

California); Masters in Urban and Regional

Planning (University of California,

Los Angeles)

Managing Director:

Airports Company South


Directorships:


– ABSA Bank Limited

– ABSA Group Limited

– Airports Company South


– Air Traffic & Navigation

Services Company

Trustee of:

– Hlahla Family Trust

LL DHLAMINI (7)

(Non-Executive)BSc (Computer Science) (UCT); CA(SA);

BCom (Conversion) (UCT); Postgraduate

Diploma in Accounting (UCT)

Directorships:


– Xabiso Consulting

– Saccawu Provident Fund

– SA Quantum

– Nkwenkwezi Investment

– Xabiso CA Inc


See legend on page 11



The Board of Directors_continued

MS MOLOKO (10)

(Non-Executive)BSc (Hons) (Mathematics) (University of

Leicester); Postgraduate Certificate in

Education (University of Leicester);

Advanced Management Programme

(Wharton Business School)

Executive Chairman:

Thesele Group (Pty) Limited

Non-Executive Chairman of

Alexander Forbes Group

Directorships:


– Acucap Properties Limited

– Gen Re (South Africa)

– Thesele Properties (Pty)

Limited

– Thesele Asset Managers

– Business Venture

Investments No 991

(dormant special-purpose

vehicle)

BN NJOBE (1, 8)

(Non-Executive)MSc (Agric) (Bulgaria)

Executive Director:

Tiger Brands Limited

Directorships:


– Bigen Africa Group

Holdings (Pty) Limited

– Pan-African Capital

Holdings (Pty) Limited

– Pan-African Investment

and Research Services

(Pty) Limited

– Kagiso Trust Investment

(Pty) Limited

SK MAPETLA (6, 8)

(Non-Executive)BSc Chemisrtry (Lesotho); BSc Chemical

Engineering – Exemption (USA); MSc

Analytical Chemistry (USA); Business

Management Diploma (Irish Management

Institute, Dublin); Executive Development

Programme (Wits); Certificate Programme

in Financial Analysis (Wits)

Chief Executive Officer:Biotech PharmaceuticalsDirectorships:– Findevco (Pty) Limited– Africa Board Member,

Aspen Pharma Holdings– Chairman, South African

Pharmaceutical ExportCouncil

– Head of Strategy, NationalAssociation ofPharmaceuticalManufacturers (NAPM)

– Trustee, Manto-TshabalalaMsimang HealthProfessionals Trust

– Chair, Afrika BiopharmaInvestment (Pty) Limited

– President, BlackPharmaceutical Forum

– Jabula Portfolio InvestmentHoldings (Pty) Limited

– Umlamli Pharmacies (Pty)

Limited

NN NOKWE (3, 10)

(Non-Executive)MSc (Chemical Engineering) (Moscow

Institute of Oil and Gas);

International Management

Certificate (Insead); Certificate in Finance

and Accounting (Wits); Global Executive

Development Programme (GIBS)

Chief Executive Officer:

Mpumalanga Economic

Growth Agency

Directorships:


– Manyano Investments

(Pty) Limited

– Prospect SA Investments

50 (Pty) Limited

– Maredi Telecom &

Broadcasting (Pty) Limited

– EDI Technologies (Pty)

Limited

– Vuya Investments (Pty)

Limited

– JM Energy Solutions


JR BARTON (8, 10)

(Non-Executive)Chartered Management Accountant

(FCMA); Advanced Management

Programme (AMP) (Harvard

University)

Directorships:


– Redis Construction

Afrika (Pty) Limited

– Mystic Blue Trading 437

t/a Direct Paper

Trustee of:

– Greater Durban

Community

Foundation

Legend:(1) Chairman of Board Human

Resources and Remuneration

Committee

(2) Chairman of Board Audit

Committee

(3) Chairman of Board Technical

Committee

(4) Chairman of Directors’ Interest

Committee

(5) Chairman of Board Risk

(6) Member of Board Human

Resources and Remuneration

Committee

(7) Member of Board Audit

(8) Member of Board Technical

Committee

(9) Member of Directors’ Interest

Committee

(10) Member of Board Risk

Management Committee

** Alternate

JC MTSHALI (6, 8)

(Non-Executive)BSocSci (UCT); BCom; LLB (UCT)

Practising Attorney

Directorships:

– Bowman Gilfillan Inc


– Bonjava Resources (Pty)

Limited

– Univani Investments (Pty)

Limited

– Aine Properties (Pty)

Limited

Member of:

– Mandilor Properties CC

NG NIKA (2, 4, 10)

(Non-Executive)CA(SA)

Chief Financial Officer:

PetroSA

Directorships:


– The Petroleum Oil and Gas

Corporation of South


– Brass Exploration

Unlimited



Chairman’s Statement

The global economic and financial crisis

is providing the development finance

community, including multilateral,

regional and national institutions such

as the IDC, with an unprecedented

opportunity to showcase their

relevance, importance and

effectiveness in contributing to the

recovery of financial systems, in

curtailing to a significant degree the

credit paralysis, ensuring the survival

and sustainability of key sectors of

economic activity and in alleviating the

adverse impact on society at large.

Introduction

The world’s economies will recover from the current crisis,

just as they did from the numerous others that preceded it.

The pendulum will inevitably swing the other way, but

concerns abound over the pace and shape of such a

recovery, the eventual state of a haemorrhaging global

financial system, the remaining fiscal appetite for public

sector intervention, the relative standing of the industrial

bases that do survive the ongoing upheaval, and the

vulnerability of societies at large.

The global crisis has unfolded so rapidly and severely that

governments, institutions, businesses and individuals

throughout the world have been struggling to grapple

with its harsh ramifications and to grasp the uncertainties

ahead. Although crises are a relatively common occurrence

in economic history, we are facing the worst downturn

since the Great Depression, with the fall in global trade and

industrial production having been of a similar scale.

Most of the advanced economies have been experiencing

deep recessions and the resurgence of protectionism as a

result of dramatic increases in unemployment levels,

whereas several emerging and/or developing economies

have seen their economic growth sharply curtailed. This

adversity occurs as millions of young people worldwide

enter the labour market. A recent analysis undertaken by

representatives of the Council of Economic Advisers and

the Office of the Vice President of the United States of

America (USA) highlighted that, as a rule of thumb, a 1%

decline in gross domestic product leads to a loss of one

million jobs in the USA.



The South African economy officially entered a recession in

the second half of the period under review. Our mining and

manufacturing sectors have been the hardest hit as global

and domestic demand for their output subsided. This marks

the first recession experienced by the South African

economy in 17 years and has put an abrupt end to its

longest upswing on record. An expansionary policy stance

is being carried through by both the monetary and fiscal

authorities. Our country’s substantially healthier fiscal

position has enabled a strongly counter-cyclical budget,

carrying a pragmatic theme that balances stimulus

requirements with fiscal limitations. A massive R787 billion

public sector capital expenditure programme is under way

and South Africa will experience substantial benefits from

major sporting events such as the FIFA World Cup in 2010,

which will be hosted in an African country for the first time

in the association’s history.

The well-regulated and relatively robust South African

financial sector largely escaped the mayhem faced by its

counterparts in advanced economies, but the worldwide

deleveraging process, the liquidity freeze and the retreat in

investment flows have taken their toll domestically and

elsewhere on the African continent. Consequently, a

successful development finance institution (DFI) such as

the IDC is being called upon to play a strongly counter-

cyclical role, to alleviate the credit paralysis, assist in

ensuring the survival and sustainability of key economic

agents and industries, and minimise the adverse impact on

African society at large.

“The Industrial Development Corporation has developed a

programme to fund companies in distress.” President Jacob

Zuma, Republic of South Africa, in the State of the

Nation Address.

Development finance as a counter-cyclical instrument

Developing countries are being hit hard by the global

economic meltdown as most sources of income have

either shrunk or dried up. These include export proceeds,

tourism earnings, migrant worker remittances, official

development assistance, financial sector credit, foreign

direct investment and portfolio inflows. These adverse

developments are leaving economic agents crippled,

resulting in employment losses and further impoverishing

the poor.

The unfolding crisis has highlighted important lessons for

the developing world. A key message is that policy reforms

and sound macro-economic management, although

critical, do not guarantee the sustainability of capital

inflows. Domestic financial systems thus need to be

strengthened in order to reduce their dependency on

volatile foreign capital. Furthermore, export markets need to

be diversified away from traditional segments, with South-


The establishment of IDC offices in all of South Africa’s

nine provinces is providing a strong impetus to our

regional penetration and developmental efforts. Good

progress has been made in enhancing stakeholder

relations within the provinces and regional

development strategies were finalised during the year.


Chairman’s Statement_continued

South and regional trade providing vital avenues, and the

composition of national export baskets needs to be

broadened to reduce their vulnerability to market collapse.

Due to their weak savings capacity and propensity, most

African economies have traditionally relied on international

capital for investment financing, which is increasingly

difficult to access due to the credit crunch. African

commercial banks are, therefore, feeling the freeze in

interbank lending worldwide and the deleveraging process

has not yet run its full course.

The development finance system, whose relevance has

often been downplayed by private financiers, multilateral

institutions as well as policy-makers, should by definition

play a critical role in facilitating access to credit during crisis

periods. Successful DFIs are generally prepared to take on

and manage a higher risk profile, often play a catalytic role

in industrial development and overall investment activity,

and provide financing when markets are tight. However, the

very limited financing capacity of most African DFIs at this

crucial point in our continent’s economic history provides a

further extremely important lesson for the future.

“The economic difficulties of today … do demand an open-

minded understanding of older ideas about the reach and

limits of the market economy. What is needed above all is a

clear-headed appreciation of how different institutions work,

along with an understanding of how a variety of organisations

– from the market to the institutions of state – can together

contribute to producing a more decent economic world.“

Nobel Economics Laureate Amartya Sen.

The IDC’s response to the unfolding crisis

The IDC is one of the few African development finance

institutions capable of coming to the fore in a very

meaningful manner. Considering the mushrooming market

failure in the private financial sector at large, enormous

demands are being placed on the Corporation to fill the

void. The IDC is being called upon to play an increasing role

in sustaining investment activity in South Africa and

elsewhere on the continent, thereby helping to fill the

significant gap left unserviced by the private financial

sector, and to assist enterprises in distress. However, despite

its relative balance sheet strength and human resource

capabilities, pragmatism must prevail.

Conscious of the potential enormity of the challenges

ahead and the serious financial risks involved, the IDC has

been under no illusion that the acceptable intervention

parameters had to be determined upfront, with the same

applying to the necessary mitigating mechanisms and the

capital allocation thresholds beyond which the

Corporation’s financial sustainability would be

compromised.

As the financial year progressed and the global economic

crisis unfolded, the IDC experienced intensifying pressures

on almost all fronts. On the demand-side, such pressures

included: the need to assist existing clients in order to

prevent their demise; requests for funding assistance from

new applicants experiencing financial difficulties, including

businesses previously serviced by commercial banks; and

an overall escalation in stakeholder expectations, including

all spheres of government.

Concurrently, a number of constraints either emerged or

were magnified. These included the reduced availability of

credit facilities from traditional sources due to the global

credit crunch, and a higher cost of funding across the

board; lower equity valuations due to poor market

conditions and negative investor sentiment; diminished

income from loan repayments and dividend receipts; and,

among others, a higher level of impairments and write-offs

associated with the existing portfolio.

A “business as usual”approach would have been highly

inappropriate under such extraordinary circumstances.The

IDC embraced the challenges wholeheartedly.We swiftly

refocused, restrategised and rolled out initiatives that have

been assisting in countering the adverse effects of the

economic crisis on South Africa’s economic base and, where

possible, extending such support beyond our borders.

“As the ‘special-purpose vehicle’ for industrial development, it is

imperative that the IDC continues to re-orientate its activities

towards a more developmental approach to investments in

strategic sectors through the provision of finance at attractive

rates accompanied by appropriate conditionalities for

recipients of such financing.” Minister of Trade and Industry

Dr Rob Davies, Republic of South Africa.

Sustaining investment activity, promoting equitable

development, creating jobs

Weak global demand has affected most export-oriented

South African businesses, while many domestic producers

have had to compete fiercely against foreign suppliers

targeting our home front as the scramble for shrinking

markets intensified. Domestic spending, in turn, became

increasingly subdued and eventually contracted, as

households and businesses struggled to weather the

economic storm. Private consumption expenditure

contracted quite sharply towards the latter part of the

review period, while the quarterly average growth in private



sector fixed investment decelerated to 2,9%, or less than

one-third of the pace recorded in the preceding year.

Many investment plans were either postponed or

cancelled outright.

Despite the gradual slowdown and eventual contraction in

economic activity during the period under review, the IDC

responded in a strongly counter-cyclical manner.

Our operational units dedicated substantial effort to

support greenfield developments, introduce new

technologies, propel competitiveness improvements,

promote the expansion of productive capacity and

implement national industrial policy in general. Green,

innovative technologies and alternative energy sources

deserved special focus, especially at a time when South

Africa’s electricity infrastructure faces excessive pressure.

Cognisant of the importance of investment activity and job

creation in an economic recovery, our efforts paid off – the

value of IDC funding approvals increased by 27% relative to

the preceding year, totalling R10,8 billion in 231

transactions. Start-ups and expansions represented 36%

and 17% of funding approvals respectively, thus

highlighting the success of our drive to promote the

expansion of Africa’s economic base, particularly that of

South Africa. However, the sharp increase in demand for

IDC financing was also a sign of the adverse conditions in

credit markets.

Fast deteriorating global and local economic conditions

eventually led to 208 000 jobs being shed in the South

African economy over the first three months of 2009.

Countering this trend, the record level of IDC funding

activity during the year under review is expected to create

approximately 24 200 new direct employment

opportunities in South Africa alone. This reflects the

absolute emphasis of the IDC’s Leadership in Development

strategy on sustainable employment creation and job

retention. The development of small and medium

enterprises (SMEs) is a most important means to this end, as

illustrated by the fact that SMEs represented 68% of the

overall number of businesses funded by the IDC over the

course of the financial year. As part of our business support

strategy, almost R9 million was also provided in the form of

grants for the purposes of developing the business skills of

our client base.

The establishment of IDC offices in all of South Africa’s nine

provinces is providing a strong impetus to our regional

penetration and developmental efforts. Good progress has

been made in enhancing stakeholder relations within the

provinces and regional development strategies were

finalised during the year. The IDC’s image and product offer

have been vigorously promoted, thus resulting in a higher

number of applications for financing. As an integral part of

our regional strategic approach, particularly targeting the

lesser developed areas of South Africa, six new


IDC Chairman Wendy Luhabe and CEO Geoffrey Qhena at the IDC Women’s Day celebrations in August 2008

The IDC is being calledupon to play an increasing role in sustaininginvestmentactivity in South Africa and elsewhere on the continent




development agencies were established throughout the

country during the past financial year.

Our funding benefited projects ranging from the first

bio-ethanol operation in Cradock, which will contribute to

the development of a responsible biofuel industry in South

Africa, to an indigenous marine finfish culture project in the

East London Industrial Development Zone; from

manganese ore mining and processing, to an investment in

a satellite project that will improve the quality of

telecommunication services on the continent. As part of

our Broad-based Black Economic Empowerment drive, we

funded numerous operations that will gradually assist in

effectively transforming our country’s economic base.

These ranged from a wholly black-owned diamond cutting,

polishing and jewellery manufacturing operation, to a very

large independent power-producing project that will

benefit farming co-operatives and poor rural communities;

as well as further support to a wholly black female-owned

company specialising in the refurbishment of Metrorail

commuter coaches. We also enhanced entrepreneurial

support, particularly to entrepreneurs who are active in

rural areas and previously disadvantaged, such as emerging

farmers involved in citrus farming, and SMEs engaged

in food-processing activities across most of South

Africa’s provinces.

Crisis periods also provide a window of opportunity for

more cost-effective project preparation (specifically pre-

feasibility, feasibility and environmental impact studies) that

could lead to project commissioning early in a subsequent

recovery. The IDC is thus focusing on conceptualising,

developing and sponsoring projects that could benefit

from timeous commissioning as economic conditions

improve. Examples include a start-up investment that will

lead to the establishment of a new, battery-electric vehicles

industry in South Africa; the development of novel

technology to produce titanium powder and, among

others, a sisal industry development initiative that will also

entail beneficiation into woven and composite products.

Assistance to firms in distress, retaining employment

As the impact of the global economic crisis on the South

African economy became increasingly discernible, the IDC

anticipated that the shareholder – the South African

government – as well as other stakeholders, would expect

no less than a leading role from our Corporation in assisting

industries and firms under serious duress. Basically all

sectors of economic activity were expected to come under

strain to varying degrees. Considering our resource

limitations, whether financial or operational, we proceeded

to identify the sectors where our assistance was likely to be

most critical and where our interventions would potentially

have the largest impact.

The IDC’s comprehensive response was duly

communicated to the Shareholder, through the higher

echelons of the Department of Trade and Industry and

the Presidential task teams focusing on South Africa’s

response to the economic crisis, in the last quarter of the

financial year. The IDC’s business units responsible for

financing activities in the most affected economic sectors

were requested to formulate sector-specific approaches

and were instructed to proceed without delay in

assessing applications for financial assistance from firms

under distress.

Funding of R500 million was approved, particularly towards

the latter portion of the financial year, for firms experiencing

distressed conditions as a result of the sharp economic

downturn. By doing so, approximately 2 500 jobs are likely

to have been saved across a range of economic sectors,

including mining, metals, transportation equipment, textiles,

chemicals and tourism. Furthermore, the restructuring of

76 existing clients was realised through various means in

order to alleviate their cash flow constraints during these

turbulent times. Distress funding, due to its peculiar

characteristics, also has its own requirements in terms of

monitoring regularity and intensity. Accordingly, the IDC

strengthened its post-investment monitoring capabilities.

“The reality of job losses has led to the crisis response.The first

consideration is to preserve jobs and then to preserve strategic

industrial capacity”. Minister of Trade and Industry Dr Rob

Davies, Republic of South Africa.

While focusing on enterprises experiencing difficulties as a

result of the cyclical downturn, due cognisance has been

taken of the need for structural interventions at industry

level, including consolidation, restructuring and

productivity enhancements. The aim is to ensure that

industries emerge from the crisis on a more competitive

footing and thus in a better position to reap the benefits of

an eventual recovery. Accordingly, the IDC has been an

effective participant in Presidential task teams focusing on

“Financing and Investment” and “Distressed Sectors”, as well

as in sector-specific Nedlac teams that are formulating

individual industrial support and revitalisation strategies.

The build-up of liquidity buffers and deliberate changes in

risk thresholds are clearly preventing commercial banks

from fully recognising the medium- to long-term viability of

many business enterprises. The IDC is determined to


counter and reverse this economically damaging market

failure. A collaborative funding approach is thus being

pursued with other financiers, encouraging risk sharing and

stimulating the flow of credit in the economy, so as to

contribute to an alleviation of the currently tight credit

conditions. In doing so, we are leveraging our balance sheet

even further.

Committed to realising Africa’s potential

As the shockwaves of the global economic crisis continue

hitting Africa’s shores, the extent and depth of the damage

across our continent is becoming increasingly detectable.

It is also clear that the patterns of financial flows associated

with investment, lending and trading activity have been

dramatically altered, with detrimental economic and social

implications for Africa in its entirety. The adverse impact has

been gradually spreading from a regional perspective – a

serious setback to Africa’s recent economic growth

performance, which had averaged 6% pa over the period

2003 to 2008.

“…this crisis has come when African governments have taken

broad-based measures to reform their economies, followed by

significant achievements … it is now threatening to wipe out

our gains of the past ten years and disrupt all our plans for

further progress.” Minister for Finance and Economic Affairs

Mustafa Mkulo, United Republic of Tanzania.

Access to trade credit lines used to finance imports and

investments is under threat due to the global credit crunch,

while portfolio flows have been reversed and remain weak

due to institutional deleveraging, pessimistic investor

sentiment or extreme risk aversion. Foreign direct

investment is estimated to have contracted, although the

rather long lead time of typical projects could imply that

some of the capital may have already been committed.

The African banking sector is feeling the freeze in interbank

lending worldwide from a funding standpoint, and may

come under substantial pressure through its customer

base should the economic slowdown intensify on the

home front.

The IDC, which has a continent-wide mandate, was able to

come to the fore in a meaningful manner. The Corporation

approved R2,9 billion in funding for investment projects in

the rest of Africa (ie excluding South Africa) during the

review period. This represented a 38% increase on the

preceding year’s figure and illustrates the IDC’s efforts to

alleviate the credit scarcity and stimulate investment

activity on the African continent. Most importantly, our

funding activity in financial year 2008/09 is expected to

result in the creation of 5 000 new direct job opportunities

in the rest of the continent (ie outside South Africa).


The exemplary standing of the IDC as a financial

institution bears testimony to the relentless

implementation of international best practice in

corporate governance, particularly sound risk

management. The IDC is thus in a position to play a

very critical role at such an important juncture in our

country’s socio-economic development.




Examples of projects for which funding was approved

include the IDC’s first mining investment in Eritrea

(ie a multi-commodity project that will produce gold,

silver, copper and zinc), a cassava cultivation and starch-

processing project in Swaziland, a pipe-manufacturing

plant in Botswana and a multi-faceted infrastructure

project in Uganda.

The African continent is richly endowed with commodities

and other resources, including an enormous, yet largely

unexploited agricultural potential. Forecasts for most

commodity prices point, at best, towards a very modest

recovery in 2009. However, considering the demand and

supply forces at play in the medium to long term,

commodity prices should resume an upward trend. In the

nearer term, this will be underpinned by the rollout of

massive stimulus packages focusing on infrastructure

investment throughout the globe. Over the medium term,

the eventual recovery of the world’s economies should

augment commodities demand, while income growth in the

densely populated and fast-growing emerging economies

such as China and India will almost certainly sustain the

momentum over the longer term.

The challenge remains for African countries to make the

most of a future recovery, tirelessly encouraging the

beneficiation of their resources instead of continuing to

export value-adding opportunities, missing out on the

massive export earnings potential and in fact creating,

elsewhere in the world, the employment opportunities that

are so desperately needed locally.

Human resource development

For the moment, the struggle for survival by companies

across the globe has overshadowed the war for talent.

However, as economies recover, companies will rapidly

resume the recruitment of top performers and put in place

measures to ensure their retention. This is key even in

difficult times, and particularly in light of the skills

constraints still facing numerous South African firms across

various professional fields. The IDC recognises the strategic

imperative to provide a holistic framework for the

development and growth of its employees, and even more

so in the currently adverse economic environment, when

extraordinary demands are being placed on our human

resource base.

During the past financial year the Women’s Development

Strategy was added to the comprehensive array of personal

development programmes offered to IDC staff. This strategy

has entailed a number of initiatives aimed at developing

women at all levels in the Corporation, including the

provision of opportunities for women to progress in the

organisation; focused development to attract and retain

professional women; and providing the required tools for

women to operate professionally and confidently in an

ever-changing business environment. Altogether seventy-

five women benefited from these initiatives during the

course of the year, with the initiatives providing an

experimental approach to understand the business

challenges facing the IDC and how we can learn from

other organisations.

Financial performance

To succeed in accelerating and sustaining the development

process, often by playing a catalytic role in greenfield

investments and, at the present time, by also providing

finance to distressed firms in light of the tight credit

markets, generally involves taking on and managing a

higher risk profile. Accordingly, a DFI like the IDC needs to

safeguard its own sustainability through extremely sound

financial and risk management processes.

The balance sheet of the IDC Group was not spared the

blows from the sell-off in global equity markets. Its total

asset value fell by 19%, from R90,4 billion to R73,4 billion, as

both listed and unlisted equities tumbled during the year.

However, this was countered to some extent by a 35% rise

in loans and advances, from R7,9 billion to R10,6 billion, as

the Corporation responded to an ever-rising demand for its

funding. The significant decline in investments

notwithstanding, the IDC’s capital and reserves remained

very strong at R65 billion, albeit lower than the R76 billion

recorded in the previous year.

Group profits for the year reached an all-time record value

of R5,6 billion, an increase of R1,7 billion over the previous

year. The R1,9 billion profit generated by the IDC’s operating

subsidiary, Foskor, contributed significantly to the Group’s

overall performance. However, the higher profits derived

from the IDC’s core financing activities also supported this

record profitability. As the ramifications of the global

economic crisis took their toll on many companies in our

portfolio, impairments rose by 183% to R1,2 billion

(2008: R420 million).

Conscious of the difficult environment ahead and of the

extraordinary demand for financial assistance, the IDC is

planning to gear its balance sheet to a much greater

extent over the next few years. Financial sustainability

will, nevertheless, remain imperative during these

challenging times.


Tribute

The global crisis has ruthlessly revealed the blatant failure

of corporate governance in many of the world’s most

powerful financial institutions – hence the irresponsible risk

taking and lax oversight that led to their eventual demise

or to the ongoing turmoil of surviving ones.

The exemplary standing of the IDC as a financial institution

bears testimony to the relentless implementation of

international best practice in corporate governance,

particularly sound risk management. The IDC is thus in a

position to play a very critical role at such an important

juncture in our country’s socio-economic development.

We are ready to sift through the uncertainties, to consider

alternative scenarios and their implications for our country

and institution, to think expansively about the

opportunities that lie ahead, and to prepare accordingly.

For this, and on behalf of the Board of Directors, we

congratulate Mr Geoffrey Qhena and his executive team,

as well as the management and staff of the Corporation,

for their tireless dedication, enthusiasm and intensified

efforts during these demanding times.

My eighth and final year as Chairman of the Board has

probably been the most challenging.Yet, it is extremely

heartening that, at a time when many of the world’s

financial institutions find themselves unnervingly

vulnerable, we as a Board can provide the assurance that

the IDC can and will continue to execute its role as a

development financier, meaningfully filling some of the

void left unaddressed by the commercial banking sector

and assisting in building an effective developmental state.

As this incredible personal journey comes to a close, I

express my profound gratitude to all Board members for

their invaluable contributions, business acumen, guidance

and commitment. My utmost appreciation is extended to

our fellow directors whose term ended on 30 September

2008, namely Messrs Fran du Plessis, Patty Graham, Thembi

Kunene and Dave Lewis, who served most diligently as

Deputy Chairman of the IDC Board since 2001. During the

course of the past financial year the Board has also had the

privilege of welcoming Messrs Lael Bethlehem, Lindani

Dhlamini, Shadrack Mapetla and Roger Pitot as directors,

whose contributions have already been invaluable.

The pace of economic deterioration appears to be

subsiding in many parts of the globe, with a few indications

of growth resuming in certain regions. However, it would be

premature to predict an end to the economic mayhem.

The impact of ongoing international efforts to thaw global

credit markets and stimulate economic activity worldwide

will take time to bear results. Confidence in and within the

world’s financial system must firstly be restored. Even then,

the system will have considerably less financial leverage

and will be significantly leaner. We expect that the

singular lesson for us all is that the world needs a new

moral compass.

As an enviable member of the global development

finance community, the IDC will undoubtedly rise to the

challenge, effectively playing a stimulatory role during

these trying times and continuing to make significant

contributions to the industrial development and economic

transformation of South Africa and the rest of the

African continent.

WYN LuhabeChairman



Executive Management


MG QHENAChief Executive Officer

K SCHUMANNDivisional Executive: Services Sectors

LWJ MATLHAPEDivisional Executive: Human Resources andSupport Services

GS GOUWSChief Financial Officer



G VAN WYKChief Risk Officer

LP MONDIChief Economist and Divisional Executive:Professional Services

U KHUMALODivisional Executive: Resources Sectors

NV SOWAZIDivisional Executive: Marketing and Corporate Affairs

PB MAKWANEGeneral Counsel and Divisional Executive: Legal Services

S MEERDivisional Executive: Industrial Sectors


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Chief Executive’s Report

2009 has been a significant year for the

IDC as indeed was 2008.Yet the

significance of this year stems from the

manner in which the whole world has

experienced a reversal of economic

fortunes believed to be much worse

than even the Great Depression of the

1930s. Fortunately, the experience of

the 1930s and recessions thereafter

have been harnessed to forge a

quicker turnaround.

After more than 17 years of sustained growth the South

African economy has slipped into a recession. This is the

fastest slide into a contraction in 25 years. The statistics for

GDP growth for the first quarter of this year from Statistics

South Africa have confirmed that the 6,4% downward trend

confirm that the economy is in recession. The words of the

former Minister of Finance, Trevor Manuel, in his last budget

speech that dark clouds were gathering have been

confirmed. The technical recession proves that there are

times that require state intervention in the macro-political

economic system and that South Africa is neither an island

unto itself nor can it insulate itself from the macro-economic

imbalances that have struck the global economy on an

unprecedented scale. Universally, economies are inextricably

linked and no accounting principles and standards nor

regulation, or the lack thereof, could counteract the effects of

neo-liberalism and the undisciplined activities of financial

institutions driven by their lust after profits and avarice.The

consequences of the subprime crisis have been felt in both

the developed economies of the G8 countries as well as, if

not more so, in the emerging market economies.The South

African economy has been hit, albeit not as dramatically as

elsewhere, and the Industrial Development Corporation (IDC)

has taken heed of the fact that its operating environment

has undergone significant changes over the past 12 months.

This calls for more dedication and renewed commitment to

support government policy in stimulating the economy.

Industry development

The Minister of Finance in the 2009 budget speech

identified the IDC as the conduit through which new

business as well as companies in distress should be

assisted. Indeed, market failure is best addressed by

financing sustainable businesses in addition to companies

already in distress. Accordingly the IDC has not stopped at

new ventures but is attending to struggling businesses too.

In fact, the IDC has expanded the spectrum across which



assistance has been rendered. The expectation is that there

will be a greater need for businesses to be rescued.

Accordingly, the IDC has allocated funds to the value of

R6,1 billion to be spread over two years to assist businesses

in distress. This programme of funding will be administered

such that it will not be a blanket bailouts at a broad

industry level interventions but will be on a firm-by-firm

basis using long-term sustainability of enterprises as the

foundation for assistance, whilst helping sustain strategic

capacity and skills and also preserving jobs.

Given the current economic milieu the IDC cannot but

increase and expand its developmental and restructuring

assistance within deserving companies. The IDC must

continue with its normal role as a developmental agency

and not lose its focus that is the nucleus and core of its

business. It is anticipated in the year ahead the IDC will

approve more than R11,4 billion to help different sectors

grow, inclusive of R2,9 billion allocated for companies

in distress.

Entrepreneurial support

The primary financing activities of the IDC showed a

marked increase in the period under review. As the

economy of South Africa declined, the demand for IDC

funding to entrepreneurs increased. As a result the number

of investment approvals increased from R8,5 billion in 2008

to R10,8 billion in 2009.

The IDC provides support on three levels: provision of

funding for small, medium and large enterprises, business

skills development to potential entrepreneurs through

IDC-sponsored training and support for clients who are

facing the current difficulties that necessitate restructuring.

Although access to finance is one of the challenges faced

by SMEs, business skills remain a problem. To address this,

IDC is also providing training and business support to

clients. The expectation is that more SMEs will require our

support in the year ahead. Underpinning this is the IDC

commitment to the financing of SMEs that are critical

drivers of sustainable economic growth and job creation.

A major effort has been made to address skills deficiencies

both pre- and post-investment. Training has especially been

aimed at teaching potential entrepreneurs key skills that

entrepreneurship demands. As part of its multi-faceted

approach to developing entrepreneurs, the IDC approved

business support grants to the value of R8,9 million during

the year under review. These grants, coupled with

entrepreneurs’ own contributions, are aimed at strengthening

businesses by providing targeted business support where

entrepreneurs require training in specific areas.

At the end of the last financial period the IDC undertook to

extend its reach and presence to all provinces of South

Africa to ensure that as an institution we are more

accessible to entrepreneurs. We are pleased to report that

A major effort has been made to address skills

deficiencies both pre- and post-investment. Training

has especially been aimed at teaching potential

entrepreneurs key skills that entrepreneurship demands.


Chief Executive’s Report_continued

during the period under review the regional offices of the

IDC have all been in operation and to date these offices

have seen 26% of business plans that are submitted to the

IDC. The regional managers have decreased the

turnaround time on responses to clients after an initial

assessment of these business plans through their location

in the regional offices. To build and extend partnerships in

regions to entrepreneurs, the IDC will work in close

cooperation with Khula Enterprises in the year ahead to

reach micro-enterprises specifically.

Developmental performance

The IDC’s Leadership in Development strategy underpins the

creation of sustainable employment. To achieve its

objective, IDC job targets were doubled from 2007 onward

and in light of the current economic crisis, substantial job

initiatives and job creation programmes have been put in

place. At a time when economic conditions have

deteriorated both globally and within the South African

economy and when 208 000 people lost their jobs in the

first quarter of 2009, the IDC has and will continue to serve

the economy in the process of increasing the industrial

capacity of South Africa to promote job creation through

entrepreneurship. With the unemployment rate at 23,5% in

the first quarter of 2009 signalling a total of 4,2 million

unemployed people by the end of March 2009, the key

sectors that have been most affected by the rising job

losses are the trade sector, manufacturing, mining and

construction. The IDC has endeavoured to not only save

jobs but also to create new jobs. During the year under

review the IDC approvals will create 24 200 jobs and save

2 500 jobs of which 75% will be in the clothing and

textiles sector.

We aim to contribute to 9% of the country’s job creation

needs by 2011 and save jobs most specifically at this time

through special funding for businesses in distress, with the

majority of the jobs saved to be in clothing, textiles, and

leather and footwear industries as well as in gold jewellery

manufacture, forestry and orchards.

In order to ensure that our developments are indeed

sustainable, the IDC continues to assess the long-term

sustainability of its investments both with respect to job

creation and financial performance of clients. This year was

no different. A random sample of IDC clients was selected

to assess if the expected jobs created were indeed created

to ensure our success is meaningful. The newly staffed Post-

investment Monitoring Department will be critical in

ensuring the effective monitoring of IDC clients in this

regard, with a view that should clients require additional

assistance meeting their entrepreneurial needs, the IDC will

assist them wherever possible.

Black economic empowerment

Black Economic Empowerment (BEE) remains a priority at the

IDC.We remain committed to the implementation of broad-

based BEE as defined in the Codes of Good Practice.

Altogether 57% of the total value and 60% of the total

number of approvals benefited black-empowered companies.

The value of approvals to empowered companies increased

from R5,4 billion in 2008 to R5,9 billion. Of this, R1,8 billion was

for acquisitive BEE transactions.

In addition to our traditional financing activities around BEE,

the IDC continues to look at and improve on expansionary

BEE and support to black designated groups. We achieve

this through, amongst other things, the approval of our

Transformation and Entrepreneurial Scheme. This fund is

aimed specifically at entrepreneurs from the most

disadvantaged groups in South Africa. There are five funds

incorporated under this scheme: Women Entrepreneurial

Fund of R400 million, Disabled Persons Fund R50 million,

Community Fund R150 million, Development Fund

R250 million and Equity Contribution Fund R150 million.

Internally we have improved our processes such that we

have self-rated the IDC as a level two contributor against

the adjusted generic scorecard for public entities.

This represents an improvement from our previous year

during which we were self-rated as a level four contributor.

Regional development

Rural developmentThe increased client interaction in the regions as a result of

the opening of the regional offices, the IDC accepted

580 business plans from entrepreneurs based in the various

provinces of South Africa. The role of the regional offices,

however, is not limited to financial assessments. During the

year the respective regional managers were involved in a

number of activities in partnership with various other

regional role players. These included but were not limited

to provincial and local government, business chambers and

other DFIs.

IDC-funded development agencies have had another

successful year of unlocking regional investment potential.

During the year an additional seven agencies were approved,

making it a total of 30.This is in addition to the 23 existing

agencies.These agencies have continued to have successful

interventions in local economic comparative advantages as

well as tapping into the economic potential of townships

and rural areas to create social equity.



Rest of Africa

As with previous years the IDC has had a successful year on

the African continent. The strategy and prioritisation of

sectors and areas of the continent served our objective of

contributing to industrialisation and achieving the highest

possible development impact on the continent well. This is

evidenced through the value of investment approvals on

the continent (excluding activity in South Africa) which

increased from R2,1 billion in 2008 to R2,4 billion in 2009.

The largest of these investments relate to mining and

telecommunications infrastructure. A number of strategic

investments were also made in the construction, healthcare

and transportation sectors.

The IDC actively engaged various development finance

institutions (DFIs) in the economic regions of the continent

to partner, where possible, with the IDC in financing

strategic projects on the continent. To this end the IDC has

provided lines of credit to two institutions around the

continent with the view to further out development impact

in Africa.

The IDC remains actively involved in the Africa DFI forum.

During the year we actively participated in the forum

events that took place in South Africa. We remain

committed to strengthening relationships across Africa

and indeed working together with our partners on the

African continent.

Sustainability

The IDC has again shown that it is a key agency in the

provision of development finance. To support sustainable

development, the Corporation has funded business in

keeping with the IDC Act. The IDC has not escaped the

ripple effect of the financial crisis and as a result its capital

base has declined. This was due to the decline in both listed

and unlisted equities during the year. This has resulted in a

downward fair value adjustment of approximately

R26 billion. Despite this decline the Corporation remains

financially viable and in a sustainable position, with reserves

of R65 billion from R76 billion last year.

Loans and advances have, however, increased by 35% from

R7,9 billion to R10,6 billion. This is an indication that the

Corporation has not tightened its lending criteria and there

is an increased demand for funding to be provided by the

Corporation. In light of this, the Corporation is looking to

gear the balance sheet much more in the next few years to

meet this increased demand for funding. Borrowing is

expected to increase from R5,9 billion to R24,9 billion in the

ensuing period.

The IDC Group made a record profit of R5,6 billion, an

increase of R1,7 billion over the previous year. The

profitability of the operating subsidiary, Foskor, increased

from R0,8 billion in the previous year to R1,9 billion in the

current year. The profits from the core financing activities of


The CEO cutting a ribbon to officially open

the Limpopo Regional Office

The IT department posing after winning an award as the Best Support Unit for 2008


Chief Executive’s Report_continued

the Corporation also increased significantly during the year

under review. The share of profits from equity-accounted

investments declined from R1,9 billion in the 2008 financial

year to R1,1 billion in the 2009 financial year due mainly to

the effects of the global financial crisis. Many companies

have been affected by this crisis and, as a result,

impairments have increased by 183% from R420 million in

the previous year to R1,2 billion in the current year. This

high level of impairments is also a signal that we invest in

higher risk companies who will feel the impact quicker.

Strategic initiatives

Funding initiativesA number of large projects that have strategic impact and

are in keeping with national and provincial strategies

include, amongst others, beneficiation, expansion of the

local aerospace industry, and financing of hospitals through

the hospital and transformation scheme.

During the period under review the IDC has approved

special schemes for the clothing, textile, leather and footwear,

and gold jewellery and forestry industries. Most specifically,

through its strategic partnership with the dti, the IDC will

administer the clothing and textile competitiveness

improvement programme which has been designed to

stimulate the competitiveness of the South African clothing

and textile manufacturing sector.This five-year programme

will be administered by the IDC and is valued at R250 million.

The IDC has over the years identified specific funding

schemes in strategic sectors. This funding has been used to

increase competitiveness, transform the sector and provide

competitive financing to those who require it. These

schemes attempt to acknowledge the areas of market

failure in funding to specific sectors through the

acknowledgement of the long periods before cash

generation make the sector more attractive to potential

investors and incentivise for high development impact.

This has led to the extension of the pro forestry and pro

orchards funding schemes for two years.

Other strategic projects include those that are addressing

aspects of electricity generation through our focus on

cleaner technologies. Electricity generation through

independent power providers through the use of public-

private partnerships and a number of cleaner energy

alternatives such as solar power generation. This has

included support to companies utilising selling of carbon

credits as an income stream and support to the energy

enterprise efficiency programme for South Africa.

Shareholder activism Shareholder activism has always been something that the

IDC has understood to be a strategic intervention that we

are in the privileged position to exercise due to the nature

of our shareholding in companies. On maturity of a

strategic investment the IDC will divest. Foskor, while a

subsidiary of the IDC, is no exception. A decision was taken

by the Board to divest from Foskor and give shareholding

back to the market. The strategic nature of the decision was

to introduce BEE shareholding into Foskor through the sale

of IDC’s 26% shareholding. Further to this is the

introduction of broad-based groupings into the BEE

grouping, empowerment of the surrounding communities

to Foskor operations and the inclusion of IDC-funded

vendor financing that has made this a truly unique broad-

based BEE transaction.

Internal processesDuring 2008 the IDC undertook a values campaign during

which the behaviour and values of IDC employees were

identified. The values tag line of I Make it Happen is central

to the new IDC values. This is seen as not just a tag line but

a way of being for IDC staff. The three core values of

“professional, partner, passion” talk to the IDC way of doing

business, which should create a mark of excellence to

whoever IDC employees interact with such that the IDC

mandate will be entrenched beyond financing.

With the increase in staff, there have been space constraints

in the existing infrastructure of the IDC. As a result we have

used this as an opportunity to upgrade the existing

infrastructure and change the IDC head office in Sandton to

an open-plan environment. This has been an ongoing

project which will be completed during 2010. The Open

Plan Open Mind campaign has been successful in ensuring

readiness on the part of all staff for the new office

configuration. This new open-plan office is anticipated to

change the way the IDC does business and moves us closer

to a paperless environment.

The IDC has long recognised that the ability to innovate will

ensure success and longevity. The Innovation initiative at

the IDC was undertaken during the period under review as

a way to formalise the processes that encourage staff to

innovate around both internal and external processes. This

acknowledges that there may be new ways to achieve our

objectives and to operate even more successfully. This will

also assist the IDC to improve in every facet of our business.

Our innovation drive is bringing all of this together.

Stakeholder engagementIn line with our values, the IDC launched new customer-

centric deliverables per department and unit within the

Corporation. These talk to the new values but also to the

engagement with all stakeholders that indeed both

operational and support staff at the IDC interact with.



Since 2006 there has been an increasing trend in customer

satisfaction with the IDC’s service. It is hoped that with

these new customer-centric deliverables combined with

the increased reach and presence of the IDC, and improved

lines of communication through our new website and

electronic communications that our clients will have a

pleasant experience with IDC staff.

Corporate Social Investment

This has been a busy period for CSI at the IDC. As with

previous years the IDC has maintained its ongoing CSI

activity through staff payroll activities through the I Do Care

and Nguni Cattle programmes. Added to these initiatives

are the volunteering programme that had its second

successful year through the Habitat for Humanity

programme which saw IDC employees build five houses in

Orange Farm.

During the year the IDC contributed R10 million to a fund to

counteract the effects of the violence against foreign nationals

through the xenophobia attacks in residential areas around

South Africa.This was complemented with a collection of

food and clothing items by staff, which was presented to

various charity organisations around Johannesburg for

distribution to those with the greatest need.

The women at the IDC have once again contributed

meaningfully to the CSI programmes. This year every

woman staff member was presented with an opportunity

to adopt a grade 11 scholar who will be mentored by that

staff member until the completion of their secondary

schooling, with the top 10 scholars being afforded the

opportunity to qualify for an IDC bursary. These 210

scholars’ fees, uniforms, extra mathematics, science and

accounting programmes and stationery costs are being

covered by the IDC at an estimated cost of R3 million.

In addition to this, the IDC bursary scheme this year

sponsored 168 students – 90 females and 78 males.

Mindful of all of this, it is our hope that we are contributing

positively to the growth and development of South

Africa’s youth.

Prospects

We are anticipating that this will be a busy year at the IDC.

Not only will we be increasing our regular funding activities

but we are anticipating that given the current economic

preconditions there will continue to be an increased

demand for IDC financing. We are ready for the challenges

that lie ahead. We have readied the Corporation through

our available finance, competent staff, excellence in our

internal processes and systems.

The role of the IDC with regard to inputs to the national

development agenda will also be ramped up. We are

anticipating that our inputs to the various partners that we

have at the various spheres of government will continue

and indeed be increased. It is apparent from the number

and range of projects and initiatives that the IDC is

undertaking that having the right staff complement is a

very necessary component of success of the IDC. With that

in mind, we have identified the human capital capacity

constraints that have existed and identified a plan that we

are implementing to ensure that we grow the existing

human capital capacity to fulfil the mandate given the

increased demand for IDC funding at this time.

We are expecting that the level of impairments will increase

in the year ahead due to the operating environment and

the increased level of risk that the IDC will be taking to

address our core role of being a counter-cyclical institution.

Acknowledgements

An organisation is only as successful as its staff and once

again the successes of the IDC could not have been

possible without a dedicated staff complement and

executive management team. It takes a dedicated group of

individuals with a passion for development to tackle the

challenges that the IDC faces when we undertake our

investments. I believe that we have this team at the IDC.

With this in mind I wish to express my gratitude to the

dedication of the executive management team who with

me guide the staff at the IDC.

Thanks to the Board of Directors who continue to provide

strategic guidance and challenging debates that help us to

create an enabling environment for the staff. A special

tribute to the Chairman of the Board for having dedicated

10 years to this Corporation, your guidance and inspiration

will forever be appreciated.

My profound appreciation to the Minister of Trade and

Industry and his team for their invaluable and continued

support during the year, and the Portfolio Committee of

Trade and Industry whose interaction is always welcomed

and inspiring.

MG QhenaChief Executive



Details of financing per Strategic Business Unit (SBU):

(R’m) 2009 2008

Resources sectors SBUs 7 139 5 010

Food, Beverages and Agro-industries 594 739

Mining and Beneficiation 3 078 2 813

Public and Private Partnerships 3 340 1 397

Venture Capital 127 61

Industrial sectors SBUs 2 598 1 729

Chemicals and Allied Industries 442 233

Textiles and Clothing 402 400

Metals, Transport and Machinery Products 574 839

Wood, Paper and Other 385 197

2010! and Construction 795 60

Services sectors SBUs 3 937 3 795

Franchising 232 399

Healthcare and Education 650 411

Media and Motion Pictures 477 363

Techno-industries 848 523

Tourism 756 1 141

Transportation, Financial Services and Other 974 958

Total approvals 13 674 10 534

Cancellations of prior years’ undrawn commitments 2 912 2 077

Net approvals 10 762 8 457

Number of enterprises financed before cancellations of prior years’undrawn commitments 262 218

Number of enterprises financed net after cancellations 231 167

Operational Review – NEW BUSINESS


The net financing approvals during the five-year period

2005 to 2009 totalled R33 billion.

The number of approvals reflects an increasing trend

over the past five years in line with the increase in the

value of approvals.

Value of financing approvals pastfive years (net after cancellations)

0

2

4

6

8

10

12

2005 2006 2007 2008 2009

Financial year

R b

illio

n

Number of financing approvals(net after cancellations)

0

100

200

300

2005 2006 2007 2008 2009

Financial year

Nu

mb

er



Nearly 80% of the funding approved will be utilised for new

or additional capacity.This is in line with the IDC’s objective

regarding the creation of additional capacity. Altogether

36% of the financing will be utilised for new start-ups,

which is in line with the IDC’s objective of assisting the

entry of new entrepreneurs in the economy. Nearly 5% of

the approved financing (R500 million) was for distressed

companies.

A total of R1 489 million (14% of the approved financing)

will be utilised in South African rural areas and

townships. Investments in new or additional capacity in

the rest of Africa will utilise 27% of the approved

financing.

Altogether 159 of the approvals during 2009 (69% of the

total number of approvals) were for SMEs. A total of

R2 126 million (nearly 20% of the total value of

approvals) were for these SMEs (companies with less

than 200 employees, with a turnover less than

R51 million and/or less than R55 million total assets).

The R10,8 billion approved during the past financial yearwill assist in the creation or saving of 31 700 new directjob opportunities. Altogether 26 761 of these jobs will becreated/saved in South Africa and nearly 5 000 in therest of Africa. The IDC’s financing activities during thepast five years will assist in the creation of more than 147 000 job opportunities.

Altogether 34% of the jobs will be created in the South

African rural areas and townships, and 50% will be

created (or saved) in the rest of South Africa and 16% in

the rest of Africa.

Geographic utilisation of financing

27%

10%

South African townships (4%)

Rest of South Africa (59%)

Rest of Africa (27%)

South African rural areas (10%)

4%

59%

Number of approvals according to size of businesses

69%SMEs (69%)

Large enterprises (31%)

31%

Number of approvals according to size of businesses

69%SMEs (69%)

Large enterprises (31%)

31%

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

Number of jobs created(including rest of Africa)

South Africa

Rest of Africa

Nu

mb

er o

f SA

job

s

’05 ’06 ’07 ’08 ’090

10 000

20 000

30 000

40 000

Nu

mb

er o

f R

est

of

Afr

ica

job

s

Utilisation of financing

Distressed companies (5%)

South African start-ups (36%)

South African expansions (17%)

Investments in the rest of Africa (27%)

Ownership changes (15%)

27%15%

17%

5%

36%




DIVISION: INDUSTRIAL SECTORS

Operational Review

Case study: Supporting entrepreneurs inthe chemicals industryProject

The Chemicals and Allied Industries SBU has committed funding of R11 million to

Nkonzwentle, a small-scale manufacturing company operating in KaBokweni, outside

Nelspruit. Established in 2004, the company produces polypropylene bags for the

agricultural sector in the Lowveld region.

Creating jobs

Nkonzwentle is majority women-owned and the investment will create 140 jobs in a

rural area.

Building beneficiation capacity in the chemicals sector

South Africa produces an abundance of polypropylene, yet has limited capacity for

beneficiation. Partly utilising the Transformation and Entrepreneurship Scheme (TES),

the IDC will assist Nkonzwentle to backward integrate and scale up its operations, and

manufacture more efficiently. The IDC’s funding will also be used to buy plant and

equipment. The investment is aligned with the dti’s Industrial Policy Action Plan’s (IPAP)

initiative to improve beneficiation capacity in the polypropylene sector.



Operational Review – INDUSTRIAL SECTORS

Chemicals and AlliedIndustries

The Chemicals and Allied Industries SBU

offers finance to companies operating in

the chemicals and allied industries

sector, one of the largest manufacturing

sectors in the South African economy.

The unit aims to be a development

leader in creating sustainable industrial

growth in South Africa and the rest

of Africa.

Development impact

• During the past financial year the SBU approved

investments totalling R355 million which are expected to

create 331 job opportunities in South Africa and the rest

of the continent.

• The unit also provided a working capital facility of

R15 million to one of the IDC’s business partners, saving

approximately 474 jobs.

Highlights of the year under review

• There was a significant decrease in the unit’s

outstanding capital from approximately R1,8 billion

at the end of March 2008 to approximately

R500 million at the end of March 2009. This was

mainly as a result of the good performance of Foskor,

which repaid all of its shareholders’ loans amounting

to R1,44 billion. Foskor also paid a dividend to the

IDC of R1,1 billion. The impairments of the SBU

however almost increased sevenfold as a result of

companies experiencing severe cash flow problems

because of the economic crisis.

• A substantial investment was earmarked for the

expansion of Bliss Chemicals, an existing IDC interest

that manufactures MAQ washing powder.

• Approval was obtained to invest in the establishment of

a large pipe manufacturing plant in Botswana using

Austrian technology.The investment comprises an equity

stake of 31% with the balance being debt funding.The

investment will be co-funded by DBSA and the unit sees

this as the start of other co-funding opportunities with

other development finance institutions.

• An amount of R15,2 million was earmarked for

enterprises that provide products such as bricks and

paving, especially for local government infrastructure

programmes in Gauteng, Mpumalanga and the

Eastern Cape.


Opportunities remain for downstream beneficiation in

the chemicals sector. In particular the unit will look to

develop projects linked to the beneficiation of

zirconium and titanium dioxide.

• The unit made an investment of R40 million in an

enterprise that produces zircon sand and beneficiates

it into speciality chemicals with applications in high-

value-added products. South Africa produces 45%

of the world’s zircon sand, which is then exported

for further beneficiation. This project forms part of

the dti’s Industrial Policy Action Plan (IPAP) as a

strategic initiative.

Sector trends

• Most IDC business partners in the plastic sector

experienced margin squeeze in the first half of the

financial year due to high oil prices and therefore

experienced cash flow difficulties. Fortunately, most were

able to trade themselves out of difficulty when fuel prices

softened during the latter part of 2008. This resulted in

fewer impairments than initially expected.

• Declining consumer spending, especially in the

residential housing market, affected many brick

manufacturers. This was cushioned to some extent by

government infrastructure spend.

Outlook and key initiatives

• The chemicals sector has been identified as a strategic

sector under the dti’s National Industrial Policy Framework.

Although the unit made strides in starting to implement

Industrial Policy Action Plans (IPAP), progress has been

slower than anticipated because of the current global

economic conditions.

• Opportunities remain for downstream beneficiation in the

chemicals sector. In particular the unit will look to develop

projects linked to the beneficiation of zirconium and

titanium dioxide.

During the past

financial year the

SBU approved new

investments totalling

R355 million, which

are expected to

create 331 job

opportunities.


Operational Review – INDUSTRIAL SECTORS_continued

2010! and Construction

The 2010! and Construction SBU

finances economically viable

businesses within the construction

industry and also facilitates the

financial support of viable businesses

directly related to the 2010 FIFA

World Cup®.

Development impact

During the past year the unit has funded a number of

infrastructure projects across the continent, helping to boost

social and economic development. Support for businesses

related to the 2010 FIFA World Cup® has also risen steadily.

In addition, the unit has provided funding for BEE

acquisitions of medium to large construction companies to

help transform the industry in line with the Construction

Industry Charter.


During the past financial year the unit:

• approved commitments of approximately R582 million

to small, medium and large businesses in the

construction industry; and

• funded the expansion and acquisition of a 10,5% stake

in listed construction firm Basil Read.

2010!The unit funded Homeless Construction, one of the few

black-owned construction companies awarded a slice of

the contract to build and upgrade stadiums for the 2010

FIFA World Cup®.

Construction

• In order to diversify the IDC’s book and utilise the

immediate financial benefits of a strong JSE-listed

company to help develop smaller enterprises, the unit

funded the acquisition of a 10,5% stake in Basil Read.

• Commitments to businesses across Africa grew to

approximately R1 billion across a diversified portfolio

of loan and equity investments.

• Skills training workshops were funded by the unit in

conjunction with the Construction Industry

Development Board (CIDB) to boost skills, particularly

financial expertise, within the construction industry.



Sector trends

Rising interest rates and the global economic downturn has

adversely affected some players in the construction

industry during the past year, particularly in the residential

building market. However, the construction of public

infrastructure, such as airports, roads, schools, power

stations and sport stadiums, has continued to grow. This

made the construction sector the fastest-growing sector in

South Africa. This trend is expected to continue in the

medium term, largely driven by government and parastatal

budgeted expenditure.


During the next financial year the SBU will focus on:

• providing rapid financing and performance guarantees to

qualifying enterprises;

• spreading the provision of construction finance to more

provinces; and

• financing women in construction in order to contribute

to the success of the Construction Industry Charter and

gender equality in general.


The unit has

provided

funding for BEE

acquisitions to

help transform the

construction industry.




The IDC remains committed

to developing the country’s

aeronautical manufacturing

capabilities through the Aero-

Mechanical Manufacturing Cluster.

Metals

The Metals SBU aims to develop and

support viable downstream producers

of value-added ferrous and non-ferrous

metal products and establish a

complete value chain in the transport

equipment and fabricated metals

sectors. This includes the manufacture

of products for the renewable energy,

automotive and transport sectors.

Development impact

• The unit approved 27 transactions to a value of

approximately R574 million, which are expected to create

1 203 new job opportunities as well as save an additional

157 jobs.

• Of the total amount invested, approximately R138 million

was towards funding expansionary BEE activities,

acquisitions or changes of ownership.

• The investments were mainly for start-up and

expansionary projects, particularly in the SME sector, but

in view of the current global economic meltdown,

investments were also made in the distressed sectors of

automotive and capital goods.


The unit approved financial assistance to establish a

photovoltaic polysilicon module assembly plant in Cape

Town. The project will create 106 direct and 30 indirect

jobs in a photovoltaic downstream operation, the third

of its kind in South Africa. The company is wholly owned

by a French-registered company which develops, instals,

finances and operates photovoltaic installations of all

sizes, from residential-use panels to solar parks, and

which decided to secure its supply of solar panels from

South Africa.

Further investment and support was granted to a 100%

black female-owned company which specialises in the

refurbishment of Metrorail commuter coaches. In

support of government’s accelerated rolling stock

programme aimed at developing a reliable and efficient

passenger rail system for the FIFA 2010 World Cup®.

The company has created 204 permanent jobs in the

semi-rural Karoo town of Touws River.



The SBU approved approximately R220 million for auto-

component suppliers, comprising mostly SMEs. It also

approved R70 million for the automotive sector and

R150 million for the capital goods industry. Of this total

amount, R9 million was approved for a distressed

company involved in high-pressure and gravity die-

casting of zinc and aluminium auto components for the

local and export market. With the IDC’s assistance, the

company was able to negotiate and restructure its

existing facilities with other funders. In addition, the IDC

facility has enabled the transformation of the company

through the acquisition of 26% shareholding by a Broad-

based Black Economic Empowerment group. It is

envisaged that the IDC’s investment will result in the

preservation of 157 jobs.

The unit continued to make progress in supporting

entrepreneurs in the transport equipment

manufacturing sector, specifically those operating in the

boat- and yacht-building industry. South Africa is now

the second largest manufacturer of catamarans after

France, and the increased demand for South African-built

boats has seen the sector exporting 85% of its products.

The industry has the potential to create employment

opportunities for workers both in the Western Cape and

KwaZulu-Natal.

Sector trends

The sectors serviced by the unit have been adversely

impacted by the global economic slowdown, with the

automotive and capital goods sector being the hardest hit.

The global and local automotive industry experienced a

decline in the sale of new vehicles, a process of

rationalisation, the closing of plants and dealerships, as

well as large-scale retrenchments.

Notwithstanding the current macroeconomic challenges

worldwide, the unit continued to benefit from the

Industrial Policy Action Plan’s (IPAP) focus on the

beneficiation of basic metals, as well as the manufacture

of fabricated metals products primarily to support the

public sector capital expenditure programme through

state-owned enterprises such as Eskom, Transnet, the

Pebble Bed Modular Reactor Company, and Public Rail

Services Agency.

With the imminent lifting of the export restrictions

legislation by the dti on scrap metal, the unit expects to

see both local and international players setting up scrap

metal beneficiation and downstream processing plants in

South Africa.


Renewable energy will continue to be a key focus area for

the unit. It will play a role in establishing new industries,

expansionary projects and facilitating BEE in the

manufacturing of solar water heating systems, photovoltaic

solar systems, wind-generated electricity plant components,

hybrid vehicles and other types of vehicles using

environmentally friendly energies.

The IDC remains committed to developing the country’s

aeronautical manufacturing capabilities through the Aero-

Mechanical Manufacturing Cluster. With the establishment

of the Centurion Aerospace Village (CAV), the global

integration of subtier suppliers will be undertaken with two

lead industry partners, namely Aerosud and Denel. This will

ensure that SMEs and BEE players can pursue opportunities

up the supply chain.

The SBU remains committed to developing the automotive

sector in South Africa. The release of the detailed elements

of the Automotive Production and Development

Programme (APDP) from 2013 to 2020 will enable vehicle

manufacturers and their suppliers to plan strategically for

the future and to finalise investment decisions with

confidence and certainty. In addition, government will

develop the automotive sector as one of four lead sectors

prioritised for fast-tracking based on its potential to

contribute to economic growth, employment and equity

under the National Industrial Policy Framework (NIPF) and

Industrial Policy Action Plan (IPAP).

Further investment

support was

granted to a 100%

black female-

owned company.


Risk Capital Facility (“RCF”)

The Risk Capital Facility SBU was

established in 2001 to manage third-

party funds and IDC ring-fenced funds.

It channels these funds into high

development impact and economically

viable projects whose needs are not

totally addressed by IDC’s normal

funding products and those offered by

third-party financiers.

Development impact

The funds managed by the unit focus on developmental

areas including: technological innovation; SME

development; job creation; Broad-based BEE; and

empowerment of other previously marginalised groupings

such as women and people with disabilities. The majority

of these funds are channelled into projects through a

co-financing basis with IDC Investments.

The role of the unit is to support these high developmental

projects that would otherwise not happen without

concessionary funding support due to their higher risk

profile. In order to support these projects, the IDC allocates

and ring-fences portions of its capital to targeted groups. In

addition, the IDC, through managing third-party funds,

broadens its impact by leveraging these funds.

The funds currently managed by the unit include:

• The Transformation and Entrepreneurial Scheme (TES),

a R1 billion IDC ring-fenced fund established in February

2008 for the empowerment of entrepreneurs from

various marginalised groups. This scheme consists of the

following five funds:

– The Women Entrepreneurial Fund, offering funding

to women entrepreneurs and women-owned

businesses. The fund has an investment value of

R400 million, of which R40 million is for business

support.

– The People with Disabilities Fund, with an investment

value of R50 million, of which R5 million is for

business support aimed at developing disabled

entrepreneurs.

– The Development Fund, focusing on the

empowerment of blue-collar workers by assisting

them to obtain shareholding in various projects and



The TES scheme facilitated

32 approvals amounting to

R121,7 million. The approved

projects are expected to create

1 892 jobs throughout the country

in a variety of sectors.



business. The fund has an investment value of

R250 million, of which R7,5 million is for

Business Support.

– The Community Fund, focusing on empowering

black communities to obtain shareholding in IDC-

funded projects. The fund has an investment value

of R150 million, of which R5 million is for

Business Support.

– The Equity Contribution Fund, supporting black

entrepreneurs and BEE companies with financial

contribution requirements. The fund has an

investment value of R150 million, of which

R15 million is for Business Support.

• Risk Capital Facility 1 and 2 Funds (RCF1 and RCF2):European Union-funded facilities capitalised at

approximately €47 million each, managed on behalf of

the dti.

• The Support Programme for Industrial Innovation(SPII): A fund managed on behalf of the dti. It is aimed

at promoting technology development in industries

within South Africa through the provision of financial

assistance for innovation of competitive products and/or

processes. SPII consists of three schemes, namely Product

Process Development (PPD), and Matching and

Partnership schemes.

• The Product Process Development (PPD) Schemeprovides financial assistance in the form of a taxable, non-

repayable grant of between 50% and 85% of the total

qualifying costs incurred in pre-competitive development

activity associated with a specific development project

up to a maximum of R500 000.

• The Matching Scheme: A taxable, non-repayable grant of

50% and 75% of the qualifying costs incurred in the

development activity up to a maximum grant of

R1,5 million.

• The Partnership Scheme is in the form of a conditionally

repayable grant, of up to 50% of the qualifying costs

incurred in the development activity, with a minimum

conditional grant amount of R1,5 million repayable on

the successful implementation of the project.


• During the past financial year the unit successfully

launched and implemented the TES scheme.

• The TES scheme facilitated 32 approvals amounting to

R121,7 million. The approved projects are expected to

create 1 892 jobs throughout the country in a variety

of sectors including mining, tourism, food and agro

processing, wood, metals, health, transport and

chemicals. One of the projects financed through TES is

Auspex, a hotel initiative in the Eastern Cape, one of the

poor provinces in South Africa, which will create

347 jobs.The project will result in broad-based black

empowerment through the acquisition of 20%

ownership in the business by blue-collar workers.

• The RCF2 fund resulted in 11 approvals totalling

R109,7 million with at least 922 jobs expected to be

created. One of the major projects is the Phoenix

Recovery Fund, a R45 million niche fund financed to

the tune of R20 million by the RCF unit. The fund

focuses on the turnaround of distressed companies.

Phoenix will finance distressed companies in all

sectors of the economy, a critical undertaking in the

current economic climate.

• The IDC Board approved the management of the

Clothing and Textiles Competitiveness Programme

(CTCP), a five-year dti grant-funding initiative designed

to stimulate competitiveness of the South African

clothing and textile manufacturing sector through

people, processes and product upgrading within the

companies involved.

• Funding for 72 innovation projects with a total value of

over R57 million through the SPII programme was

approved, of which 37 projects to the value of

R14,5 million were committed to SME and BEE

companies under the PPD Scheme.TMI Consultancy,

which successfully developed and commercialised a

generic simulator platform using the latest controller

technologies, was ranked to be the winner, at the dti2008 Technology Awards, under the small companies

category.The generic approach to the design reduces

cost of simulators in different environments.


The unit’s focus for the next financial year will be to:

• ensure successful implementation of the CTCP desk;

• ensure continued facilitation of investments under TES

and RCF2 Fund in order to ensure outreach in all

provinces in South Africa and in the rest of Africa; and

• develop a blueprint for the refocusing of the SPII Scheme

programme in order to increase participation and

development impact.

IDC front Final.qxd 8/18/09 11:15 AM Page 41



Textiles and Clothing

The Textile and Clothing SBU aims to

be the primary source of development

finance for the textiles, clothing, leather

and footwear industries in South and

southern Africa.

The unit provides loan and/or equity finance to projects

and businesses that exhibit economic merit and assists in

the turnaround of troubled businesses with clear recovery

potential. It also works with government to help create an

environment conducive to investment in these sectors and

with the industry to identify, develop and grow viable

business opportunities.

The unit covers the following subsectors:

• the production of synthetic fibres used in textile

production (the production of natural fibres is the

domain of the Food, Beverages and Agro-industries SBU);

• the spinning of fibres into yarn;

• the processing of fibres into non-woven textiles;

• the weaving of yarn into fabric;

• the production of apparel, household textiles and other

textile goods;

• the printing, dyeing and other finishing processes

associated with the above;

• the production of leather goods; and

• the production of footwear.

Development impact

The SBU approved 18 transactions with a total value of

more than R400 million. These transactions are expected to

result in 635 new job opportunities as well as save more

than 2 400 jobs.


• The past financial year was the first full year for the

unit since the former Chemical, Textiles and Allied

Industries SBU was split into two different divisions

on 1 October 2007.

• The IDC Board approved the Textiles, Clothing, Leather

and Footwear Competitiveness Scheme. The scheme

aims to encourage the upgrading and modernisation

of plant and equipment in these sectors, since ageing

plant and equipment has been identified as one of the

main reasons behind South Africa’s limited

competitiveness in this area. In terms of the scheme,

funding for such plant and equipment can be made

available at prime less 5%.



Four transactions, with a total value of approximately

R70 million, were approved under this scheme during

the year under review.

• The unit approved funding to WM Eachus and

Company (Pty) Limited, the holding company of the

Sheraton Textiles business. This business, employing

more than 500 people, has been operating in the

household textiles industry since 1922. The group

manufactures a range of home textiles including

sheets, pillows, duvets and comforters. The business

was faced with certain closure due to its high levels of

debt, yet it remained operationally sound, with good

prospects. By recapitalising the business, the IDC did

not only save the 500 jobs but also ensured the

continuation of a long-standing, basically sound, South

African textile business.

Sector trends

The textiles sector remained under pressure, mainly due to

the availability of cheap imports from the East. However,

the dti made good progress during the year with the

development and implementation of action plans to assist

the sector, based on the previously approved customised

sector programme. The credit crunch has had a marked

effect on the sector as banks became more stringent in

their criteria for granting credit. However, companies in this

sector that have the ability to be flexible and responsive to

their customers’ needs are likely to survive and prosper,

despite the threats faced by the sector in general.


During the upcoming year, the unit will focus on:

• identifying and exploring sustainable elements in the

clothing and textiles, as well as the leather and footwear

value chains. It will also proactively develop projects in

these areas. This will be done not only in South Africa, but

on a regional basis;

• actively managing the IDC’s existing investments in this

sector, to provide further financial support where justified

and to identify growth and new project opportunities for

them. The main objective would be to manage our

equity investments to the point of where the IDC can exit

the investment;

• providing input and assistance to the dti for the

implementation of action plans to support the industry;

• creating a conducive environment for new investment

and growth of the industry focused on the areas where

South Africa can compete successfully; and

• assisting competitiveness and modernisation by reducing

the cost of funding through the Textiles, Clothing, Leather

and Footwear Competitiveness Scheme.

The IDC Board approved the

Textiles, Clothing, Leather and

Footwear Competitiveness

Scheme. The scheme aims to

encourage the upgrading and

modernisation of plant and

equipment in these sectors.




Wood, Paper and Other

The Wood, Paper and Other SBU

finances projects and investments in

the forestry, pulp, paper, furniture, wood,

biomass and other manufacturing

industries.

The unit aims to:

• address the current and anticipated shortage of timber in

South Africa, support transformation in the forestry value

chain and develop SMEs;

• support the development of downstream beneficiation/

value-added industries in the forestry value chain; and

• support the development of the renewable energy

sector by funding projects that meet the criteria to earn

carbon credits through the Clean Development

Mechanism framework.

Development impact

During the past financial year the unit approved funding of

R383 million. These 20 investments will facilitate the

creation and retention of 559 jobs in South Africa, mainly in

rural areas.


In the year under review the unit:

• approved the first wood biomass-to-energy project in

George. The project will generate 24 MW of electricity

and earn carbon credits;

• approved and implemented various rural community

transactions in the forestry sector;

• extended the Pro-Forestry scheme to support the

development of new forestation projects as well as the

transformation of the industry in line with the Forest

Sector Transformation Charter;

• approved a project in Mali which will manufacture

chipboard from rice straw; and

• made significant progress in establishing and

developing expertise in carbon finance and

renewable energy.

Sector trends

During the reporting period some structural changes were

evident in the forestry sector, with a significant drop in

demand for structural timber and consequently high stock

levels. Increased focus on clean development mechanisms

and the application thereof in the development of

environmentally friendly projects has also taken off.




Over the coming year the unit will look to:

• support the growth of green industries by funding

projects involved in emission reductions, clean

development technologies, waste management

and recycling;

• focus on the development of renewable energy projects;

• develop and implement partnerships with the

Department of Agriculture, Forestry and Fisheries, the

Council for Scientific and Industrial Research, South

African Forestry Company Limited and Mondi Zimele in

specific subsectors in the value chain;

• cooperate closely with the dti to support the

development of the local furniture sector; and

• participate in the Forestry Charter Council and support

the implementation of the Forest Sector Transformation

Charter through IDC investments.

During the past financial year

the unit approved funding of

R383 million. These 20 investments

will facilitate the creation and

retention of 559 jobs in South

Africa, mainly in rural areas.

The unit has made

significant progress in

establishing and

developing expertise

in carbon finance and

renewable energy.



Operational Review


Case study: Environmentally friendlytravelProject

The Venture Capital SBU provided an initial investment of R30 million for a 10%

shareholding in Optimal Energy (Pty) Limited, a South African start-up company that is

in the process of developing a battery electric vehicle called Joule. The unit facilitated

a further investment of R50 million through the Metals SBU in March 2009, increasing

the IDC’s shareholding in Optimal Energy to 22%.

Establishing a new industry

The support of the IDC and Innovation Fund will help facilitate the establishment of a

new industry in South Africa. The design, development and manufacturing of battery

electric vehicles will diversify the country’s current role as vehicle assembler. When fully

commercialised, the company is expected to create approximately 1 500 jobs. The IDC

will be closely involved and assist Optimal Energy to raise the remaining funding

requirement to set up a production facility with a capacity of 50 000 units per annum.

The IDC is also exploring opportunities to set up a lithium-iron battery manufacturing

plant in South Africa to support electric vehicles for export.

Environmentally friendly travel

The battery electric vehicle will have no harmful emissions and is expected to appeal

to environmentally conscious customers, including the state and state-owned

enterprises, as well as customers who are sensitive to the ever-escalating running costs

of internal combustion engine vehicles.

DIVISION: RESOURCES SECTORS

The battery electric vehicle


Operational Review – RESOURCES SECTORS_continued


The unit had a phenomenal year

from an investment approval

perspective, approving 11 new

and two follow-on investments in

the seed/start-up stage to a total

value of R127,2 million.

Venture Capital

The Venture Capital Strategic SBU acts

as a catalyst in developing new or

unique South African technologies by

providing early stage finance to

entrepreneurs. The unit helps to

stimulate technology companies to

commercialise their research and

development, while facilitating the

development of a self-sustaining, early

stage, technology-focused venture

capital industry in South Africa.

Development impact

Through its funding, the Venture Capital SBU provides much-

needed access to finance for entrepreneurs and SMEs in the

seed or start-up phase of development of unique,

commercially viable South African technologies.

The unit’s investment mandate allows investment into any

technology-focused industry.The SBU has identified a number

of industries, such as biotechnology, nanotechnology and

clean technology, which are regarded as having a potentially

strong competitive advantage from a South African

perspective. It helps to stimulate the development and

growth of these potentially lucrative industries by proactively

sourcing deals through networking and by fostering relations

with relevant industry stakeholders.

Finance is provided on a full risk-sharing basis, with the IDCacquiring a significant minority shareholding in thebusinesses in line with the risk assumed by the IDC. Inaddition to the IDC’s participation on the boards ofdirectors of these investee companies, the Venture CapitalSBU also plays an active role at the executive managementlevel of these companies by providing strategic support,advice and guidance where required.


Direct investmentsThe unit had a phenomenal year from an investmentapproval perspective, approving 11 new and two follow-on investments in the seed/start-up stage to a total valueof R127,2 million.The 13 approvals compare favourablywith the five investments approved in the previous yearand a target of 12 for the year under review. Of the 13investments four are in the SBU’s targeted industries, iebiotech (including medical devices) and cleantechnologies.The SBU’s cumulative approvals since start-up on 1 April 2007 up to 31 March 2009, amount to

An employee of African Everose showing fresh-cut roses

that have a vase life of up to 6 months



R158,8 million, leaving R91,2 million of the originallyapproved R250 million still available for investment. It isclear that an additional capital allocation will need to berequested as the R250 million will be fully invested inapproximately three years as opposed to the originallyanticipated five years.

Some of the new technologies to be developed andcommercialised with the equity funding approved by theSBU during the year under review include:

• a plug-in battery electric vehicle;

• composite industrial fans that are differentiated by theiraerodynamic efficiency, improved wear characteristicsand power efficiency as well as their reduced weight,maintenance and noise pollution;

• a comprehensive, portable wound management systemused for removing dressings, cutting away dead tissue,cleaning of wounds with either saline or ozonated waterand the subsequent drying of wounds with warm air andthe application of creams or liquids as prescribed by adoctor.The system also has a massage facility;

• a remote surveillance system that allows the home orbusiness owner to observe, via cell phone, any area of thehome or business at any time.The system has thefunctionality to detect motion and to alert the owner viaSMS, who then has the option to watch a live videobroadcast on a cell phone from any camera connectedto the system;

• an inexpensive disposable (single-use) nerve stimulatorused in regional anaesthesia;

• a technology that preserves fresh-cut roses and extendstheir vase life for up to 6 months.The preserved roseslook exactly like fresh roses and do not require water;

• a robotic gaming platform in the form of a highly agiletwo-wheeled robot that adds substantial value to thedriving-around play-pattern of conventional radio-controlled toys through its autonomous behaviour,personality, programmability and challenging gameplaycapabilities; and

• a bus management system suitable for the South Africantransport environment that offers value through betterinformation relating to driver management (eg trackingspeeding, travel times, route adherence), vehiclemanagement (eg reporting over-revving, service triggers,vehicle tracking) and people management (eg trackingticket sales, unaccounted for passengers, overloading,crime monitoring).The system will be compliant withEuropay, Mastercard and Visa.

Wholesale investmentsSince 2001, in its previous guise as the WholesaleVenture Capital Department, the unit has providedfunding to a number of venture capital and privateequity funds for investment by these funds. These funds

include: three technology venture capital funds; abiotechnology-focused venture capital fund; the NewAfrica Mining Fund focused on early stage explorationand mining projects; and the Women Private Equity Fundwhich invests in women-focused businesses. All thefunds have now completed their investment periodsand are currently focused on value addition anddivestment from their investment portfolio companies.

During the year under review these funds collectivelyexited from three underlying investments, returningclose on R47,3 million to the IDC, which translated intoan average annual return of 64% on capital invested.

One of the technology venture capital funds wasseverely impacted by the unexpected liquidation of oneof its portfolio companies, which constituted the majorportion of the fund’s investment portfolio from a valuepoint of view. The impact of the global economicdownturn on the local equity markets further caused thevalues of underlying investments in the various funds toreduce significantly, most notably those investments inJSE-listed companies. The resultant net decrease in thefair value of the IDC’s investments in the six third-partymanaged funds amounted to R114,3 million.

Sector trends

The current economic environment is not expected to have

an adverse effect on the SBU’s investment activities, mainly

as a result of the fact that the SBU provides funding in the

form of pure equity and consequently there is no onerous

debt service obligations placed on the investee companies.

To the extent that investee companies rely on earning

revenue from consumers, it is expected that the viability of

such companies may be negatively affected over the short

term. However, since the unit’s investments are of a longer-

term nature, the cyclical nature of the economy is of less

concern and is therefore not expected to have a major

impact on the value of the unit’s investments.


The SBU’s focus for the upcoming year will be on:

• building and maintaining a healthy pipeline of deals that

fit the unit’s investment mandate;

• providing strategic support and ongoing guidance to

investee companies. With its growing investment

portfolio, much of the unit’s resources will be consumed

by these post-investment management activities; and

• identifying the need for, and facilitating the provision of,

business support in respect of business plan

development as well as the development of

entrepreneurial skills to applicants that potentially fit the

unit’s investment mandate and criteria.


Operational Review – RESOURCES SECTORS


Food, Beverage and Agro-industries

The Food, Beverage and Agro-industries

SBU plays a leading role in the

development of the agricultural value

chain of South Africa and the rest

of Africa.

Development impact

• During the past financial year the unit approved funding

of R390 million. These 31 investments will facilitate the

creation of 2 334 jobs in the South African economy,

mainly in rural areas.

• Despite the global economic downturn, the unit

responded countercyclically and significantly increased

its impact in terms of entrepreneurial support. Its funding

assisted almost 200 entrepreneurs directly. Most of these

entrepreneurs are active in rural areas and are previously

disadvantaged. This is the highest impact achieved in a

one-year period, since the establishment of the unit.

• During the reporting period the IDC Board approved a

scheme specifically earmarked to develop the

horticultural value chain. The Pro-Orchard II was approved

for an amount of R200 million over the next two years.

This follows the success of Pro-Orchard I, which assisted

26 companies with a total amount of around

R150 million (75% fund utilisation). Altogether 81% of

the companies were BEE companies and the investments

will facilitate the creation of 2 024 jobs.

• The first bio-ethanol plant in Cradock, Eastern Cape, a

project which was approved in the previous financial

year, is currently in the pre-implementation phase. This

project will play a significant role in the development of

a responsible biofuel industry in South Africa.

• The unit’s highly labour-intensive berry projects are on

track and are likely to have significant development

benefits to local economic development of Stutterheim,

Charlestown (Amajuba) and George.


During the year under review the unit:

• approved wholesale finance facilities to agri-businesses

which provide financial and technical support to

emerging farmers. More than 150 emerging farmers,

including female farmers and co-operatives, benefited

from the unit’s funding. Investments focused on the

rural areas of the North West and Free State provinces;



Investments will

facilitate the

creation of 2 334

jobs in the South

African economy,

mainly in rural

areas.

• supported an additional eight emerging citrus farmers

as part of an initiative to revitalise the development of

the Kat River Valley in rural Eastern Cape. This brings

the total number of farmers assisted to 17;

• took the lead in supporting the first kob (Argyrosomus

japonicus), also known as kabeljou, marineculture

project in the East London Industrial Development

Zone (IDZ). The project pioneered the development of

hatchery/spawning technology and land-based

recirculation systems for the sustainable production of

indigenous marine finfish;

• continued its financial support of its innovative joint

venture with the CSIR in the development and

commercialisation of specialised controlled-release

technology that can be used in the pharmaceutical,

sport nutrition, animal feed and food industries;

• provided support to a number of SMEs including

enterprises involved in: date juice production

(KwaZulu-Natal); confectionery products and other

food products (Gauteng); ground nut processing

(North West); soya oil milling (Mpumalanga); juice

manufacturing (KwaZulu-Natal); pet food production

(Eastern Cape); macadamia production (Limpopo); as

well as ostrich meat processing (Western Cape);

• contributed significantly to a cassava cultivation and

starch-processing project in Swaziland.

This will replace imports from the Far East and play a

significant role in the downstream usage of this

product in the paper and food industries of South

Africa. This project has contributed significantly to

foreign direct investment in Swaziland. The IDC’s

partnership as co-investors in this project with

Norfund, the Norwegian-based development finance

institution, has also been strengthened;

• completed due diligences on sizeable projects in

Ethiopia and Tanzania;

• continued to support nuts projects in Limpopo, Free

State and Northern Cape; and

• made a donation, together with the IDC’s External

Training Department, of R175 000 to the Citrus

Academy. The donation will enable previously

disadvantaged students that benefit from the Citrus

Academy Bursary Fund, to gain exposure to the

industry through the attendance of technical

conferences and symposia related to the agricultural

sector. The donation is to help address the challenge

of finding and retaining suitably qualified previously

disadvantaged managers, one of the main obstacles

to transformation of the agricultural sector.

Sector trends

During the past year significant structural changes occurred

in the food, beverages and agro-industries value chain at a

global as well as local level. Global food prices increased

dramatically, emphasising the need for increased food

production.The crisis highlighted Africa’s underutilised

agricultural resources as an important component in

addressing the problem.With relatively strong food

commodity prices, returns on agricultural investments are

improving and again beginning to attract investors.

However, the global liquidity crisis has to some extent

curbed this trend.


The IDC has developed a strategy to respond to the global

food crisis.This includes supporting increased food

production through assisting emerging farmers; creating

increased competition in food processing by supporting

SME grain and oil seed milling capabilities; ensuring food

security through a coordinated SADC approach to food

production; and focusing on supporting food-sensitive

biofuels projects.




Mining and Beneficiation

The Mining and Beneficiation SBU plays

a leading role in the development of

commercially sustainable mining and

beneficiation projects in South Africa

and the rest of Africa. The unit actively

seeks partnerships with resources

companies involved in projects in

these regions and attracts local and

global partners.

Development impact

• During the past financial year the unit undertook its first

mining investment in Eritrea. The multi-commodity Bisha

Project will produce gold, silver, copper and zinc over its

expected lifespan. It is estimated that the project will

create 400 direct job opportunities and increase

government revenues. The project is expected to serve as

a catalyst for the further development of a mining

industry in that country.

• The IDC provided a revolving credit facility to WakeGem

(Pty) Limited, trading as African Romance (AFRO), a 100%

black-owned and operated diamond manufacturing and

jewellery design company. AFRO is located in a state-of-

the-art facility in Sandton and has 64 employees. This is

part of the unit’s efforts to grow and advance the

country’s diamond cutting and polishing industry.


• The unit was mandated as a lead arranger of the

US$90 million Bisha Project in Eritrea.

• The unit funded two BEE parties, Sedibeng Iron Ore

and Coza Mining in the Northern Cape. Both were

successful in obtaining exploration licences over

several farms for iron ore.

• The IDC supported a BEE transaction at Blue Ridge

Platinum Mine, a 50/50 joint venture between Ridge

Mining Plc. and Imbani Platinum (SPV) (Pty) Limited.

Construction of the mine and associated surface

infrastructure commenced in 2007. Construction is

complete and the concentrator plant was

commissioned in March 2009.

• The unit approved a R260 million funding facility to

Majestic Silver Trading, a Broad-based BEE company, to

develop a manganese mine in the Northern Cape.

The capacity of the mine and processing plant will be

2,0 million tons per year.


With long lead times to

development, the unit intends

to fund new mining investments

in anticipation of an economic

upturn.


Sector trends

The global financial crisis led to a collapse in equity markets

and the mining industry did not escape unscathed. As a

result, mining companies began cutting back on capital

expenditure for projects and expansions. With commodity

prices falling dramatically, the ferrochrome, platinum and

diamond markets were severely hit in South Africa – these

are amongst the country’s biggest exports. Coal and gold

managed to buck the trend to some degree, with demand

being driven by energy requirements and the need for safe

investment havens respectively.

However, it appears that the worst of the impacts of the

financial crisis have been absorbed. Stimulus packages in the

US, China and UK are expected to stimulate demand,

especially for non-ferrous metals. Commodity prices are likely

to begin increasing towards the end of the year, driven by

the base metals copper, zinc and lead on the back of an

expected economic recovery in China. Aluminium and nickel

are likely to lag as they are associated with a recovery in the

automotive sector.


• With long lead times to development, the unit intends to

fund new mining investments in anticipation of an

economic upturn. The unit can play an important role in

providing project finance, as this is an area where

traditional funding from institutions has dried up. This will

position companies to take advantage of the longer-term

supply-side constraints that are likely to emerge as a result

of current project delays and cancellation of expansions.

• The unit will also focus on supporting existing clients,

particularly newly established businesses, that will be

particularly vulnerable in the current downturn.

• Africa and southern Africa in particular present good long-

term opportunities for setting up a steel project in view of

the growth potential in the market. Growth in world

demand for steel is expected to average 6% to 7% per

annum and the outlook for the South African steel market

is expected to be between 6% to 8%. Demand in Africa

will be driven by continuing infrastructure and

construction spend. There is currently a shortfall of

approximately 12 million tons of steel annually.

Demand in Africa will

be driven by continuing

infrastructure and

construction spend.




Public Private Partnerships

The Public Private Partnerships (PPP) SBU

aims to partner project developers and

financiers in delivering commercially

viable PPPs and infrastructure-related

projects that have high developmental

and job-creation impact potential

within South Africa and the rest of the

African continent.

Development impact

The unit approved a total of six projects that are expected to

generate over 2 200 jobs.


• The unit views the telecommunications sector as an

important driver of economic growth and is therefore

focused on funding projects that make

telecommunications more affordable and accessible

across the continent. The following are three main

projects that will improve communication capacity and

foster competition in the sector:

– NeotelThe first full-scale national infrastructure-basedcompetitor to Telkom, Neotel has communityservice obligations aimed at improving telecomaccess to rural communities. The unit approved aportion of the long-term funding required by thecompany. Neotel’s fibre-optic cable project hascreated a significant number of jobs anddownstream opportunities.

– The New Dawn satellite projectFunding was approved for investment in the NewDawn satellite project positioning a satellite directlyabove southern Africa at the 330 E orbital slot.The satellite will improve the quality of tele-communication services on the continent bysupplementing existing and planned tele-communication and submarine cable capacity.Project shareholders include a local BEE informationand communication technology company,Convergence Partners, as well as Altirah Capital, alocally based investment entity. A number of Broad-based BEE entities are also shareholders in this project.

– Broadband Infraco The IDC holds a 26% shareholding in BroadbandInfraco. Approved at a time when the BroadbandInfraco Bill was under deliberation by the relevantparliamentary committees, this investment is


The unit views the telecommunications sector as

an important driver of economic growth and is

therefore focused on funding projects that make

telecommunications more affordable and accessible

across the continent.


starting to bear fruit with Tier 1 and Tier 3

telecommunications infrastructure being delivered.

In addition, the unit:

• approved a total of R18 million for the implementationphase of an electricity-generation project based on thecirculating fluidised bed technology. The unit currentlyhas a shareholding of approximately 23% in the project;

• approved a total of approximately R1,4 billion for a localindependent power-producing project. Theintroduction of a BEE partner in this project with jobcreation and procurement opportunities for localcommunities around the project site are the keydevelopmental impacts of the project. The inclusion offarming cooperatives and poverty-stricken ruralcommunities as beneficiaries in the Broad-based BEEentity will further enhance the empowerment status ofthe project; and

• approved approximately R75 million for the Kalangalainfrastructure project in Uganda. The projectencompasses the development of a ferry, as well as theupgrade of roads, and water and power supplies. Theproject will result in a number of improvements for thecommunity including access to electricity throughoutthe day, reliable transport and clean water.

Sector trends

The global financial crisis continued to restrict much needed

capital for infrastructure investment. However, in an attempt

to minimise job losses and position their economies to take

advantage of any economic recovery, governments

worldwide began focusing on infrastructure rollout.

Opportunities therefore exist for the unit to partner with

other industry players in rolling out infrastructure projects.


• Key initiatives being pursued by the unit are aimed at

addressing the transport infrastructure backlog and

electricity supply constraints, with working groups having

been formed to drive progress in these two areas.

• The introduction of independent power producers and

the diversification of the energy mix towards more

environmentally friendly sources will underpin demand for

IDC funding in the electricity-generation sector. The unit is

also focused on the funding of independent power

producers in a bid to address the electricity shortage

across Africa.

• The unit continues to look for projects that result in

improved access to clean water for poor communities,

whilst fulfilling the needs for industry development.

• Transport infrastructure backlogs, including rail and road

to port infrastructure, pose significant opportunities for

private sector participation, underpinned by a well-

developed PPP framework.




During the upcoming financial year the unit will

continue to proactively identify and develop new

project ideas for rural development and poverty

alleviation.

Strategic High-impactProjects

The Strategic High-impact Projects SBU

aims to build a pipeline of medium-

and long-term innovative, strategic

high-impact projects in which the IDC

can invest. The unit identifies potential

projects and develops them to

bankability stage so that the IDC’s other

SBUs can fund them.

Development impact

During the past year the unit:

• initiated the drive for the establishment of a system of

innovation in the IDC;

• worked with the Department of Trade and Industry

(the dti) and the China Africa Development Fund (CADF)

and assisted in a memorandum of understanding (MoU)

between the two parties.The IDC and the dti are now in a

position to develop projects that would get access to

CADF’s R5 billion fund; and

• initiated a relationship with the Industry TechnologyResearch Institute of Taiwan (ITRI). An MoU will be signedto encourage and promote cooperation in accessingtargeted technologies and resources, technology transferand development to South Africa and the rest of theAfrican continent.

Highlights of the year under reviewDuring the past year the unit:

• worked together with IDC subsidiary Foskor (Pty)Limited to find viable alternatives for the use of Foskor’sgypsum waste material.The unit has been investigatingnew technology that uses gypsum to produce buildingpanels that could be used in the building of schools,clinics and houses.The unit is collaborating with thetechnology provider to obtain the necessary regulatoryapproval for the alternative building material in SouthAfrica. A marketing survey was also initiated to gaugemarket perception of the product;

• investigated the viability of manufacturing advancedbatteries (batteries for electric vehicles and hybridelectric vehicles) in South Africa for transportation.Theunit also began the process of identifying potentialinternational technical partners, as the country does notcurrently have the capability to design and manufactureadvanced batteries for transportation.The unit iscurrently in the process of identifying and negotiatingpotential partnerships with international batterymanufacturers, as well as participating in a drive toresuscitate advanced battery research and development



with the view to creating a national technology roadmapand the required support mechanisms;

• investigated a sisal industry development initiativethat seeks to grow at least 50 000 ha of sisalplantations, initially in Limpopo. Most of the fibreproduced will be beneficiated into woven (spinningand weaving) and non-woven (composites) products.The industry will also produce about 2,5 tons ofmucilage, which will be used to produce biogas andethanol as well as organic fertilisers;

• entered into an MoU with Trade and InvestmentKwaZulu-Natal, Tourism KwaZulu-Natal and InqabaTrust, representing the community, on a beach tourismproject on the KwaZulu-Natal North Coast. The projectis at a prefeasibility stage to ascertain viability andsustainability; and

• embarked on an initiative to identify and developmore projects that will develop rural areas and combatpoverty in the country. To date, eight projects in sevenrural areas have been visited and evaluated. Two ofthese eight projects are being considered for furtherdevelopment and possible funding.

Other projects under development include:

• the Makhathini Biofuels Project to enable theestablishment of a sugarcane-to-fuel ethanol plant;

• the development of novel South African technology toproduce titanium powder and the establishment of therequired infrastructure to produce the material; and

• the establishment of a facility that will enable a nationalpreclinical drug development platform to carry outpreclinical trials for the development of drugs.

Sector trends

The current financial crisis has negatively impacted theprojects pipeline of the unit. A number of projects, especiallythose with corporate co-investors, have been put on hold dueto the current economic circumstances.The IDC, however,takes a long-term perspective and, as far as possible, iscontinuing with the development of these projects.


During the upcoming financial year the unit will:

• continue to proactively identify and develop new projectideas in rural areas;

• proactively analyse opportunities in the renewable energy sector;

• investigate opportunities in the water treatment industry inline with the Department of Water Affairs and Forestry’sWater for Growth and Development Framework;

• investigate potential project opportunities in the area ofnanotechnology;

• investigate the application of appropriate biotechnology infood processing, especially in poor rural households;

• collaborate with various municipalities to find opportunitiesfor waste usage, such as landfill gasification to produceelectricity and other products; and

• investigate potential project opportunities in electronic-waste.


The newly-opened

Ethekwini Hospital and

Heart Centre that was

funded by IDC



Case study: Supporting advancedtechnology manufacturing

Project

The Techno-industries SBU provided expansionary funding of approximately

R64 million to an East London-based SME television manufacturer, Vektronix. The

company will manufacture a range of Samsung plasma television sets.

Building new capacity

This investment is in line with the National Industrial Policy Framework’s (NIPF)

objective of developing South Africa’s capabilities as a manufacturer, rather than an

importer of advanced technologies.

Future growth

Vektronix will be placed in a favourable position to qualify for the manufacture of set-

top boxes, which will allow analogue televisions to receive a digital signal once the

Broadcasting Digital Migration (BDM) project has been implemented.

DIVISION: SERVICES SECTORS

Operational Review

Workers at Vektronix; the company will soon manufacture a range of Samsung Plasma television sets



Operational Review – SERVICES SECTORS_continued

Techno-industries

The Techno-industries SBU finances

projects and investments in the

Information, Communication

Technology and Electronics (ICTE)

industries in Africa.

Development impact

• Through the approval of 13 transactions involving

financing to a total value of approximately R634 million,

the unit helped to facilitate the creation of nearly 3 000

job opportunities in the year under review.

• Projects selected aim to create, expand and/or transform

the ICTE sectors to enable a competitive environment.


• In line with its objective of growing sectoral diversity,

the unit approved finance amounting to R76,9 million

for three businesses in various sub-sectors of the

electronics industry. This takes the unit’s total exposure

to the electronics sector to R129 million.

• Since most of the ICTE businesses in South Africa are

situated in Gauteng, the unit promoted regional equity

through facilitating two investments outside the

province, including one in the rural areas of KwaZulu-

Natal (Ixopo) and one in the Eastern Cape (East London).

• The unit continued to facilitate transformation in the

ICTE sector by providing finance to Broad-based BEE

parties for expansionary purposes.

• The unit provided a restructuring solution to Bihati

Solutions, a niche market player in the installation of

telecommunications infrastructure both domestically

and in the rest of the African continent, particularly the

DRC. The company faced operational as well as

shareholder challenges, but together with the workout

and restructuring team, the unit was able to convert

existing debt into long-term equity, recapitalise the

company, contain costs and increase the BEE

shareholding in the company. The solution was at the

back of solid market growth, ensuring that Bihati

Solutions remains sustainable into the future.


Sector trendsTelecommunications growth continues into the rest of

Africa, especially in the area of mobile telephony. Locally

there is an increased focus on broadband infrastructure. The

conversion of value-added network operator licences will

provide increased competition in the local market.

Government is still a major contributor to the growth of the

local IT sector, although there is limited SME participation in

the sector.

The local outbound-focused Business Process Outsourcing

(BPO) sector has continued to contract, mainly due to the

National Credit Act and the sector’s inability to attract non-

risk-based contracts. In order to be sustainable, the sector

needs to diversify into inbound services. Other challenges

facing the unit include stabilising its BEE portfolio, which, as

a result of volatility on the JSE Limited, was compromised.

The unit is confident that the investments will recover in

the near future, as the underlying investments remain solid.

Outlook and key initiativesDuring the upcoming year the unit will focus on:

• diversifying its portfolio towards new and developing

sectors such as electronic waste and electronics;

• stabilising the BEE portfolio;

• facilitating the increase of investment in SMEs operating

in the IT sector, especially those with government

tenders; and

• participating in the development of the Business Process

Outsourcing and Off-shoring (BPO&O) sector, particularly

to promote the sustainability of SME participation in

the sector.


Projects selected aim to create, expand and/or

transform the ICTE sectors to enable a competitive

environment.

Telecommunications

growth continues

into the rest of

Africa, especially

in the area of

mobile telephony.


Operational Review – SERVICES SECTORS

Franchising

The Franchising SBU supports

emerging entrepreneurs with limited

access to capital, to acquire and

manage a sustainable franchised

business in South Africa and the rest of

Africa. The unit also provides support

and assistance to owners of new

franchise concepts in order to enable

them to expand and develop into

sustainable franchises that can in turn

support other emerging entrepreneurs.

Development impact


• restructured the facilities of 14 clients in distress to assist

them to survive the economic downturn;

• assisted a further 19 businesses in distress by facilitating

the sale of assets to new owners; and

• approved funding of R212,6 million to support 80 new

entrepreneurs to start up new franchises. These facilities

are expected to create 2 459 jobs once the businesses

have been established.


During the year under review the unit approved:

• a facility to assist the master franchise holder to set up

the Nando’s franchise in DRC;

• funding for the set-up of 10 KFC outlets mainly in rural

and township areas; and

• a facility for Spar to roll out six Super Spar and eight

Spar outlets in rural and township areas in the

Western Cape.

In an attempt to diversify the portfolio away from the

food and restaurant sector, which has been affected by

the economic downturn, 70% of new funding approved

this year was to non-food franchises, including Planet

Fitness KZN, Placecol Beauty Centres, Dream Nails &

Beauty as well as National VOIP Switching Centre (a call

centre business).

Sector trends

As a result of the economic downturn, the franchising

industry experienced pressure on turnover and margins as

consumers curtailed expenditure. At the higher end of the


market, businesses such as restaurants and suppliers of

luxury items were most affected. However, fast-food outlets

showed steady growth as they benefited from consumers

buying down. Non-food franchises were less affected by

the recession.


In view of the global economic crisis, the year ahead is

expected to be difficult and franchises will have to ensure

that they manage their margins tightly.

In this year the Franchising SBU will focus on:

• further diversifying its portfolio into non-food franchises;

and

• assisting new franchise concepts to be established and

to expand.


In an attempt to

diversify the portfolio

away from the food

and restaurant sector,

which has been affected

by the economic

downturn, 70% of

new funding approved

this year was to

non-food franchises.




A large

number of

investments

focused on

hospitals and

clinics in

township and

rural areas.

Healthcare and Education

The Healthcare and Education SBU

aims to be the preferred development

funding partner for innovative

enterprises in the healthcare and

education sectors.

Development impactThe SBU concluded 11 transactions in the period under review,

creating 1 482 job opportunities in the healthcare and

education sectors.The value of the transactions amounted to

R626 million. A large number of investments focused on

hospitals and clinics in township and rural areas under the

Township and Rural Hospital Scheme.

Highlights of the year under review During the last year the unit:

• continued to approve funding under the Township and

Rural Hospital Scheme.To date R208,7 million of the

R500 million scheme has been approved since the

inception of the scheme in March 2008. Four approvals

have been made including to:

– Medleb Hospital of Lebowakgomo (Pty) Limited

(Medleb), a 51% black-owned company which was

granted a licence by the Limpopo Department of

Health and Welfare to establish a 20-bed private hospital

in Lebowakgomo, Limpopo.The hospital will be at the

lower end of the private healthcare market serving

historically underserviced areas.The hospital is set to be

completed in December 2009; and

– Cosmo City Clinic (Pty) Limited (CCC), a 51% black-

owned day clinic operating from a temporary

structure in Cosmo City since July 2006.The IDC

approved R8,2 million of funding to assist CCC to

construct and equip a new facility.Three additional

full-time medical practitioners will join CCC, supported

by visiting specialists. A dentist, optician and an in-

house pharmacy will augment these services;

• made a second hospital approval for Capensis, in line

with the development of the independent hospital

sector. The IDC provided funding for the construction of

the new, high-technology, 200-bed hospital, Kassier

Road Hospital, with an orthopaedic and neurosurgery

focus in Hillcrest, KwaZulu-Natal;

• approved funding for the establishment of a 135-bed

private hospital in Lusaka, Zambia. Healthshare Health

Solutions (Pty) Limited (Healthshare), an experienced

IDC KZN regional manager Pat Moodley at the Ethekwini Hospital and Heart Centre


South African hospital operator, will assist in the planning

and development of the hospital;

• approved a building loan facility to Melovest Investment

Holdings (Pty) Limited; and

• approved funding under the Township and Rural Hospital

Scheme to expand the existing Bellville hospital from 79

beds to its full 123-bed capacity, and to expand the

Gatesville hospital by a further 40 beds.

The application is aligned with the Healthcare and Education

SBU’s strategy to develop independent black-owned

hospitals, specifically at the lower end of the private

healthcare market serving historically disadvantaged under-

serviced areas.

• The SBU took part in a consultative forum to determine

key policies and interventions needed to revitalise the

education sector.

Sector trends

HealthcareHigh levels of poverty and unemployment continue to make it

difficult for most people to pay for health services, placing an

immense strain on the public sector.The burden of disease

continues to increase in the country mainly due to HIV and

Aids. Accordingly, the debate around the National Health

Insurance (NHI) is central to resolving the issues around

equitable access to healthcare services in both the public and

private healthcare sectors.The Department of Health continues

to engage the private sector so as to ensure that an appropriate

funding model is developed for South Africa.

The use of generic medicines continues to grow in South Africa,

however, with a market share of approximately 57%, the share

of generics of the South African market is still lower than in

other developed markets. Regulatory shifts have increased the

use of generics under the National Drug Policy which makes

generic substitution mandatory.

The weakening of the Rand against major currencies was a

major concern for most manufacturers in the healthcare sector,

as most manufacturers import their raw materials.With prices of

raw materials increasing by up to 50% and the prices of

pharmaceutical products regulated, margins were squeezed.

The hospital sector was also affected as a large percentage of

equipment is imported.

A significant deterioration in global and economic conditions

negatively impacted the SBU’s business, with an increase in

impairments. However, large listed companies in the

pharmaceutical sector, such as Aspen, which focus on exports,

benefited from the weaker currency.

EducationHuge disparities continue to exist in the South African public

and private education sectors. Early childhood education has

been identified as a priority area for government and research

has shown that one good pre-school year makes a big

difference in primary schooling.

The South African economy continues to be skills-constrained.

The demand for unskilled labour as a percentage of

employment has declined steadily since 1970 (from

approximately 70% to 40%), while that of skilled and highly

skilled labour has been consistently on the rise. In the period

2001 to 2006, South Africa was on average producing 5 600

artisans per year, compared with the need for 12 500.

The formation of FET colleges was to address the development

of vocational skills with the technical colleges working in

tandem with employers.The link between the employers and

colleges has, however, declined since the 1990s, resulting in

poorly trained graduates from the colleges.


• The priority for the SBU in the coming year will be the

identification of active pharmaceutical ingredients that can

be manufactured locally in line with the NIPF. The unit has

completed a scoping report for the manufacture of codeine

and will be developing the project further in the next

financial year.

• The SBU will be developing viable PPPs in the healthcare

sector in line with government’s stated objective of

improving the delivery of health services to the South

African population.

• The unit has identified telemedicine as a strategic priority in

line with the Department of Health’s plan to address the

inequalities in the South African healthcare system.

• Affordable private education is still a focus for the SBU and

bankable opportunities will continue to be developed.

• The SBU will be focusing on the development of technical

skills, especially in sectors where there are shortages.




Media and Motion Pictures

The Media and Motion Pictures SBU

promotes entrepreneurial and sectoral

development within the entire media

value chain.

The SBU continues to play a leading role in the

development of the South African motion picture

subsector through strategic partnerships with key industry

role players, including the National Film and Video

Foundation, the dti and local producers, by funding locally

developed film projects. The SBU has also played a leading

role in the development of the downstream portion of the

media value chain through its continued support of the

introduction of new entrants to television broadcasting.

Development impact

• The SBU had a successful year, recording its highest ever

approved funding amount of R281,5 million, in 11 new

approvals, including additional funding for two

previously approved investments.

• The SBU funded two projects in the animation

subsector, which has traditionally had difficulty in

attracting funding from commercial entities.

• In the motion picture sector, the SBU encouraged

partnerships with the private sector to co-fund the

production of locally-developed and produced films.

• The SBU provided funding for two companies, which

produce advertising and media targeting taxi

commuters. This helped to uplift the taxi industry by

creating new revenue streams for taxi owners. One of

these companies will use IDC funding to extend media

platforms to taverns and car washes, creating small

businesses in underdeveloped areas.

Highlights of the year under reviewDuring the past financial year the unit:

• obtained approval to fund Speedy Productions (Pty)

Limited for the establishment of a new animation

studio in Pretoria. The IDC funding is earmarked for

capital expenditure on animation software, hardware,

furniture and fittings, and the fitting and equipping

of a sound studio within the animation studio;

• funded a portion of a feature length animation film,

entitled Zambezia, to be produced by a local company,

Triggerfish.This project is of great importance to the

animation subsector, as it is only the second official


There are also many

opportunities to

develop unique

content for media

platforms that

have positive

developmental

spin-offs for small

businesses. These

projects resonate

with government

programmes to

create jobs.

animation feature film to be produced in South Africa.

Zambezia will create a platform and structure through

which other animation productions can be created,

developed, funded and produced.The IDC will play a

crucial role in spearheading the creation of this industry

in the country;

• funded two locally-developed, locally-based stories,

Million Colours and Winnie, which is based on the

intimate and in-depth biography: Winnie Mandela:

A life by Anne Marie du Preez Bezdrop. The IDC co-

funded the production of the film with Absa Bank.

The film’s anticipated international audience will

also profile the local film industry;

• funded the participation of Kopano Ke Matla into On

Digital Media (ODM), SA’s second pay-TV operator.

ODM intends starting broadcasting within the next

12 months;

• extended a facility to Provantage (Pty) Limited, a

company specialising in out-of-home media

solutions targeted at consumers in transit. The IDC’s

facility will be used by the company to expand its

media solutions to other advertising platforms such

as taverns, car washes and taxi rank television

networks. The proposed expansion will result in the

creation of jobs directly in the townships; and

• funded Massiv TV, which has developed state-of-the-

art technology to provide stimulating television

content to minibus taxi commuters in transit. The

project is expected to improve the livelihood of

hundreds of taxi owners by providing them with an

additional income stream generated from advertising

income. The IDC acquired 24% of Massiv TV, with a

further 26% interest banked for an empowerment

suitor. The capital injection will be channelled to fund

further growth in the business.

Sector trendsThe success of animated films such as The Lion King and

Madagascar suggests that films with African themes have

significant potential attraction with global audiences. To

date, such films have come out of Hollywood rather than

Africa, but there are signs that animators on the continent

may be poised to make an impact on the world market.

The South African animation industry is still in its infancy

when it comes to the long format or feature film

production and there remain opportunities to fund the

production of locally produced and developed animation

films.

There are also many opportunities to develop unique

content for media platforms that have positive

developmental spin-offs for small businesses. These

projects resonate with government programmes to

create jobs.

Outlook and key initiativesDuring the year ahead the unit will focus on:

• growing the production of low-budget local films to

meet the demand expected from new pay-TV channels;

• identifying opportunities to assist local media companies

to expand into Africa; and

• continuing to look at developing the local broadcasting

subsectors, particularly in rural areas.



Tourism

The Tourism SBU focuses on asset-

based finance with the bulk of its

portfolio invested in the

accommodation sector.

Development impact

The unit approved finance of R710 million to 25 businesses

mostly in the SME sector, creating 1 700 jobs.



• concluded and completed a full drawdown on the

Tourvest transaction;

• approved a R160 million facility to Auspex Properties

for the construction of a fully black-owned five-star

170-room Radisson-operated hotel in Port Elizabeth;

• funded R133 million for the construction of a four-star,

240-room hotel with conference facilities next to

O.R. Tambo International Airport to be managed by

Premier Hotels;

• assisted the Arts and Crafts desk at the dti and the

Cape Craft and Design Institute in administering funds

earmarked for the Arts and Crafts sector in the

Western Cape. In 2008, 114 enterprises were assisted

with local market access, 60 crafters were assisted with

export opportunities and a number trained during the

2008 Winter School;

• approved US$3,5 million for the refurbishment of a

hotel in Doula, Cameroon; and

• provided financial assistance to support the

development of subsectors such as arts and crafts,

sports tourism, and business tourism across Africa.

Sector trends

The tourism industry showed some growth in the past year,

despite the global downturn. Growth in visitor numbers

was driven by increased regional travel. Overseas visitor

numbers slowed as international travel slumped globally.

A number of high-profile sporting events, including the

Confederations Cup, Indian Premier League and the Lion’s

tour of South Africa in 2009 should cushion the impact of

depressed economic activity, particularly as these are taking

place during low season. During the upcoming year the

2010 FIFA World Cup® should give a much-needed boost to

the tourism industry.

The Radisson-operated hotel in Port Elizabeth



As a result of tighter capital markets, investment activity in

the tourism sector during the coming year is likely to be

subdued. Although investment has been driven by the

2010 FIFA World Cup®, there is likely to be a slowdown in

activity after the event. The long-term outlook for the

industry, however, remains positive as a result of anticipated

growth in tourism post-2010. Most of the new

development is based on a long-term view of the sector.

During the upcoming year the unit will focus on:

• the development of subsectors such as arts and crafts,

event management, business tourism as well as the

accommodation sector;

• participation in the establishment of good-quality

hotels on the African continent, mostly through the

provision of export credit facilities;

• support of Broad-based BEE projects and investments

with significant development impact, particularly in

priority provinces and rural areas;

• provision of support to businesses targeting the 2010

FIFA World Cup®, such as travel services, venue hire and

event management; and

• improvement of internal processes to improve

customer service.


The unit approved

finance of

R710 million to

25 businesses

mostly in the SME

sector, creating

1 700 jobs.

During the upcoming year the 2010 FIFA World Cup®

should give a much needed boost to the tourism

industry.




Transportation, FinancialServices and Other

The Transportation, Financial Services

and Other SBU positions itself within

the South African and greater African

economy as a financial partner for

economic growth and development.

The SBU seeks to promote BEE participation, increase

capacity building and lead sector growth and development

on a sustainable and viable basis.

Development impact

In the year under review the SBU:

• obtained approval for 13 transactions to the value of

R748 million. Of this amount R331 million was approved to

support SMEs and intermediaries that would service SMEs

and R156 million was for development in the rest of Africa;

• reached out through intermediaries to rural-based

enterprises and micro-enterprises. This is part of the SBU’s

strategy to ensure further access by micro- and small

businesses to IDC funding; and

• continued to provide financial support to the transport

sector by working further with existing financial providers

in the sector and developing joint-venture products

through a risk-sharing model while addressing market

gaps. These joint ventures ensure IDC has a greater reach

in the economy.


In the year under review the SBU:

• entered into a joint-venture arrangement with ABSA

to provide additional capital to the taxi sector. This will

increase access to finance for taxi operators to assist in

the acceleration of the recapitalisation process;

• funded three black financial services intermediary

companies which focus on providing funding to

micro- to small enterprises in rural and urban areas.

This promotes the development of black financial

services companies and addresses access to finance

for rural micro-enterprises;

• provided a line of credit of US$5 million to the

Development Bank of Zambia for on-lending to SMEs

in line with the strategy to assist other African

Development Finance Institutions;

• extended a further R100 million to Mercedes-Benz

Financial Services to ensure that further access to

finance for black SME transporters is provided in light of

the tightening of credit by existing financial institutions;

IDC CEO Geoffrey Qhena (R) and SwaziBank MD Stanley Matsebula signing a loan agreement.The unit has supported financial institutions in the rest of Africa to

fulfil their developmental mandate



• entered into a joint venture with Scania Financial

Services to provide funding to bus operators in South

Africa and the rest of Africa, in support of the bus

sector and 2010; and

• provided funding for two BEE acquisition transactions,

one of which was expansionary in nature.

Sector trends

The launch of the Transport Charter in October 2008 placed

transformation at the centre of the sector. The Charter has

seven subsector charters including: road; rail; taxi; bus;

aviation; maritime; and forwarding and clearing. The SBU

will continue to support the charter through its sector

strategies and financing activities by engaging with

all stakeholders.

The transport sector has experienced difficulties due to the

drop in demand for commodities and exports. This has

resulted in many companies reducing their transport

requirements and subsequently SME companies have been

affected as many do not have a diversified client base.

The SBU has engaged its joint-venture partners to find ways

to assist clients in surviving this difficult period. Measures

taken include engaging with the contract providers,

extending deferments and assisting with resale of

the assets.

As the transport sector is well serviced by the existing

financial institutions in terms of the provision of finance, we

still position the SBU as a partner to these institutions to

ensure finance is extended to more SMEs and to address

market gaps. The SBU has thus extended the joint-venture

model to the taxi and bus sector. Access to finance for

operators is becoming increasingly important to ensure

recapitalisation for 2010 and provision of rural transport.

The logistics sector is still a key challenge with many of the

logistics parks not developing in the manner envisaged.

The contraction of the transport sector has not abated in

the rest of Africa as it has in developed countries. The SBU’s

strategy in the aviation and maritime sector is slowly

bearing fruit with the first approved aviation transaction.

Focus will be on assisting African airlines recapitalise their

fleets and develop new routes. The IDC’s limited and

cautious involvement in this sector is viewed from the

perspective of improving transport links in order to

improve economic links.

With South Africa’s limited commercial maritime capacity,

this sector is seen as a growth area from a jobs and skills

development perspective, and there is an increased focus

to develop the sector.

The financial services sector still finds the provision of

access to finance for micro- and small enterprises a

challenge. We find financial institutions are exploring and

developing models to provide funding to these enterprises

with many establishing micro-enterprise divisions. We view

this as a positive sign that the private sector is finally

viewing this subsector as growth areas of business.


• The SBU will continue its support of the joint ventures

which enable the IDC to reach a broader target market

and share financial risk. This strategy will be undertaken

on a subsector basis and entered into where we find a

market gap exists and the IDC can assist in sharing the

risk for the private sector to enter. This is in line with

promoting access to finance for those entities that do not

meet normal banking criteria and are financially

excluded. The feasibility study into the provision of

commercial microfinance is complete and the SBU is to

engage new partners and work with Khula Enterprises.

The economic crisis has seen several partners withdraw

from the project. However, the final results are positive

and we will move into the implementation stage in the

new financial year. As a result of the SBU’s initiatives in

this area, we have seen a number of private institutions

that are willing to enter this sector and have approached

the IDC for funding.

• The unit will continue to participate in the aviation and

maritime sectors by providing not only financial support

but also lead sector development. The SBU hosted a

Maritime seminar at the IDC in October 2008, which

raised various challenges to sector growth. We believe,

however, that the strategy to develop and grow a

sustainable maritime sector is achievable if the

momentum to develop the sector is maintained by

government and the private sector. The SBU will liaise

with stakeholders in the logistics sector to determine a

way forward to assist in the development of the sector as

a whole.

• The SBU will continue to play a sector support and

facilitation role due to the well-established financial

institutions in South Africa that cater for the transport

and financial services sector. We will also further support

financial institutions in the rest of Africa to fulfil their

development mandate.



Significant Investments

Hernic Ferrochrome (Pty)Limited

Hernic is the world’s fourth largest

producer of ferrochrome, a key input in

stainless steel production. IDC acquired

an equity interest in Hernic in 1995

and has actively supported its growth

since then.

IDC holds a 21,25% equity interest in Hernic.

Hernic’s profitability improved by 30% during the year under

review.The improvement in profitability is attributable to

record ferrochrome prices as a result of strong market

demand during the first half of the year. Ferrochrome

demand weakened during the second half of the year, largely

due to excessive overstocking by stainless steel

manufacturers. Ferrochrome prices fell from around US$2,00

per pound in August 2008 to less that US$0,70 per pound in

February 2009. South African ferrochrome producers,

including Hernic, responded to the weakened demand by

closing 70% of the country’s production capacity.

Ferrochrome markets are expected to remain under pressure

during the first half of 2009, and improve thereafter.

Karsten Group Holdings(Pty) Limited

Karsten Group Holdings (Pty) Limited,

previously known as Karsten Boerdery

(Pty) Limited (Karsten), is a diversified

agricultural and exporting company

with its main operations in the

Northern Cape. It produces table

grapes and dates. The IDC has a 36,55%

shareholding in the company.

Karsten is export-focused and achieved record sales

volumes of 3 million cartons. High prices and the

weakening exchange rate further benefited the company.

It has an established marketing company in the UK through

which most of its exports are channelled. The company

showed consistent growth over the past five years and,

during the year under review, the company recorded its

highest profit ever.

The company is further gearing itself to mitigate its

exposure to agricultural risks through geographic and

product diversification. Local production, for example, is

spread over a 300km strip down the Orange River and,

through an IDC loan, the company has expanded to Ceres

in the Western Cape, where the company grows apples,

pears, cherries and blueberries. A Broad-based BEE citrus

expansion of 350ha at Kakamas co-financed by IDC is also

in progress. The company is a huge job creator and

currently employs 4 150 seasonal workers.

Eastern Produce Malawi(Pty) Limited

In 2001 the IDC entered into a share

swap agreement with Linton Park Plc

(LPP), a company incorporated in the

UK, whereby LPP’s UK-registered

subsidiary, John Ingham & Sons Limited

(JIS), acquired a 73,2% shareholding in

Sapekoe (Pty) Limited in exchange for a

26,8% shareholding in Eastern Produce

Malawi Limited (EPM). EPM produces

and processes tea and macadamia nuts

in Malawi.

While EPM is a profitable and mature entity, its macadamia

nut plantations have yet to achieve full production.

A vertically integrated operation, EPM boasts 10 tea-

processing factories, one tea-blending plant and a state-of-

the-art macadamia nut-processing factory, the latter

comprising dehusking, drying, cracking, sorting and

packaging operations.

During the year under review EPM produced approximately

15 400 tons of made tea, of which approximately 91% was

supplied by EPM’s own tea estates and about 9% by small

outgrower plantations. The tea is sold primarily to Europe

by JIS’s in-house marketing infrastructure. Profits from tea

operations amounted to approximately 450 million



Malawian Kwacha (MK) during the financial year. Tea prices

have risen over the year and seem to be holding out at

these levels.

By comparison, EPM’s macadamia nut production of

approximately 540 tons of saleable kernel yielded a profit of

MK216 million in 2008.

Prilla 2000 (Pty) Limited

Prilla 2000 (Pty) Limited (Prilla) is a

wholly owned subsidiary of the IDC

that produces 100% cotton yarn. The

company currently has approximately

300 employees and has spinning mills

in Pietermaritzburg and in Atlantis,

Cape Town.

The company reported a loss of R66 million for the period

ending 31 March 2009, which stands in stark contrast to the

profit of R4,6 million for the previous year. This is mainly

attributable to international economic conditions that

began to negatively impact demand towards the end of

the 2008 financial year. Although local demand was not

as badly impacted as some offshore markets, a price

imbalance resulted from substantial increases in the

international price of cotton lint that could not be

passed on to downstream customers competing

against cheap imports.

In addition to the poor trading conditions, quality problems

related to the supply of inferior raw material further

exacerbated pressure on demand and price. In October

2008 a fire in the Atlantis plant brought production to a

standstill. With a correction in the price imbalance still

illusive and the higher logistical costs of production in

Atlantis, a decision was made to mothball the plant until

market conditions justify the reopening or relocation of

the plant.

Over the first few months of the 2009 financial year the

combination of a decrease in international cotton lint

prices and an increase in the selling price of yarn again

resulted in improved trading conditions to near acceptable

levels. The management team has been strengthened with

the appointment of several key members to the team, and

the quality problems seem to have been overcome. With

much of the international economic turmoil still looming, it

is not expected that the company will perform better than

breakeven for the 2010 financial year. However, a number of

fundamental changes in the local market emerged

subsequent to year-end, offering opportunities to

reposition the company strategically to both increase

demand and decrease exposure to fluctuating market

conditions. Any positive results in this regard, however,

should only be expected to benefit the company in the

2011 financial year.

Foskor (Pty) Limited

Foskor Limited (Foskor) is an 85%

subsidiary of the IDC, with two

divisions.

The two divisions comprise:

• a phosphate rock and copper mining division with

production facilities in Phalaborwa; and

• a phosphoric acid and fertiliser division situated at

Richards Bay.

During the year under review Foskor generated record

profits and paid substantial dividends. The company’s

export orientation improved as a result of the Rand trading

in a favourable range, successful hedging strategies and

substantial strengthening of international selling prices.

Trading conditions in the fertiliser industry, specifically in

the phosphoric acid industry, continued to show

improvement. These factors had a positive effect on the

financial performance of Foskor, with a resultant record

profit being realised. Revenue increased by approximately

226% to R10,159 million. Profits increased 196% to

R1,919 million.

The year was also characterised by much corporate activity,

including:

• Coromandel Fertilisers Limited (CFL) and its distribution

partner Sun International taking their shareholding up to

15% in April 2008, after the successful conclusion of the

three-year Business Assistance Agreement (BAA);

• the successful divestment of the Zirconia operation to

Carborundum Universal Limited;

• the conclusion of advanced preparations for the potential

listing of Foskor;

• the conclusion of a Broad-based BEE partner selection

process for Foskor; and

• the establishment of management and employee share

option schemes for Foskor employees.

The Phalaborwa phosphate division produced

approximately 2,4 million tons of final phosphate rock,

which was lower than the previous year’s production.

This was due to lower feed grades and diminishing above-



ground reserves and downtime due to mill breakdown and

shutdown to convert plant to handle feed from the new

pyroxinite pit. Foskor is compliant with the Department of

Minerals and Energy agreement on the mine closure

requirements under the new legislation. Conversion of “old-

order” mining rights to “new-order” rights is still ongoing

and in hand.

The performance of the Phosphoric Acid Plant in Richards

Bay achieved a production of approximately 659 thousand

tons below last year’s record production. Granular fertiliser

has also performed below budget. Foskor’s safety record

was above 99%. Air emission compliance for all plants was

above 98% – well above the statutory requirements of 96%.

Safety and environmental compliance remains a key focus

area at all operations.

Foskor continues to be faced with challenges in the market

and operations. The outlook for realisable prices has

deteriorated as the commodity boom has tapered off.

Foskor also continues to make inroads in reducing its

breakeven exchange rate through efficiency improvements,

the continued benefits with CFL technical agreement, and

improved efficiencies and cost containment that will help

to manage some of these challenges. Foskor is budgeted to

remain profitable in the 2009/10 financial year under the

current conditions.

Umicore Autocat SouthAfrica (Pty) Limited

Umicore Autocat South Africa (Pty)

Limited (Umicore) produces

automotive emission control catalysts

(“autocats”) at a production plant in

Port Elizabeth, predominantly for export

into the European and American

automotives industry. An autocatalytic

converter is a device which is fitted to

the exhaust system of diesel and

petrol-powered vehicles to reduce the

toxicity of emissions from the internal

combustion engine.

The current global recession has had a negative impact on

the performance of the automotives industry worldwide.

Umicore, like other local automotive components

manufacturers and exporters, has been negatively affected.

Various measures are being implemented at the company

to reduce the negative consequence of the declining

market demand. Although it is difficult to predict recovery

in the market, Umicore is taking all the necessary steps to

ensure that it is well placed to benefit from the market

uplift when it happens.

During the year under review the much-awaited Automotive

Production and Development Programme (APDP), which is

set to replace the Motor Industry Development Programme

(MIDP) from 2013 until 2020, was finalised and announced.

Although the specific incentives relevant to the autocatalytic

converter industry are still outstanding, discussions are on

going between government and industry to finalise relevant

levels of incentives.

Umicore Group, which owns 55% of Umicore to the IDC’s

45%, recently acquired the Port Elizabeth-based

automotive catalyst operations of a competitor, Delphi.

IDC subsequently approved Umicore Group’s proposal for

the two Port Elizabeth operations to merge. The merger will

result in IDC owning 35% of the merged entity, to Umicore

Group’s 65%.

Hans Merensky (Pty) Limited

The IDC is a 42,6% shareholder in HansMerensky Holdings (Pty) Limited (HMH).HMH’s operations comprise a timberbusiness managed under a brandknown as Merensky, which consists ofsoftwood and hardwood plantations,sawmills and panel production facilitiesin the Eastern Cape, KwaZulu-Natal andLimpopo. The fruit business underHMH’s control trades as Westfalia andincludes operations that consist of thegrowing, processing and marketing ofsubtropical fresh and processed fruitproducts. In EU countries, Westfaliaprovides a category service to majorretailers and procures products from

Significant Investments_continued



several countries of which the SouthAfrican production base represents oneof the sources of product.

The year under review was marked by the onset of theglobal economic slowdown. Notwithstanding the liquiditycrunch, market demand for subtropical fruit grew by 5% inEU markets. Westfalia acquired Greencell Limited, asubtropical fruit prepacker and distributer in the UK, inorder to increase market share and extend its categoryservice offering to its customers in the United Kingdom.

Operational results from Merensky were negativelyimpacted by the combined effects of electricity loadshedding, weakened demand for softwood structuraltimber and the slower-than-expected learning curve inbringing new plywood business to full realisation. Positiveresults were achieved from hardwood lumber products andall forestry operations. Good progress was made in theregeneration of long rotation plantations in the EasternCape and KwaZulu-Natal, which were damaged in the prioryear’s devastating fires.

The global economic climate necessitated thepostponement of equity raising for the purposes ofexpansion projects and for the rationalisation of minorityinterests in operating companies. However, additionalequity will be needed when the company returns to itsintended growth plans.

The continued contraction of the residential buildingmarket is likely to negatively impact lumber prices andmarkets. The postponement of the Kokstad sawmill will addto the management challenge of keeping old sawmillsavailable, while meeting more complex market variables.A weakening Rand bodes well for fruit exports from SouthAfrica and revenue streams generated in countries withstronger revenues. The company will focus on increasingthe supply of ready-to-eat fruit during all the months of theyear, as well as adding citrus products to the sales mix.

The IDC is confident that Hans Merensky will remain apreferred lumber products manufacturer and subtropicalfruit grower in South Africa, and remains committed to thegrowth and expansion plans of the company.

York Timber HoldingsLimited

Formerly known as the York TimberOrganisation, York Timbers HoldingsLimited (York Timbers) acquired control

of Global Forest Products (Pty) Limitedand South African Plywood (Pty)Limited (collectively known as the GFPGroup) from the Global EnvironmentalFunds on 12 July 2007.

The IDC elected to waive its pre-emptive and tag-along

rights and exchange its 30% shareholding in the GFP Group

for a 29,8% interest in the shareholding of the listed entity

York Timbers. This reinvestment was partly utilised to fund a

community and staff trust through special-purpose

vehicles, which in total obtained 12,8% of the ordinary

listed shares in York Timbers.

York Timbers is now a fully integrated forest products

company that owns 61 000 ha of plantations, seven

sawmills, a plywood mill and a national warehousing

network. In 2008 York Timbers decided to close the York

Lumber sawmill due to the unavailability of saw logs in

close proximity to this mill.

York Timbers’ interim financial results for the six months

ended 31 December 2008 were impacted by weaker market

conditions related to the current global economic crisis.

This resulted in a decrease in the demand for sawn timber

during the latter half of 2008, coupled with margin pressure

caused by rising input and raw material costs that could

not be passed on to York Timbers’ customers.

Management implemented a stringent cost control

programme, and sought to improve internal efficiencies,

increase sales volumes and carefully monitor debtors.

All capex projects have been postponed. In order to reduce

sawn timber output to 80% of capacity as a result of reduced

market demand for timber products, the rationalisation of

marginal sawmills is under consideration.The decrease in

sawmilling volumes will result in an improved ratio between

own logs used to expensive third-party supplied logs,

positively impacting margins and cash flows.

In addition, a new CEO and CFO were appointed to steer

York Timbers through the changing economic

environment.

York Timbers’ performance for its financial year ending

30 June 2009 is expected to be lower than budgeted as

adverse trading conditions continue through 2009. The

underlying asset base of York Timbers, however, remains

solid due to the value and quality of its plantation assets.

In addition, once the surplus of logs arising from the

accelerated harvesting and salvage operations, which were

undertaken after the fires of 2007 and 2008, is depleted, it is

forecast that there will be a log shortage for at least the

next 18 years.


Operations support and sustainability departments

The Post-investmentMonitoring Department

In July 2008 the IDC established the

Post-investment Monitoring

Department (PIMD). The department

aims to ensure the efficient, correct

and timeous implementation of

approved transactions, monitoring

of business partners (BPs) and

protection of the IDC’s interest

until such time as the relationship

between IDC and the relevant

business partners terminates.minates.

Previously, account managers in individual Strategic

Business Units (SBUs) would be responsible for dealmaking,

the disbursement of approved facilities, relationship

management and monitoring of existing accounts from

“cradle to grave”. However, in view of its continued growth

as well as an ever-evolving business environment, there

was a need to create PIMD as a separate unit from the SBUs

to focus on post-investment management.

Appropriate post-investment administration, adequate

controls and monitoring processes are critical for the

management of IDC investments.

The post-investment monitoring process commences

immediately after the approval of the application for

finance and following the finalisation of the contractual

agreements between the IDC and its business partners. This

ranges from the facilitation of fund drawdowns;

amendments during the lifespan of the business partners;

the monitoring of existing interests including regular

reviews and client visits; and the regular analysis of financial

information in order to proactively identify clients that have

financial difficulties.

Key highlights to date include intensified and formalised

engagement with the IDC’s business partners on an

ongoing basis. The aim is to proactively identify early

warning signals, and initiate and apply appropriate

intervention(s).

Regional Activities

IDC regional offices aim to extend the

reach of the IDC to all areas of the

country by developing and

coordinating the implementation of

regional strategies, proactively driving

new business development, providing

account manager support and assisting

clients through the provision of

business support.

Development impact

• During the past financial year the demand for financing

from the IDC increased substantially and the number of

financing applications received during this period was

nearly 50% higher than the number of applications

received during the previous year.

• Substantial progress was made with strengthening the

IDC’s regional presence. Regional offices have now been

opened in all nine provinces. Regional offices are better

placed to meet the unique developmental needs,

challenges and opportunities in each province.

• The number of applications received by the regional

offices increased from an insignificant number at the

beginning of the financial year to 25% of the total

number of applications received during March 2009, the

last month of the financial year.


• The IDC’s regional strategies were finalised and approved.

Extensive research was undertaken and the SBUs’ sectoral

strategies and broad consultations were considered

before the strategies were approved.

• The regional offices also started to provide business

support including assisting new entrepreneurs with the

development of bankable business plans, and providing

assistance to IDC clients in identifying and addressing

operational, strategic and financial management gaps for

sustainability. This was especially important under the

current economic conditions.

• Good progress was made with the development of

stakeholder relations within the provinces. The IDC’s

presence and image was actively promoted, including

the initiation and driving of regional marketing




interventions aimed at attracting regional/local

stakeholders to further grow business opportunities and

enhance the regional development impact of the

organisation.

• An analysis of the location for regional offices, took into

account the following: provincial growth and

development strategy; the nature of the economic

activities in the province; the availability of road, air and

other transport infrastructure; the location of stakeholders

such as other DFIs, business organisations, government

departments and agencies; the dti; SME support

organisations; proximity to the IDC’s target markets; and

population numbers as well as levels of industrialisation.

• All the regional offices are now fully operational and

equipped with the necessary office and

telecommunications infrastructure. The IT systems are

fully integrated with those of the head office.


During the upcoming year the IDC’s regional strategies will

be refined and action plans implemented. One of these

action plans will provide for the expansion of the IDC’s

presence in the provinces. This aims to ensure that the IDC

has representation in the main centres of the provinces to

ensure the provision of quality service throughout the

province and to extend the IDC’s reach.

The strategy involves each regional office establishing

“satellite offices” in the main town/city of every district. By

leveraging off sister organisations’ infrastructure, such as

office or desk space, regional office staff will then visit each

of these satellite offices on a regular basis.

The IDC will also focus on overcoming the operational

challenge of networking widely but effectively by

collaborating with other institutions, sister organisations

and stakeholders.

The unit will increase awareness of the IDC’s requirements

and criteria to improve the success rate of financing

applications so that a larger percentage of applications

progress to the approval of the financing stage.

One of the key strategies of the regional offices is to

proactively identify and drive new business development

throughout each region, especially in rural areas.

This will include the involvement of communities

through cooperatives and community trusts in the

development of projects.

Operations Head Office

Operations Head Office provides

business support services to

prospective and existing IDC clients

through the Business Support

Programme (BSP). The BSP focuses on

SMEs and aims to promote the long-

term viability and sustainability of IDC-

funded businesses and the promotion

of entrepreneurship through training

and consultancy services to

entrepreneurs.

Existing IDC clients that are deemed to be in distress or face

growth challenges are referred to the BSP to receive

business support. The BSP engages management

consultants and industry experts to provide professional

services, advice, guidance and mentoring to the clients at

their business premises. The objective is to assist clients to

improve the management of their businesses. The BSP

provides ongoing monitoring to ensure satisfactory

performance by consultants.

The business plan preparation support services assist

prospective clients who apply to the IDC for finance and

who require assistance to improve their business plans in

order to meet the financing criteria. This is provided via

established consultancy services.

The IDC provides grant funding to clients and therefore shares

in the cost of engaging consultants.The IDC under its various

targeted funds, such as the Risk Capital Facility and the

Transformation and Entrepreneurial Scheme, approves the

provision of business support grants to clients.

During the reporting period the BSP was expanded to

include Socio-Economic Development (SED) services for

assistance to targeted beneficiaries, specifically workers,

communities and cooperatives to realise imperative Broad-

based BEE objectives. The main objective of the SED


Operations support and sustainability departments_continued


function is to promote ownership of equity by workers’

trusts in companies in which blue-collar workers are

employed. In a similar way, community trusts will own

equity in companies that use the land that belongs to the

targeted communities. To date, 35 workers’ trusts and seven

community trusts now own meaningful equity in IDC-

funded companies throughout the country.

The SED function engages consultants with legal expertise

to assist targeted beneficiaries to form trusts and

cooperatives, as legal vehicles, to take ownership of

shareholding whenever possible in IDC-funded

transactions. Workers and community trusts and

cooperatives also receive IDC grant funds to engage

consultants and train trustees and members to improve the

management of their legal entities.

The IDC’s decision to regionalise its operations in all the

nine provinces has helped to extend the outreach of

business support, especially to historically disadvantaged

entrepreneurs in rural areas. It has also helped to decrease

consulting costs associated with travel and

accommodation of consultants. The SED function remains

located at the IDC’s head office, but its services are provided

throughout all provinces.

Whenever training needs are identified among business

support clients, BSP invites IDC’s Learning and Development

(External) Department to intervene.The department

organises appropriate training for IDC clients, such as groups

of entrepreneurs, managers, staff, workers, and community

trusts and cooperatives.



• approved improved business support internal control

systems and procedures;

• rolled out business support to regional offices and

trained regional managers to deliver business support

services in their respective provinces;

• approved R8,9 million of business support grants to

provide assistance to IDC clients. An additional

R8,8 million of business support funds was leveraged

from clients’ own contributions as commitment to

business support services;

• received a substantial increase in the number of business

support requests, especially for assistance to clients to

prepare business plans for submission to the IDC to

access finance, predominantly for business start-ups;

• engaged a highly experienced international senior expert

from PUM, a Dutch organisation. The consultant provided

business support to an IDC client as the consulting skill

could not be found locally or on the IDC panel

of consultants;

• expanded the Business Support Programme to include

socio-economic development services to workers and

community trusts and cooperatives; and

• appointed three socio-economic development specialists

in the Operations Head Office to facilitate B-BBEE through

trusts and cooperatives.


Over the upcoming year, the unit aims to:

• develop business support as an expert function within

IDC and introduce business support proactively at the

due diligence/investigation stage;

• expand the number of consultants through the

introduction of sector-specific expert consultants to

respond to sector-specific business support requests and

regionalise consultants;

• intensify and leverage resources from other business and

technical support service providers, such as Small

Enterprise Development Agency, Productivity SA, PUM, etc;

• employ business support skills training of regional

officers that would be employed to augment the

resources of regional offices to increase the rollout of the

business support functionality in provinces;

• develop and introduce new business support products;

• explore ways to accelerate the receipt of benefits by the

workers and community trusts from the companies in

which the trusts own equity;

• develop and introduce implementation guidelines to

support workers’ and community trusts and cooperative

policies;

• develop a proactive implementation strategy for

community foundations within IDC; and

• assist with the beneficiation of Nguni cattle skin so as to

produce value-added products.

The IDC’s decision to

regionalise its operations

in all the nine provinces

has helped to extend the

outreach of business

support.



The Africa Unit

The Africa Unit provides business

development services and promotes

the IDC in the rest of Africa.

Development impact

• The unit’s commitment in terms of approved projects

stands at 48 projects in 17 countries across Africa.

• The largest portion by value of approved projects is in the

Democratic Republic of Congo, followed by Mozambique

and Nigeria.

• On a sectoral basis the rest of Africa portfolio of approved

projects is concentrated in mining, transport, storage and

communications, electricity, gas and water supply, and

wholesale and retail trade.


• The IDC made inroads in providing technical assistance

and lines of credit to sister development finance

institutions on the rest of the continent. These are

provided to impact indirectly the establishment and

maintenance of SMEs on the continent.

• The IDC provides capacity-building and training services

to sister institutions in the SADC, particularly SACU. This

is done directly through:

– IDC staff as presenters and facilitators at appropriate

forums;

– exchange programmes (secondments) with sister

DFIs; and

– by making facilities available through the IDC

Academy.

• The unit continued to play an important role in

facilitating the strengthening of institutions that are

considered essential to the development of DFI capacity

on the continent, including the SADC DFI Network;

the SADC Development Finance Resource Centre; and

the Association of African Development Finance

Institutions (AADFI).


The IDC approved and is considering lines of credit for

DFIs in:

• West Africa (primarily via regional institutions);

• East Africa (via regional institutions); and

• SADC (on a country-by-country basis).

Agency Development andSupport

The Agency Development and Support

(ADS) department has been tasked

with the responsibility of advancing

and leveraging development and

job-creation opportunities in

marginalised areas.

It seeks to be a catalyst for sustainable local economic

development and innovation, and to address market

failures for the benefit of communities in poor provinces,

rural areas and townships. It achieves this through the

establishment and support of development agencies

within municipalities.


During the past financial year six new agencies were

established throughout the country. These agencies

include: Umjindi (Mpumalanga); Moretele (North West);

Okhahlamba (KZN); Waterberg (Limpopo); Ukhahlamba

(Eastern Cape); and Taung (Northern Cape).

Despite the current environmental difficulties experienced

at local government level, a number of agencies have

progressed to the next phase including: Blue Crane

(Operational 3); Umhlosinga (Operational 1); Moses Kotane

(Establishment); Kouga (Operational 2); West Rand

(Establishment); and Overstrand (Operational 1).

In addition, over the past year, the department:

• co-hosted (with the LED Network) a national conference

on “Cooperating to Compete”;

• implemented Local Economic Development (LED) cadet

training as part of the dti’s Khulis’umnotho programme

aimed at strengthening local government capacity;

• helped development agencies leverage IDC funds, with

indications that for every R1 provided by the IDC,

agencies have leveraged a further R8;

• piloted the Small Town Revitalisation strategy in

Okhahlamba (Winterton and Bergville) in KwaZulu-Natal;

• approved a new “project-based” initiative by Exco for

piloting in two municipalities;

• launched a strategic intervention into communities

negatively impacted by mining, and the decline of

this sector;



• approved an integrated strategy leveraging transport for

the facilitation of economic and social benefit which is

due to be piloted;

• developed a holistic strategy for addressing social

exclusion and the building of social capital which will be

rolled out into agencies; and

• cooperated on a number of other initiatives with a variety

of stakeholders in the LED sphere, including on the

drafting of national agency establishment guidelines,

municipal Public Private Partnership guidelines, the

facilitation of e-commerce and e-learning initiatives for

marginalised communities, as well as various training and

capacity-building initiatives.


In the year ahead the department will focus on the

implementation of the various strategies developed. Key

amongst these will be cooperating with mining houses and

affected communities to limit the negative impact mining

operations and their closeness might have on those

communities.

The department will continue to ensure it has equitable

geographic spread of agencies, including in the Free State.

Environment, Health andSafety

The Environment, Health and Safety

(EHS) department was established to

ensure that the IDC and its clients

comply with environmental, health and

safety legislation. All funding applicants

are categorised according to their

industry’s environmental, health and

safety risk profile, and the IDC analyses

the potential risks that each of them

pose, identifying areas of non-

compliance and working together with

funding beneficiaries to bring them up

to the required level. It also oversees

environmental impact assessments

where these are called for and provides

assistance and advice.


• The department conducted a total of 39 assessments on

existing investments as part of the ongoing

environmental monitoring process, compared to 28 in

the previous financial year.

• The IDC executive committee approved the Energy

Efficiency of the IDC Report. The aim of the report was to

identify initiatives to be implemented at head office to

reduce energy and resource consumption of the

organisation.

• The IDC became a signatory to the United Nations

Environmental Programme Financial Initiative (UNEP_FI),

strengthening its commitment to responsible lending.


The department helped

development agencies

leverage IDC funds, with

indications that for every

R1 provided by the IDC,

agencies have leveraged a

further R8.



• Made significant progress on greening the IDC head

office, including discontinuing bottled water at IDC

meetings and functions, recycling cooking oil from the

canteen, replacing all polystyrene cups and plates with

reusable crockery.


During the year ahead the department will focus on:

• ensuring that clients continue to adhere to relevant

legislation and as far as possible follow best practice;

• increasing awareness and acting upon EHS issues on the

IDC’s business partners;

• reducing electricity consumption. As part of the open-

plan office project, energy-efficient lighting and

temperature control systems will be implemented which

are likely to contribute to significant energy savings. The

target is expected to be met during the upcoming

financial year.

External Learning andDevelopmentHighlights of the year under review

During the past financial year the unit:

• organised a Supply Chain Management course in

conjunction with the United Nations-International Trade

Centre (UN-ITC). The course was attended by the IDC

Procurement Manager, as well as practitioners from state-

owned enterprises and development finance institutions

in the SADC;

• ran a Basic Business Principles course for the IDC-

supported Kouga Development Agency;

• ran a Basic Business Principles course for women of the

Maphumulo Project in Maphumulo;

• ran Basic Business Principles and Financial Management

courses for Construction Industry Development Board

contractors;

• supported the Citrus Academy skills development

initiative with a R175 000 external training grant;

• ran a mentoring and coaching course for members of the

Charlestown Community Trust;

• deployed IDC staff to present at regional courses and

conferences in the fields of public-private partnerships,

corporate finance and human resources;

• ran a Basic Business Principles course for the Small

Enterprise Development Agency and SMEs in the

Northern Cape; and

• partnered with the Lesotho National Development

Corporation to provide training to the Lesotho SMME

Network and BaSotho Entrepreneurial Development

Corporation. This enabled trainers to acquire facilitation

skills and to deliver small business management training.

Three courses were held and 136 SMME entrepreneurs

were trained.

The department supported

the Citrus Academy skills

development initiative

with a R175 000 external

training grant.

The department made

significant progress on

greening the IDC head

office, including

discontinuing bottled

water at IDC meetings

and functions, recycling

cooking oil from the

canteen, replacing all

polystyrene cups and

plates with reusable

crockery.




Workout and Restructuring

In line with the IDC’s developmental

objectives, the department’s mission is

to contribute to the development of

sustainable businesses by adopting a

pragmatic approach to existing IDC

Business Partners in financial distress

and providing optimal solutions which

will result in the turnaround of these

businesses. In cases where liquidation is

inevitable or where the business has

ceased operations, the department

monitors the liquidation and closure

process to optimise the IDC’s recovery.

The current global economic crisis has had a severe impact

on IDC-funded companies. The credit crunch has also

limited the availability and granting of credit. This has

resulted in serious cash flow constraints for many clients.

During the 2008/09 financial year the unit saw an increase

in the number of clients transferred from SBUs to the unit,

mostly from the Franchising, Chemicals, Mining and Metals

SBUs.

Depending on the nature and extent of the problem and the

best appropriate solution, the IDC’s interventions may include

the following:

• conversion of existing debt finance into equity or

mezzanine finance;

• deferment of capital and/or interest repayments;

• provision of additional funding for working capital

requirements; and

• proposing a turnaround solution which may include

finding new investors or buyers, bringing in strategic

operating partners, appointing consultants and providing

business support through our Business Support

Programme.


One of the unit’s initiatives for the 2008/09 financial year

was to assist IDC clients to minimise the risk of business

closure by sharing tools, such as cash flow management, or

restructuring information required to be considered for

assistance. These were provided through the IDC’s online

Access stakeholder newsletter and regional awareness

campaigns. In addition, management courses were

provided by the External Learning and Development

Department. The unit will continue with the awareness

campaigns during 2009/10, especially to areas not covered

during the year under review.


During the year ahead the unit expects more clients to

come under financial pressure as demand continues to

slow and cash flows become severely constrained. The unit

intends to intensify interactions with IDC clients to ensure it

is able to intervene as early as possible to help clients

restructure and remain sustainable businesses into the

future.

The unit assists IDC clients

to minimise the risk of

business closure by

sharing tools, such as cash

flow management, or

restructuring information

required to be considered

for assistance.



Marketing

The department provides marketing

and promotion services to the IDC in

respect of the mandate, brand,

products and services – across the

continent as well as internationally.


• The department launched an advertising campaign that

received accolades from the advertising industry media

with a Saturday Star columnist praising the campaign.

• The campaign saw the IDC role in industrial and

entrepreneurial development being communicated

broadly through television and radio.

• The catalytic role that the IDC plays in ensuring that the

vision of entrepreneurs is realised through providing

funding solutions, was emphasised in the campaign.

• The campaign achieved the following:

– emphasis on the IDC development mandate and its

objectives;

– increasing awareness of the IDC in the markets in

which it operates and beyond;

– informing target audiences of what the IDC stands for

and its role in developing South Africa and the rest of

the continent;

– differentiating the IDC – “provider of development

finance for industrial and entrepreneurial

development”;

– strengthening the relaunched IDC brand and increased

recognition for the pay-off line Your Partner in

Development Finance.

• An internal Values Project was launched to encourage

staff to take a customer-centric approach to doing

business. The values identified were “Professionalism,Partnership, Passion” and aim to encourage staff to put

the customer at the core of everything the IDC does. The

Values Project is built around the top five customer-

centric deliverables per unit or department, based on

clients’ most common service needs. These will be

tracked and monitored monthly. A reward and

recognition system will help identify the stars within the

IDC who Make It Happen.

• As part of the Values Project, the department developed

a corporate “mantra” that encapsulates the IDC’s main

values. The I Make It Happen campaign aims to

encourage staff to take responsibility for their

performance and help others in the organisation to

deliver an optimum service to our customers.


During the year ahead the department will: conduct

research to determine the impact of the advertising

campaign and test whether our target audiences

understand the role and mandate of the IDC:

• evaluate and measure the effectiveness of external and

internal marketing communication campaigns and

mediums;

• focus on ensuring wider visibility for the IDC across

various regions through a focus on regional advertising

campaigns across various mediums; and

• energise staff towards Superior Customer Service by

rolling out the Values Project.

An internal Values Project

was launched to

encourage staff to take

a customer-centric

approach to doing

business.



Corporate Social Investment

The IDC Corporate Social Investment

(CSI) programme is aligned to the

Corporation’s core objectives and

government’s development

imperatives of job creation and poverty

alleviation. The focus of the programme

is primarily on rural areas and is biased

towards women, youth and people

with disabilities.

The programme consists of the following aspects:

• The Nguni Cattle Project

• The CEO’s Fund Dinaledi Schools Project

• The Social Investment Fund

• I Do Care Fund

The Nguni Cattle Project

The Nguni Cattle Project was established in 2002 and is

now operational in five provinces (Eastern Cape, North

West, Northern Cape, Limpopo and Free State) and is

expected to be launched in Mpumalanga during 2009. The

project is implemented in partnership with the provincial

departments of agriculture as well as universities. The aim

of the project is to contribute towards poverty alleviation

and job creation through the establishment of Nguni cattle

breeders and commercial farmers in rural communities. To

date, 96 farmers have been established in rural

communities across the country, with five now fully

registered with the Nguni Cattle Breeders Society of South

Africa as Nguni stud breeders.

The CEO’s Fund: Dinaledi Schools Project

The Dinaledi Schools is a project of the Department of

Education (DoE) seeking to enhance the teaching and

learning of maths and science in public schools. Over 500

schools have been selected by the DoE nationally to be

part of the project.

In 2007 the IDC adopted 15 of these schools for support

and in 2008 a commitment was made to increase the

number of schools to 30. The IDC provides learning support

materials to the schools to enhance the schools’

performance in maths and science. The schools are located

in all nine provinces: 20 in rural areas and 10 in townships.

All the schools service learners from disadvantaged

backgrounds.

The Social Investment Fund

The Social Investment Fund provides grant funding to not-

for-profit organisations and public entities involved in

enterprise development, education (maths, science and

technology), health and arts. A total of 20 projects were

funded during the reporting period as follows:

Number of Development sector projects

Income-generation projects 6

Education 6

Health 5

Arts, culture and other 3

Total 20

Employee volunteerism

Employees are encouraged to volunteer their time by

participating in community development work and

contributing towards the work of different charities. This is

done through two initiatives that take place annually: the

I Do Care Fund and Habitat for Humanity.

The I Do Care FundThe I Do Care Fund is an employee volunteer programme in

which employees contribute part of their monthly salary for

the benefit of welfare organisations. Employees are given

an opportunity to nominate charity organisations of their

choice based on preapproved criteria. The focus for 2008

was on organisations dealing with people with disabilities,

and a total of 14 organisations were selected as deserving

beneficiaries.

Habitat for HumanityIn August 2008, 300 employees took part in the building of

five houses for homes of orphaned and vulnerable children

in Orange Farm, south of Johannesburg. The building was

done in collaboration with Habitat for Humanity South

Africa, a non-profit organisation that addresses the severe

housing need in the country by providing decent,

affordable houses for the poor.

Support for victims of xenophobic attacks

In the wake of the xenophobic attacks that occurred in May

2008 around the country, the IDC established a

R10 million fund to support humanitarian relief efforts



(such as food, clothing, tents and medicines), with some

funding committed to the Red Cross.

The most affected provinces were the Western Cape,

Gauteng, KwaZulu-Natal, Mpumalanga and, to some extent,

the Eastern Cape and Limpopo.

The IDC worked with the various provincial governments as

well as provincial disaster management centres to disburse

the funds.

The monies were used towards the setting up of new

shelters such as start-up costs (fences, security, logistics,

sanitation and related essential items) for relief shelters

which had been put up in the various provinces.

IDC staff members also contributed to alleviate the

sufferring and donated food and clothing items, which

were handed to the Gift of the Givers Foundation

Procurement

The Procurement department is

charged with the sole responsibility of

sourcing goods and services required

for the functioning of the IDC while

conforming to the IDC Act and all

relevant legislation, as required by the

government of South Africa, including

the Public Finance Management Act

(PFMA) and the Preferential

Procurement Act.


During the past year the IDC:

• advertised 22 tenders to the public;

• achieved spending of 60% on companies with more than

50,1% black ownership, a 3% increase on the last financial

year; and

• achieved spending of 22% on black and/or women-

owned and managed companies, a 2% increase on the

year before.

The section is updating its systems and procedures to

comply with the dti’s Codes of Good Practice.

Information Technology


During the year under review the IT department continued

to roll out technological initiatives that enhanced and

enabled IDC business processes. A customer-centric

approach was also successfully adopted to improve the IT

service experience.

During the past year, the department completed the:

• internal development, implementation and rollout of a

new SAP pipeline management system. The system is

more user-friendly and has better processing

functionality than its predecessor;

• implementation of a new backup system (HP Data

protector) to improve disaster recovery planning;

• virtualisation of the server environment to improve server

consolidation and high availability of services;

• development and rollout of an application tracking

system that allows SBUs and departments to be able to

track the status of funding applications made by IDC

customers during the loans origination phase; and

• development and rollout of the SWIFT system, an internal

service request system. The SWIFT system was developed

and customised to process service requests made within

support departments and SBUs. SWIFT has real-time

performance management capability.

In addition, the unit:

• donated 17 computers to a high school as part of the

IDC’s Corporate Social Investment initiative;

• established SAP ABAP programming internship to skill

and uplift previously disadvantaged graduates entering

the job market. The internship is funded by the IDC and

is run by IZAZI, a systems support partner; and

• conducted an IT risk management assessment to identify

and address threats.


The IT department has planned a number of key initiatives

for the year ahead in support of the IDC’s business strategy

including:

• the implementation and rollout of a Management

Information System (MIS) platform as a way of making

critical business information available to relevant

employees to make appropriate decisions;

• the implementation of user-focused, value-add projects

to enhance productivity and enable business processes;

• the implementation and rollout of Voice-over-IP

telephony to improve telephonic functionality and

communication; and

• enhancing disaster recovery plan infrastructure to

improve the recovery of information.


Human Capital

The goal of the IDC remains to be an

employer of choice, who is committed

towards providing an environment

which nurtures the potential of its

people. The organisation’s talent

management strategy has evolved to

meet the many challenges it faces.

The current economic downturn has

highlighted the need for competent,

committed staff who can respond to

challenging conditions by being

innovative and resourceful.

A number of strategies have been implemented during the

year under review to enhance the IDC’s work environment.

These include the renewed effort to grow the organisation’s

reputation and to focus on customers through a new value

system. The succession planning and development

programme was also reviewed to increase the talent pool.

The Dual Career Management policy, which allows

specialists to grow and progress through the organisation,

as well as a performance management system ensures that

the IDC not only recognises the excellent contribution of its

people, but that it also provides interventions to improve

on performance.

The IDC remains committed to creating an environment

which promotes equity and diversity in the workplace.

Human capital interventions are implemented on merit

across the organisation. The IDC’s staff composition attests

to our commitment towards employment equity and

diversity as seen by the table below:

% designated group2009 2008 2007

Executive management 80% 80% 78%

Middle management 72% 63% 63%

Professional staff 89% 86% 85%

The IDC is also committed to nurturing the diversity of its

people through programmes which encourage them to

celebrate their differences in a positive manner. One such

example is the Diversity Awareness event hosted by the

Employment Equity Forum. The focus of the event was to

showcase the cultures, values, beliefs and traditional attires

of different cultural groups. IDC staff found this insightful

and helpful in assisting them to understand the

backgrounds of their colleagues.

The IDC invests heavily in the development and retention

of staff as well as in the improvement of general employee

interaction. A number of staff surveys were undertaken to

gauge and measure employee satisfaction. According to

the Deloitte Annual “Best Company To Work For Survey”,

86% of IDC employees who participated believe that the

organisation was an employer of choice. Other initiatives

implemented recognising staff include the prestigious IDC

Star Awards which are held annually to recognise and

celebrate excellent performance.

The IDC’s Employee Assistance Programme is designed to

provide staff with an opportunity to obtain professional

help in an atmosphere of privacy and confidentiality. The

programme has been instrumental in supporting staff

during the recent financial turmoil.

To ensure that the IDC has the necessary skills and talent

for the coming years, management continues to implement

progressive Human Capital policies such as a total

remuneration strategy, succession planning and

development as well as a dual career management

programme.



The IDC is committed to

nurturing the diversity of

its people through

programmes which

encourage them to

celebrate their differences

in a positive manner.



Group Annual Financial Statements

ContentsCorporate Governance 88

Report of the Board Audit Committee 94

Report of the Independent Auditors 95

Directors’ Report 97

Summary of the Group’s Significant Accounting Policies 106

Balance Sheets 118

Income Statements 119

Statements of Changes in Equity 120

Cash Flow Statements 122

Segmental Report – Primary Segments 123

Segmental Report – Geographical Segments 124

Notes to the Financial Statements 125

Annexures 156

Abbreviations 174

Administration 176

IDC 1 Fin Final.qxd 8/18/09 12:32 PM Page 87


Corporate Governance

Introduction

The Industrial Development Corporation of South AfricaLimited (“the IDC”) is a development finance institutionestablished in terms of the Industrial DevelopmentCorporation Act (Act No 22 of 1940), as amended (the“IDC Act”).

The objectives and mandate of the IDC, its constitution, thepowers of its Board as well as the relationship between theIDC and its Shareholder are regulated by the IDC Act and itsRegulations. The IDC is also subject to the provisions of thePublic Finance Management Act (Act No 1 of 1999) (“thePFMA”), which deals with the best practice in financialmanagement focusing mainly on outputs andresponsibilities of State-Owned Entities (SOEs).

The South African government, through the Minister of Tradeand Industry, is the sole Shareholder of the IDC.

Approach to governance

The IDC Board of Directors subscribes to the need toconduct the IDC’s business with integrity and inaccordance with generally accepted corporate practices ascontained in the King II Report.

The directors also subscribe fully to the principles embodiedin appropriate international corporate governance codes andstrive to align the Corporation’s corporate governance withnational and international best practices.

The IDC is committed to the highest standards of integrityand ethical conduct and to open and transparentgovernance that gives its Shareholder and otherstakeholders the assurance that it is being managedethically in line with best practice, applicable legislation andpredetermined risk parameters.

The year under review

The key governance highlights of activities overseen by theBoard during the year under review were the following:

• During 2008 the Board meticulously reviewed the IDC’scorporate governance framework and the composition ofBoard committees. This was particularly aimed atexpanding the mandate of the Board committees, toenable the Board to be closer to the ethical environmentat the IDC and to take charge of corporate governancewithin the Corporation.

• The Board approved the appointment of externalmembers with vast experience and professionalism tostrengthen the special credit committee to enhanceindependence of the committee and to further improvethe integrity of decision-making processes.

• The Board approved the Shareholder Engagement andProxy Voting Guidelines for the introduction of a moreformalised and consistent approach to shareholderengagement between the IDC and its investeecompanies; this was aimed at outlining the IDC’s position

on various matters relating to corporate governance andits expectations from its investee companies as a goodcorporate citizen.

• An environment was created for SMEs, on the corporate

governance side, by adopting policies that would enable

the IDC to advise SMEs on corporate governance and

therefore enhance their sustainability. Internal processes

were reviewed, to ensure that its investment processes

look at corporate governance within SMEs.

• During the year an awareness compaign was conducted

to sensitise staff to the importance of complying with the

Code of Ethics. All employees and other stakeholders are

required to act in an ethical and professional manner,

thereby upholding the core values of integrity,

innovation, accountability and superior client service,

especially during the current challenging economic

environment.

• The Corporation embedded a Fraud Awareness Week,

aimed at educating and informing employees on how

fraud impacts their daily working environment, with

specific emphasis on the contraventions of the IDC Code

of Business Ethics.

Governance Structures withinthe IDCBoard of Directors

CompositionThe Corporation has a unitary Board of Directors, currently

consisting of one executive and 13 independent non-

executive directors, and thus obtains the desired level of

objectivity and independence in Board deliberations and

decision-making. The Board is assisted by Board

committees, duly formed according to the guidelines in the

King II Report on Corporate Governance (King II) and the

Public Finance Management Act.

The size of the Board is prescribed by section 6 (2) of the

IDC Act, which requires a minimum of five and a maximum

of 15 directors appointed by the Shareholder. In line with

the recommendations of King II, the position of Chairman

and Chief Executive Officer are separately held, with a clear

division of duties. As at 31 March 2009 there were fourteen

(14) directors of which thirteen (13) were non-executive.

The directors are individuals of a high calibre with diverse

backgrounds and expertise, facilitating independent

judgement and effective deliberations in the decision-

making process.

Induction and trainingOn appointment, new directors have the benefit of an

induction programme, aimed at deepening their

understanding of the Corporation and the business



environment and markets in which the Corporation

operates. This includes background material, meetings with

senior management and visits to the Corporation’s facilities.

As part of the induction programme, newly appointed non-executive directors receive induction material whichcontains essential Board and Corporation information. Togain first-hand experience of the IDC’s operations, theBoard holds at least one meeting per year at the premisesof a client funded by the IDC. In the year under review theIDC Board held its off-site meeting at the Blue Craneagency in Somerset East.

Board Charter and responsibilities The purpose of the Board Charter is to regulate howbusiness is to be conducted by the Board in accordancewith the principles of good corporate governance. TheBoard Charter sets out specific responsibilities to be

discharged by the Board members collectively and theindividual roles expected from them.

Amongst others, the Board has the following roles andresponsibilities: to exercise leadership, integrity andjudgement, based on fairness, accountability andresponsibility; review and approve the financial objectives,plans and actions, including significant capital allocations andexpenditure; and identify key risk areas and key performanceindicators, which should be regularly monitored.

Board meetingsThe Board meets eight times per annum or ascircumstances necessitate. Once a year, the Board meets fora strategic breakaway to discuss strategic issues.

Meetings of the Board are scheduled annually in advance.The record of attendance of directors for the year underreview was as follows:

IDC Board attendance record (2008/9)

May June Aug Sept Oct Nov Jan Feb MarchDirector 2008 2008 2008 2008 2008 2008 2009 2009 2009

WYN Luhabe (Chairman) ✓ A ✓ ✓ A ✓ ✓ A ✓

Mr DH Lewis* ✓ ✓ ✓ ✓ – – – – –

Mr MG Qhena ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Adv FA du Plessis* ✓ T ✓ ✓ – – – – –

Ms P Graham* ✓ ✓ ✓ A – – – – –

Ms T Kunene* A ✓ ✓ ✓ – – – – –

Mr MC Nkuhlu A ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Ms MW Hlahla ✓ A ✓ A A A A A ✓

Mr MS Moloko A ✓ ✓ ✓ ✓ ✓ ✓ A ✓

Ms BN Njobe A ✓ A ✓ ✓ A ✓ ✓ ✓

Mr JC Mtshali ✓ ✓ ✓ ✓ ✓ A ✓ ✓ ✓

Ms NN Nokwe A A ✓ ✓ A ✓ ✓ A ✓

Mr NG Nika ✓ ✓ ✓ ✓ ✓ A A ✓ ✓

Mr JR Barton ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Ms LL Dhlamini** – – – – ✓ ✓ ✓ ✓ A

Mr SK Mapetla** – – – – ✓ ✓ A ✓ ✓

Ms LI Bethlehem** – – – – ✓ ✓ ✓ ✓ ✓

Mr LR Pitot** – – – – ✓ ✓ ✓ ✓ ✓

Mr GS Gouws (Alt) ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

✓ Present * Tenure ended 30 September 2008

T Via telephonic link ** Appointed 1 October 2008 as director

A Apologies



Corporate Governance_continued

Board committeesThe Board established five committees to assist it indischarging its responsibilities, namely the Board Audit,Board Risk Management, Board Human Resources andRemuneration, the Board Technical Committee and theDirectors’ Interest Committee, an ad hoc committee whosepurpose is to assist the Board in vetting related-partytransactions.

Delegating authority to Board committees or managementdoes not in any way release the Board of its duties andresponsibilities. There is always transparency and fulldisclosure from the Board committees to the Board.

Specific responsibilities have been delegated to thesecommittees, which operate under written Terms ofReference confirmed by the Board.

Board Audit CommitteeThe Committee comprises one executive director and fournon-executive directors as appointed by the Board. Themajority of members are financially literate. The Chairpersonof the Board Audit Committee may at his sole discretioninvite members of management to attend meetings of theBoard Audit Committee.

The overall objectives of the Board Audit Committee are toassist the Board in discharging its duties relating to thesafeguarding of assets, the operation of adequate systems,control procedures and ensuring accurate reporting,preparation of accurate financial statements and compliancewith all legal requirements and accounting standards.

The Committee has met three times in this financial year asset out below:

Board Audit Committee attendance record

23 June 11 Nov 30 March Member 2008 2008 2009

Mr NG Nika (Chairman)# ✓ ✓ ✓

Mr MG Qhena ✓ ✓ ✓

Ms MW Hlahla ✓ ✓ ✓

Mr LR Pitot** – – ✓

Ms LL Dhlamini** – – ✓

Adv FA du Plessis (Chairman)* T – –

Ms P Graham* ✓ – –

Ms G Serobe* ✓ ✓ –

Mr F Groepe* T – –

✓ Present

T Via telephonic link

A Apologies

* Tenure ended 1 October 2008

** Appointed 25 November 2008 as committee member

# Appointed as Chairperson 1 October 2008

Board Risk Management CommitteeThe Committee comprises six non-executive directors and

one external Committee member. The Chairman of the

Board, the Chief Executive Officer, the Chief Financial Officer

and the Chief Risk Officer are invited to attend all meetings

of this Committee.

The duties of this Committee include: setting out the

nature, role, responsibility and authority of the risk

management function within the IDC, outlining the scope

of risk management, reviewing and assessing the integrity

of the risk control systems, ensuring that risk policies and

strategies are effectively managed, providing independent

and objective oversight, reviewing the information

presented by management, and taking into account

reports by management and the Board Audit Committee to

the Board on financial, business and strategic risk issues. It

also assists the Board in determining the maximum

mandate levels for the various credit and Assets and

Liabilities Committee (ALCO) decisions.

The Committee has met four times in this financial year as

set out below:

Board Risk Management Committee attendance

record

12 May 11 Aug 10 Nov 23 Feb Member 2008 2008 2008 2009

Mr MC Nkuhlu (Chairman) A ✓ ✓ ✓

Adv FA du Plessis* ✓ A * *

Mr MG Qhena A ✓ ✓ ✓

Mr JR Barton ✓ ✓ ✓ ✓

Mr MS Moloko ✓ ✓ ✓ A

Ms NN Nokwe A ✓ A A

Mr T Chauke* A ✓ ✓ –

Mr NG Nika** – – ✓ ✓

✓ Present


A Apologies

* Tenure ended 1 October 2008


Board Human Resources and Remuneration Committee The Committee comprises six non-executive directors as

appointed by the Board.The Chief Executive Officer and the

Divisional Executive for Human Resources attend as invitees

and recuse themselves when their remuneration and

performance are discussed.



The main objective of this Committee is to assist the Board

in the development of compensation policies, plans and

performance goals, as well as specific compensation levels

for the IDC. The Committee annually manages the Board’s

evaluation of the performance of the Chief Executive

Officer and also assists the Board in fulfilling its oversight

responsibilities relating to succession planning as well as

overall compensation and human resource policies for all

IDC employees.


set out below.

Board Human Resources and Remuneration

Committee attendance record

23 June 22 Sept 26 Jan 30 March Member 2008 2008 2009 2009

Mr DH Lewis (Chairman)* ✓ ✓ – –

Ms WYN Luhabe A ✓ ✓ ✓

Mr MG Qhena ✓ ✓ ✓ ✓

Ms T Kunene ✓ A – –

Ms BN Njobe (Chairman)# ✓ ✓ ✓ ✓

Mr JC Mtshali ✓ ✓ ✓ ✓

Mr MC Nkuhlu** – – ✓ ✓

Mr SK Mapetla** – – A ✓

Mr LWJ Matlhape ✓ ✓ ✓ ✓

✓ Present


A Apologies

* Tenure ended 30 September 2008

** Appointed 1 October 2008 as director and 25 November 2008 as

committee member

# Appointed as chairperson 1 October 2008

Board Technical Committee The Committee comprises six non-executive directors.The

Chief Economist, the Operational Divisional Executives, and

the relevant strategic business units’ heads are invited to

attend all Committee meetings.

The purpose of the Board Technical Committee is to: assist

the Board of directors in considering sectoral research papers

and strategies and making recommendations at a high level;

and to assess project proposals and investment

opportunities of a technical nature in terms of pre-feasibility,

feasibility and implementation.

The Committee has met three times in this financial year as

set out below:

Board Technical Committee attendance record

23 June 24 Nov 30 MarchMembers 2008 2008 2009

Ms NN Nokwe (Chairman) ✓ ✓ ✓

Mr JR Barton ✓ ✓ ✓

Ms BN Njobe ✓ A ✓

Ms P Graham* ✓ – –

Mr JC Mtshali ✓ A ✓

Mr LP Mondi ✓ ✓ ✓

Ms LI Bethlehem** – ✓ ✓

Mr SK Mapetla** – ✓ ✓

✓ Present


A Apologies


** Appointed 1 October 2008 as director

Directors’ Interest Committee The Directors’ Interest Committee, an ad hoc committee

consisting of the following members:

• At least four (4) non-executive directors, including theChairperson of this Committee as appointed by the IDCBoard.

• The Chairperson may, at his or her discretion, inviteemployees to attend and to be heard at the meetings ofthe Committee.


set out below:

Directors’ Interest Committee attendance record

20 June 18 July 15 Oct 20 FebMembers 2008 2008 2008 2009

Mr NG Nika (Chairman) T T T T

Mr DH Lewis* T T – –

Adv FA du Plessis* T T – –

Mr MC Nkuhlu A A T T

Ms LI Bethlehem** – – – T

Mr LR Pitot** – – – T

✓ Present


A Apologies





Corporate Governance_continued

Delegation of authorityThe Board delegates authority to management, however,

the Board and Executive Management retain the

responsibility concerning the exercise of delegated

authority. In terms of section 56 of the PFMA, the Board may

confirm, vary or revoke any decision taken by an official as a

result of a delegation by the Board.

In the interest of promoting efficiency and effective

management of programmes and best practice of financial

management, the IDC delegation matrix sets out the various

matters reserved for the Board as an accounting authority,

and sets out the powers that have been delegated to

committees and individuals within the Corporation as follows:

Credit Committee – the Committee’s membership consists

of the Chief Financial Officer, the Chief Economist, the Chief

Risk Officer, General Counsel, all the divisional executives and

any external committee members that Executive

Management may from time to time decide to appoint.

The Credit Committee is chaired, on a rotational basis by the

Chief Financial Officer, the Chief Economist and the Chief

Risk Officer.

The Credit Committee has authority to consider transactions

with a value below R25 million provided that such

transactions are in line with policies and limits. The

Committee can approve transactions with a counterparty

exposure limit of up to R250 million.

Special Credit Committee – the Committee’s membership

comprises members of Executive Management and is

chaired by the Chief Executive Officer. The Committee is

authorised to approve transactions where the transaction

value is more than R25 million and below R250 million

provided that such transactions are in line with policies and

limits. The Committee can approve transactions with a

counterparty exposure greater than R250 million but limited

to R1 billion.

Board – the Board has authority to approve finance

applications of more than R250 million and applications

where the counterparty exposure is greater than R1 billion,

those applications that fall outside approved limits and

policies, as well as those that have significant corporate

strategy implications.

Ethical conduct The Corporation’s Code of Ethics is in line with current ways

of doing business. The Code commits directors, Executive

Management, staff and service providers to high standards

of ethical conduct in their dealing with clients and all other

stakeholders.

During the year a training workshop was conducted to

sensitise staff to the importance of complying with the

Code of Ethics. All employees and other stakeholders are

required to act in an ethical and professional manner,

thereby upholding the core values of integrity, innovation,

accountability and superior client service.

Fraud prevention and whistle-blowingIDC employees are encouraged to report any suspected

fraudulent, unethical or corrupt practices to the Fraud Tip-

offs hotline, which is managed by an independent external

service provider. The source of information remains

anonymous. This complies with the requirements of the

Protected Disclosures Act, No 26 of 2000, by creating an

environment in which it is safe for employees to report

impropriety. A training workshop was conducted to educate

and inform employees how fraud would impact their daily

working environment.

Creating a pool of experienced company directors for thecountryThe IDC’s sustainability is critically dependent on the growth

in value and proper management of its investments. The IDC

plays a unique and important role in expanding the pool of

suitably qualified directors in South Africa by nominating

IDC employees and/or external persons for appointment to

the boards of its investee companies, where it has the right

to do so. Once appointed, these IDC-nominated directors

are required to attend directorship training courses. The IDC-

appointed directors gain a wealth of experience and by

serving on these boards are able to share knowledge and

skills with directors of any other boards they may join in

the future.

Relations with the Shareholder and communication withstakeholders The Board retains full and effective control over the

Corporation by: monitoring management in implementing

Board policies and strategies within the parameters of its

mandate from the Shareholder; setting targets; and by

measuring the Corporation’s performance on an annual

basis. Through the Shareholder’s Compact, as required by

the Public Finance Management Act, the Shareholder and

the IDC maintain contact with the former having approved

the strategic direction and focus of the IDC as set out for

each financial year. The annual report is submitted to

Parliament by the Minister of Trade and Industry and made

available to the public.



Stakeholder communication

In line with the King II Report, the IDC has identified its

stakeholders and communicates with them as follows:

ShareholderIn line with the IDC Act, the IDC reports to its Shareholder

through the Annual Report. The Annual Report is distributed

to members of Parliament and is available on request to the

public.

As a further measure to encourage open communication

between the Shareholder and the Board, the latter holds

discussions with the Shareholder on matters of common

interest in order to align, as far as it is possible, its strategies

with those of the Shareholder.

Employees and managementThe Board has unrestricted access to senior management in

an effort to enhance communication and achievement of the

vision of the Corporation. Further communication with the

IDC employees is done through Board feedback sessions

convened by the CEO for IDC heads after each Board

meeting.The Board feedback sessions afford IDC heads an

opportunity to raise matters which require attention.

Public and business communityCommunication with the public is undertaken through the

the Corporate Marketing Department using a variety of

mediums including print, television, radio and internet.

The IDC’s Research and Information Department regularly

releases various publications aimed at keeping stakeholders

abreast of economic developments and promoting debate,

in line with the IDC’s developmental focus.

The IDC also hosts stakeholder engagements in all nine

provinces, which present an opportunity for the Corporation

to interact with business persons and their organisations

throughout the country.

The IDC is fully compliant with the Promotion of Access to

Information Act (Act No 2 of 2000) with its manual lodged

with the SA Human Rights Commission and made available

on its website for ease of access.

Group Company SecretaryAll directors have access to the advice and services of the

Group Company Secretary. In terms of the IDC Act, the

functions of the Group Company Secretary are in line with

the provisions of the Companies Act. The Group Company

Secretary is responsible for ensuring that the Board

procedures and applicable rules are fully observed and

comply with legislation and corporate governance tenets.

New directors are informed of their fiduciary duties during

the induction process organised by the Group Company

Secretary. Executive Management provides guidance on

matters of strategy and their respective functional

operational areas.



Report of the Board Audit Committee

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).

In execution of its duties during the past financial year, the

Board Audit Committee has:

• reviewed the procedures for identifying business risks

and managing their impact on the Corporation, including

the risk management functions;

• reviewed the Corporation’s policies and procedures for

detecting and preventing fraud;

• reviewed the effectiveness of the Corporation’s policies,

systems and procedures;

• reviewed the effectiveness and adequacy of the Internal

Audit Department and adequacy of its annual work plan;

• considered whether the independence, objectives,

organisation, staffing plans, financial budgets, audit plans

and standing of the internal audit function provide

adequate support to enable the Committee to meet its

objectives;

• reviewed the results of the work performed by the

internal audit function in relation to financial reporting,

corporate governance, risk areas, internal control and any

significant investigation and management response;

• reviewed the coordination between the internal audit

function and the external auditors and dealt with any

issues of material or significant dispute or concern;

• reviewed the entity’s compliance with significant legal

and regulatory provisions;

• reviewed such significant transactions as the Committee

deemed appropriate;

• reviewed such significant reported cases of employee

conflicts of interest, misconduct or fraud, or any other

unethical activity by employees or the Corporation;

• reviewed the controls over significant financial and

operational risks;

• reviewed any other relevant matters referred to it by the

Board;

• reviewed the adequacy, reliability and accuracy of

financial information provided by management and

other users of such information;

• reviewed the accounting and auditing concerns

identified by internal and external auditors;

• reviewed the Annual Report and financial statements

taken as a whole to ensure they present a balanced and

understandable assessment of the position, performance

and prospects of the Corporation;

• reviewed the external auditors’ findings and reports

submitted to management; and

• reviewed the independence and objectivity of the

external auditors.

Where weaknesses were identified in internal controls,

corrective action was taken to eliminate or reduce the risks.

The Board Audit Committee is of the opinion, based on the

information and explanations given by management and

the Internal Audit Department and discussions with the

independent external auditors on the results of their audits,

that the internal controls of the Corporation have operated

effectively throughout the year under review and, where

internal controls did not operate effectively, that

compensating controls have ensured that the Corporation’s

assets have been safeguarded, proper accounting records

maintained and resources utilised efficiently.

Following our review of the financial statements for the

year ended 31 March 2009, we are of the opinion that they

comply with the relevant provisions of the Public Finance

Management Act 1999, as amended, and International

Financial Reporting Standards, and that they present fairly

the results of the operations, cash flow and financial

position of the Corporation. The Board Audit Committee

concurs that the adoption of the going-concern premise in

the preparation of the financial statements is appropriate.

We therefore recommend that the financial statements as

submitted be approved.

On behalf of the Board Audit Committee:

Mr NG Nika

Chairperson

29 June 2009



Report of the Independent Auditors

To the member of the Industrial Development

Corporation of South Africa Limited

Report on the financial statements

We have audited the group annual financial statements

and the separate annual financial statements of the

Industrial Development Corporation of South Africa

Limited, which comprise the consolidated and separate

balance sheets at 31 March 2009, and the consolidated and

separate income statements, the consolidated and separate

statements of changes in equity and the consolidated and

separate cash flow statements for the year then ended, and

the notes to the financial statements, which include a

summary of significant accounting policies and other

explanatory notes and the directors’ report as set out on

pages 97 to 173.

Accounting authority’s responsibility for the financialstatements The accounting authority is responsible for the preparation

and fair presentation of these financial statements in

accordance with International Financial Reporting

Standards and in the manner required by the Public

Finance Management Act and the Companies Act of South

Africa. This responsibility includes: designing, implementing

and maintaining internal control relevant to the preparation

and fair presentation of financial statements that are free

from material misstatement, whether due to fraud or error;

selecting and applying appropriate accounting policies; and

making accounting estimates that are reasonable in the

circumstances.

Auditors’ responsibility Our responsibility is to express an opinion on these

financial statements based on our audit. We conducted our

audit in accordance with International Standards on

Auditing. Those standards require that we comply with

ethical requirements and plan and perform the audit to

obtain reasonable assurance whether the financial

statements are free from material misstatement. The audit

was also planned an dperformed to obtain reasonable

assurance that our duties in terms of sections 27 and 28 of

the Public Audit Act 25 of 2004, have been compiled with.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the

financial statements. The procedures selected depend on

the auditors’ judgement, including the assessment of the

risks of material misstatement of the financial statements,

whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant

to the entity’s preparation and fair presentation of the

financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness of

the entity’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation

of the financial statements.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our audit

opinion.

Opinion In our opinion, these group annual financial statements and

annual financial statements present fairly, in all material

respects, the consolidated and separate financial position of

the Industrial Development Corporation of South Africa

Limited at 31 March 2009, and its consolidated and

separate financial performance and consolidated and

separate cash flows for the year then ended in accordance

with International Financial Reporting Standards and in the

manner required by the Public Finance Management Act

and the Companies Act of South Africa.

Report on other legal and regulatory requirements

Reporting on performance informationThe performance information set out on pages 97 to 101,

has been reviewed.

Responsibilities of the accounting authorityThe accounting authority has additional responsibilities as

required by section 55(2)(a) of the Public Finance

Management Act to ensure that the annual report and

audited financial statements fairly present the performance

against predetermined objectives of the public entity.



Report of the Independent Auditors_continued

Auditor’s responsibility The review engagement was conducted in accordance

with section 13 of the Public Audit Act, 2004, read with

General Notice 616 of 2008, issued in Government Gazette

No 31057 of 15 May 2008.

In terms of the foregoing, the engagement included

performing procedures to obtain sufficient appropriate

evidence about the performance information and related

systems, processes and procedures. The procedures

performed depend on the auditor’s judgement.

We believe that the evidence obtained is sufficient and

appropriate to provide a basis for the findings reported

below.

FindingsBased on the work performed no material shortcomings in

the processes, systems and procedures of the entity’s

reporting against predetermined performance objectives

have been identified.

KPMG Inc. SizweNtsaluba VSPRegistered Auditor Registered Auditor

Per LJ Wormald Per A Mthimunye

Chartered Accountant (SA) Chartered Accountant (SA)

Registered Auditor Registered Auditor

Director Partner

30 June 2009 30 June 2009

KPMG Crescent SizweNtsaluba Building

85 Empire Road 20 Morris Street East

Parktown Woodmead

Johannesburg, 2193 2191



Directors’ Report

Introduction

The Industrial Development Corporation of South Africa

Limited (the IDC) was established in 1940 by an Act of

Parliament. It is a registered public corporation and a

schedule 2 listed entity in terms of the Public Finance

Management Act (PFMA) 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 business

The IDC is a self-financing, state-owned, development

finance corporation, which provides financing to

entrepreneurs engaged in competitive industries, follows

normal company policies and procedures in its operations,

pays income tax at corporate rates and pays dividends to

its shareholder.

The IDC’s vision is to be “the primary driving force ofcommercially sustainable industrial development andinnovation to the benefit of South Africa and the rest ofthe African continent”. Its primary focus is on creating

balanced and sustainable economic growth in Africa and

promoting the economic prosperity of all South African

citizens.

Performance management

The IDC’s corporate performance indicators reflect the

Corporation’s strategic goals. These include the

maximisation of its development impact, especially job

creation, and ensuring its long-term financial sustainability.

In addition, the Corporation measures itself on a range of

other indicators, initiatives that will ensure the Corporation’s

long-term sustainability and expand its impact.

The IDC’s performance evaluation focuses primarily on the

financing activities undertaken by the IDC and its dedicated

wholly owned financing subsidiaries (Mini Group) –

Findevco (Pty) Limited, Impofin (Pty) Limited, Konoil (Pty)

Limited and The Export-Import Finance Corporation of SA

(Pty) Limited. The grouping of categories and the measures

against which performance is reported differ from those

reported in the CEO’s Review of Operations and are not

directly comparable.

IDC’s focus is determined by the South African

Government’s mandate to the Corporation, with the

orientation of the organisation being towards servicing the

needs of the public. In terms of the Leadership in

Development strategy, the Corporation’s objectives are to

support industrial capacity development and promote

entrepreneurship. By pursuing these objectives, the

Corporation aims to achieve the following outcomes:

• Create sustainable employment opportunities.

• Grow sectoral diversity.

• Support new entrepreneurs entering the economy.

• Support broad-based black economic empowerment.

• Support small and medium enterprises.

• Promote regional equity, including:

– Development of rural areas;

– Supporting development in poorer provinces; and

– Stimulating economic activity in previous townships.

• Support export-focused enterprises.

• Ensuring environmentally sustainable development.

Furthermore, the IDC acts in support of government’s

African strategies and therefore also has the following

objective to support industrial development in the rest

of Africa.

The IDC aims to achieve its objectives while ensuring its

long-term financial sustainability.

In order to fulfil its role as a catalyst, it is incumbent on the

IDC to lead by example, both in its internal and external

operations. Performance measures are integrated with other

objectives around customer perspectives, internal business

procedures and organisational growth, learning and

innovation. In order to ensure the IDC’s continued ability to

deliver on its objectives in the longer term, the performance

measures include indicators to ensure that the IDC maintains

its balance sheet integrity.

The performance measurement system ensures that the

IDC remains aligned with its mandated objectives.

Performance indicators are reviewed every year to account

for changes in the environment and ensure that long-term

objectives will be achieved.

Performance measurement process and guidelines

The guidelines applied for selecting parameters and

activities to be measured are that they should:

• contribute to the IDC’s objectives;

• be measurable; and

• be controllable.

Performance indicators are measured and reported to the

IDC’s Executive and Board on an annual basis. Regular

activity reports and management accounts ensure that

deviation from the target paths can be detected and

corrected if necessary.

The IDC’s performance management system rewards

employees who exceed targets. The achievement of the



Directors’ Report_continued

targets represents the expected level of performance.

Performance targets are set on the corporate, team and

individual levels and performance-linked remuneration is

based on the combination of the achievement of the three

levels of targets and only paid when overall targets are

exceeded.

The performance measurement is reviewed by an external

auditing firm to ensure that the targets are achieved

according to the original intentions and that the overall

performance is a fair reflection of the Corporation’s

activities during the period under review. Furthermore, the

targets set for each period are evaluated for compliance

with the IDC’s objectives, fairness and compliance with the

rules of the performance management system.

Performance indicators

The IDC has adopted a balanced scorecard approach to

structure its targets and measures aspects of shareholder’s

returns, internal processes, learning and growth, and

customer and community perspectives.

The IDC measures performance against both short-term

and long-term targets. Long-term targets include indicators

that are not suited to short-term measurement as their

outcomes cannot be effectively influenced or measured in

the short-term. Performance against these targets are

measured over a two-year period.

Shareholder’s returns

Development BEE Development of

score acquisitions the rest of Africa

35% 5% 10%

Customer and community

Customer satisfaction

10%

Internal processes

Operating Cost to Movement

profits income in portfolio

20% 10% 10%

Leadership in

development

Structure of short-term targets

Shareholder’s returns

Sustainability Strategic Growth in

of job creation interventions unlisted equity

22% 17% 28%

Internal processes

Quality of portfolio

11%

Learning and growth

Employee retention

11%

Customer and community

IDC B-BBEE rating

11%

Leadership in

development

Structure of long-term targets



Targets in the “Shareholder’s returns” category measure the

IDC’s performance in terms of those aspects for which the

shareholder expects the Corporation to deliver, namely

development and long-term financial sustainability. Short-

term development indicators include measurement of the

development score, a target for the value of approvals for

black economic empowerment (BEE) acquisitions, and a

target for investment in the rest of Africa. The development

score is a composite indicator of development indicators

and incorporates measures for the Corporation’s outcomes

that it has to achieve as set out in its mandate. Each

transaction is scored according to its contribution to the

outcomes as set out above. Long-term indicators include

measurements for the implementation and sustainability

of job creation, strategic interventions by IDC as well as

growth in the value of the IDC’s unlisted portfolio.

“Internal processes” focuses on short-term indicators of

financial returns as well as movement in IDC’s portfolio

towards a balance that should ensure increased

development and financial returns. A measure for the value

of disbursements is also included. Long-term indicators in

this section consists of a measure for the quality of the

IDC’s portfolio.

The “Learning and growth” perspective has one indicator

measuring staff turnover in the IDC’s core operations.

In the short-term indicators, the “Customer and community”

perspective consists of a measure for customer satisfaction.

Long-term indicators include a measurement for the IDC’s

broad-based black economic empowerment (B-BBEE)

rating in terms of the Codes of Good Practice.

Reflection on current performance

The IDC measures its performance in a balanced manner,

and accounts for both positive and negative performance.

During the year under review the IDC exceeded its targets

on average for all categories in the short-term indicators.

A significant portion of the shareholder’s returns indicators

is made up of a indicators measuring the impact that the

IDC has on development. One of these indicators is the

development score which measures various aspects of the

outcomes listed above. The target for 2009 was to achieve a

development score of 45 814. The biggest portion of the

development score is based on a targets number of 29 228

jobs to be created and saved. Approvals during the year

were expected to create and save 26 700 jobs in South

Africa. This was slightly below the target, but a higher

number of funding approvals (231 in 2009 compared to

167 in 2008), 69% which assisted SMEs, resulted in a

development score of 51 717 being achieved.

The value of BEE acquisitions declined to R1,7 billion,

compared to R2,1 billion in the previous year. The IDC

exceeded its target for development of the rest of Africa,

with the net value of approvals benefiting the rest of the

continent amounting to R2,9 billion.

Cancellations of transactions previously approved and

larger numbers of clients experiencing financial difficulties

resulted in the IDC not being able to achieve its objectives

in the actual creation of jobs, with 76% of the targeted 80%

of jobs created.

The two-year period over which long-term targets were

measured saw the Corporation playing a larger role in

terms of strategic interventions. These interventions take

the form of investments that contribute to national or

provincial initiatives. Examples of these interventions

include support for the implementation of Industrial Policy

Actions Plans (IPAPs), support for projects in the renewable

energy sector, support for other dti initiatives, such as the

national clothing and textiles strategy and assisting with

the implementation of the dti film production rebates.

One of the most important measures for the IDC’s financial

sustainability is its ability to identify development

opportunities, invest in them and assist such companies to

grow over the long term. One indicator of the success of

this is the growth in the value of its unlisted investments.

Over the two years to March 2009, the value of the IDC’s

unlisted portfolio grew at 11,9% per annum, slightly

below the target of 12,2%. The turnaround of Foskor, IDC’s

largest unlisted investment, is still a major contributor to

this growth.

Higher than expected dividend income resulted in the IDC

exceeding expected profits despite higher levels of

impairments. The IDC also introduced a target for the value

of disbursements and achieved disbursements of

Corporate performance 2009

Short-term indicators

Long-term indicators

%

0

20

40

60

80

100

120

140

160

180

Shareholdersreturns

Internalprocesses

Learningand

Growth

Customerand

community



R7,7 billion against a budgeted R6,6 billion. Impairments

impacted the Corporation negatively in terms of long-term

indicators, with the level of impairments and write-offs as a

percentage of the average portfolio at cost increasing to

13,8% against a targeted 12,7%. A large portion of these

impairments resulted from the stock market performance

over the past financial year, where investments, particularly

related to acquisition finance, needing to be impaired as a

result of lower share prices.

Customer satisfaction improved, continuing the upward

trend experienced since 2005. The IDC also improved its

B-BBEE rating in terms of the Codes of Good Practice. The

IDC achieved a level 2 rating through a self-rating exercise,

largely as a result of an improvement in the score achieved

for preferential procurement.

A detailed analysis of the corporate performance is

provided in the table below.

Short term

Parameter (weight) Activity/Output target Performance

Development score, based on Achieve a development score of 45 814. Development score in excess of 51 717

number of jobs created and achieved. Although the number of jobs

regional, ownership, size and created and saved contributed to a significant

other attributes of enterprises portion of this, a higher number of

financed (25%). investment approvals and larger numbers of

SMEs funded was a large driver behind the

achievement of the target.

Value of approvals for BEE Approve BEE acquisitions to the value BEE acquisitions to the value of R1,7 billion

acquisitions (5%). of R1,4 billion. approved.

Value of approvals benefiting Approve R1,5 billion for the R2,9 billion approved for the development

the development of the rest development of the rest of Africa. of the rest of Africa.

of Africa (10%).

Disbursement of funds (10%). Disburse funding of R6,6 billion. Funding of R7,7 billion disbursed.

Achieve budgeted financial Net operating income before Achieved R4,0 billion.

returns for the IDC and its partnerships should be above

financing subsidiaries (20%). R1,7 billion (IDC and its financing

subsidiaries).

Achieved budgeted ratio of Achieve a ratio of 26%. Achieved a ratio of 16%.

operating expenses to net

interest, dividends and fees (10%).

Approve funding in line with Limited deviation. Most sectors exceeded the values allocated.

capital allocation (10%).

Improve customer satisfaction Improve customer satisfaction Continuous improvement in customer

(10%). rating. satisfaction rating.


Long term

Parameter (weight) Activity/Output target Performance

Actual job creation versus At least 80% of budgeted jobs should 76% of jobs created and sustained.

budgeted job creation (22%). be created.

Ensure that IDC plays a strategic IDC participation in national Several investments approved that are

role in furthering industry and provincial priority initiatives. linked to national and provincial initiatives.

development (17%).

Ensure IDC’s long-term financial Growth in fair value of unlisted Growth of 11,9% per annum recorded.

sustainability by ensuring that investments to exceed 12,2%

unlisted investment yield per annum.

sufficient returns (28%).

Manage the quality of IDC’s Impairments and write-offs as a Achieved a percentage of 13,8%.

portfolio of investments (11%). percentage of the average portfolio

valued atcost should be below 12,7%.

Reduce the staff turnover of core Reduce staff turnover to below 12,0%. Staff turnover reduced to 10,5%.

operational employees (11%).

Ensure that IDC implements Achieve a status of level 4 contributor. Good scores achieved for all

broad-based black economic aspects of B-BBEE scorecard.

empowerment as measured Overall status of level 2 achieved.

through the Codes of Good

Practice (11%).

Funding

The IDC’s loan funding requirements are sourced mainly

from international development agencies and from

commercial facilities raised through the IDC’s relationships

with commercial banks.

The IDC Mini Group’s general funding requirements for

2009 amounted to R11,7 billion (2008: R5,4 billion),

consisting of financing advances of R7,7 billion and

borrowing redemptions of R3,7 billion. These requirements

were partly met out of R8,8 billion of internally generated

funds, namely repayments received and profits. New

borrowings were limited to R3,7 billion for the year.

Corporate governance

The IDC’s directors endorse the King II Report on Corporate

Governance and, during the review period, have

endeavoured to adhere to the recommendations of the

report as much as possible. The IDC’s adherence to these

practices are outlined in the corporate governance section

of this annual report.

Public Finance Management Act

The IDC’s Board is responsible for the development of the

Corporation’s strategic direction. The Corporation’s strategy

and business plan are captured in the Shareholder’s

Compact and approved by the Board. After approval this is

agreed with the Department of Trade and Industry and

thereafter they form the basis for the Corporation’s detailed

action plans and ongoing performance evaluation.

Operating within the guidelines established in the

Shareholder’s Compact, the IDC’s various business units

prepare annual business plans, budgets and capital

programmes in order to meet their objectives as outlined

in their strategic plans.

The responsibility for the day-to-day management of the

Corporation vests in line management through a clearly

defined organisational structure and through formal

delegated authorities.



The IDC has a comprehensive system of internal controls,

which are designed to ensure that the Corporation’s

objectives are met, including the requirements of the

Companies Act and the recommendations of the King II

Report on Corporate Governance. These systems and

controls substantially meet the requirements of the Public

Finance Management Act. There are processes in place to

ensure that where these controls fail, failure is detected and

corrected.

Subsidiaries and joint ventures

Details of each trading subsidiary and joint venture are set

out in the annexures on pages 156 to 159.

Dividends

A dividend of R100 million was paid during the financial

year. On 30 June 2009 the directors declared a dividend of

R120 million.

Valuation of shares

The value of the Group’s investment in listed shares

decreased by R20,6 billion from R53,2 billion in the 2008

financial year to R32,5 billion at the end of the 2009

financial year, due to weak stock market performance,

brought about by the global financial crisis.

The value of unlisted investments held by the Group as

determined by the directors has decreased by R0,2 billion

to R2,6 billion, and the value of preference shares has

increased by R2,0 billion to R7,3 billion.

Post-balance sheet events review

The value of the Group’s listed shares has increased by

R1,6 billion up to the date of the approval of the financial

statements, as a result of the slight improvement in the

listed equities market.

Share capital

The authorised (R1,5 billion) and issued-share capital

(R1,4 billion) remained unchanged during the year.

Audit Committee information

The names of the Audit Committee members are reflected

on page 90. The meetings held and attendance record are

outlined in an earlier section of this annual report.

Directors and Secretary

The current directors of the IDC are reflected on pages

10 to 11, which also provides brief biographical details.

The name and registered office of the Secretary appear on

page 176.



Board of Directors’ responsibility for the financial

statements for the year ended 31 March 2009

This report is presented in terms of Treasury Regulations

and the Public Finance Management Act, Act No 1 of 1999,

as amended, and is focused on the financial results and

financial position of the IDC. Information pertaining to the

IDC’s state of affairs, its business and performance against

predefined objectives are disclosed elsewhere in the annual

report. The prescribed disclosure of the emoluments in

terms of Treasury Regulation 28.1.1 is reflected in note 25 of

the financial statements.

The Board of Directors are responsible for the preparation

and fair presentation of the IDC group annual financial

statements and separate annual financial statements,

comprising the consolidated and separate balance sheets

at 31 March 2009, and the consolidated and separate

income statements, the consolidated and separate

statements of changes in equity and the consolidated and

separate cash flow statements for the year then ended, and

the notes to the financial statements, which include a

summary of significant accounting policies and other

explanatory notes and the directors’ report, in accordance

with International Financial Reporting Standards and in the

manner required by the Public Finance Management Act

and the Companies Act of South Africa.

The Board of Directors’ responsibility includes: designing,

implementing and maintaining internal control relevant to

the preparation and fair presentation of financial

statements that are free from material misstatement,

whether due to fraud or error; selecting and applying

appropriate accounting policies; and making accounting

estimates that are reasonable in the circumstances.

The Board of Directors’ responsibility also includes

maintaining adequate accounting records and an effective

system of risk management.

The independent external auditors are responsible for

expressing an opinion on the group annual financial

statements and separate annual financial statements.

The IDC financial statements and group financial statements

set out on pages 104 to 173 have been prepared in

accordance with International Financial Reporting Standards,

the Companies Act of South Africa and the requirements of

the Public Finance Management Act, 1999, as amended.They

are based on appropriate accounting policies consistently

applied and supported by reasonable judgements and

estimates.

The board believes that the IDC will be a going concern in

the year ahead and has for this reason adopted the going-

concern basis in preparing the financial statements and

group financial statements.

The Board of Directors approved the group annual financial

statements and separate annual financial statements on

30 June 2009 and they are signed on its behalf by:

WYN LuhabeChairman

MG QhenaChief Executive Officer

Declaration by the Company Secretary

In terms of Section 268G(d) of the Companies Act of South

Africa, I certify that, to the best of my knowledge and belief,

the IDC has lodged with the Registrar of Companies for the

financial year ended 31 March 2009 all such returns as are

required in terms of the Companies Act, and that all such

returns are true, correct and up to date.

In terms of Section 19 of the IDC Act 22 of 1940, as amended,

I certify that for the financial year ended 31 March 2009,

the IDC has lodged with the Minister of Trade and Industry

the financial statements in respect of the preceeding

financial year.

E Moeti-MotlhammeGroup Company Secretary

30 June 2009



Summary of the Group’s Significant Accounting Policies

Impact of standards, interpretations and amendments that are not yet effective

The following new standards and interpretations are not yet effective for the current financial year. The Group will comply

with the new standards from the effective dates.

Standard/interpretation Effective date

IFRS 2 Share-based Payment amendment Annual periods beginning on or after 1 January 2009

IFRS 3 Business Combinations revised Annual periods beginning on or after 1 July 2009

IFRS 8 Operating Segments Annual periods beginning on or after 1 January 2009

IAS 1 Presentation of Financial Statements Annual periods beginning on or after 1 January 2009

revised

IAS 23 Amendment to Borrowing Costs Borrowing costs relating to qualifying assets for which the

commencement date for capitalisation is on or after 1 January

2009

IAS 27 Consolidated and Separate Financial Annual periods beginning on or after 1 January 2009

Statements revised

IAS 32 Financial Instruments: Preparation Annual periods beginning on or after 1 January 2009

and and IAS 1 Presentation of Financial

IAS 1 Statements – Puttable Financial

Instruments and Obligations Arising

on Liquidation

Reporting entity

The Industrial Development Corporation of South Africa

Limited (the IDC) is domiciled in South Africa. The

consolidated financial statements for the year ended

31 March 2009 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 30 June 2009.

Statement of compliance

The separate and consolidated financial statements have

been prepared in accordance 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

Companies Act of South Africa and the requirements of the

Public Finance Management Act No 1 of 1999, as amended.

Basis of preparation

The separate and consolidated financial statements are

presented in South African Rand, which is the Group’s and the

IDC’s functional currency rounded to the nearest million.

These separate and consolidated financial statements are

prepared on the historical-cost basis except for the following:

• Derivative financial instruments are measured at fair

value.

• Financial instruments classified as held-for-trading are

measured at fair value.

• Financial instruments classified as available-for-sale are


• Biological assets are measured at fair value less point-of-

sale costs.

• Investment property is measured at fair value.

• Revalued items of property, plant and equipment.

• Financial assets and financial liabilities designated at fair

value through profit or loss.

In addition to the above, in the IDC’s separate financial

statements the exceptions to the historical-costs basis also

include investments in subsidiaries, associates or joint

ventures, which are classified as available-for-sale and


Non-current assets and disposal groups held-for-sale are

stated at the lower of carrying amount and fair value less

costs to sell.



Standard/interpretation Effective date

IAS 39 Financial Instruments: Recognition and Annual periods commencing on or after 1 July 2009

Measurement – Amendments for

Eligible Hedged Items

IFRIC 13 Customer Loyalty Programmes Annual periods commencing on or after 1 July 2008

IFRIC 15 Agreements for the Construction Annual periods beginning on or after 1 January 2009

of Real Estate

IFRIC 16 Hedges of a Net Investment in a Annual periods commencing on or after 1 October 2008

Foreign Operation

IFRIC 17 Distributions of Non-cash Assets Annual periods commencing on or after 1 July 2009

to Owners

IFRIC 18 Transfers of Assets from Customers Transfers received on or after 1 July 2009

* All standards will be adopted at their effective date (except for the effect of those standards that are not applicable to the Group).

The directors are of the opinion that the impact of these

standards will be as follows:

• IFRS 2 amendment – Share-based Payment – Vesting

Conditions and Cancellations

The amendment to IFRS 2 clarifies that vesting conditions

are service conditions and performance conditions only.

Other features of a share-based payment agreement

should be treated as non-vesting conditions and should

be included in the grant date fair value of the share-

based payment. It also specifies that cancellations by

parties other than the entity should be accounted for in

the same way as cancellations by the entity. This

amendment is not expected to impact the Group’s result.

• IFRS 3 – Business Combinations

The principal amendments to IFRS 3 include:

– the requirement to expense all acquisition-related

costs;

– recognition of fair value gains and losses in the income

statement on interests in an acquiree at the time at

which control is lost;

– recognition of all increases and decreases in ownership

interests over an acquiree within equity whilst control

is held;

– the option to recognise any non-controlling interest in

the acquiree either at fair value or at the non-

controlling interest’s proportionate share of the net

identifiable assets of the entity acquired;

– restriction of adjustments to the initial measurement of

contingent considerations on a business combination,

with subsequent measurement of such items being

recognised in the income statement; and

– the requirement at acquisition to reclassify and

redesignate all contractual arrangements, excluding

leases and insurance contracts.

The amendments are expected to affect the Group’s

accounting for business combinations that arise after the

date on which the amendments are adopted. The effect

on the financial statements will be a function of the

number and value of any business combinations

transacted after the effective date.

• IFRS 8 – Operating Segments

This standard replaces the current IAS 14 – Segment

Reporting – and is effective for annual periods

commencing on or after 1 January 2009. The expected

impact is still being assessed in detail by management,

but it appears likely that the number of reportable

segments, as well as the manner in which the segments

are reported, will change in a manner that is consistent

with the internal reporting provided.

• IAS 1 – Presentation of Financial Statements

The revised IAS 1 supersedes the 2003 version of IAS 1.

The main change in the revised IAS 1 is the requirement

to present all non-owner changes in equity in either:

– a single statement of comprehensive income, which

includes income statement line items; or

– a statement of comprehensive income, which includes

only non-owner equity changes. In addition, an income

statement is also disclosed.

A statement of financial position, preferred term for

“balance sheet“, also has to be presented at the

beginning of the comparative period when the entity



Summary of the Group’s Significant AccountingPolicies_continued

restates the comparatives as a result of a change in

accounting policy, the correction of an error, or the

reclassification of items in the financial statements. The

revised IAS 1 will not impact the results of the Group but

will impact the format of the income statements and

statement of changes in equity.

• IAS 23 – Borrowing Costs

The revision of IAS 23 requires the capitalisation of

borrowing costs that relate to qualifying assets, ie assets

that necessarily take a substantial period of time to get

ready for their intended use or sale. It does not require

the capitalisation of borrowing costs relating to assets

measured at fair value, and inventories manufactured or

produced in large quantities on a repetitive basis. The

impact of this standard is not expected to be material,

but is dependent on the number and value of projects

undertaken after the effective date.

• IAS 27 – Consolidated and Separate Financial Statements

The amendments to IAS 27 require changes in a parent’s

ownership interest in a subsidiary that does not result in

a loss of control to be accounted for within equity as

transactions with owners in their capacity as owners. At

the time at which control is lost, a parent shall

derecognise all assets, liabilities and non-controlling

interest at their carrying amounts. Any retained interest in

the former subsidiary is recognised at its fair value at the

date control is lost. A gain or loss on the loss of control is

recognised in profit or loss. The revised standard also

requires an entity to attribute its share of total

comprehensive income to the non-controlling interest

even if this results in the non-controlling interest having a

deficit balance. The effect on the financial statements will

be a function of the number and value of transactions

that result in the loss of control over subsidiaries after the

implementation of the new standard.

• IAS 32 and IAS 1 amendments – Financial Instruments:

Presentation and IAS 1 Presentation of Financial Statements

– Puttable Financial Instruments and Obligations Arising on

Liquidation

The amendment to IAS 32 requires the classification of

certain puttable financial instruments and financial

instruments that impose on the issuer on obligation to

deliver a pro-rata share of the entity only on liquidation

as equity. The amendment sets out specific criteria that

are to be met to present the instruments as equity

together with related disclosure requirements. This

amendment is not expected to have a significant impact

on the Group’s results.

• IAS 39 Financial Instruments: Recognition and

Measurement – Amendments for Eligible Hedged Items

Inflation in a financial hedged itemInflation may only be hedged if changes in inflation are a

contractually specified portion of cash flows of a recognised

financial instrument.Therefore, where an entity acquires or

issues inflation-linked debt, it has a cash flow exposure to

changes in future inflation to which cash flow hedge

accounting may be applied. However, the amendment

clarifies that an entity may not designate an inflation

component of issued or acquired fixed-rate debt in a fair

value hedge because such a component is not separately

identifiable and reliably measurable.The amendments also

clarify that a risk-free or benchmark interest rate portion of

the fair value of a fixed-rate financial instrument will

normally be separately identifiable and reliably measurable

and, therefore, may be hedged.

A one-sided risk in a hedged itemIAS 39 permits an entity to designate purchased options as

a hedging instrument in a hedge of a financial or non-

financial item.The entity may designate an option as a

hedge of changes in the cash flows or fair value of a

hedged item above or below a specified price or other

variable (that is, a one-sided risk).The amendments make

clear that the intrinsic value, not the time value, of an option

reflects a one-sided risk and, therefore, an option designated

in its entirety cannot be perfectly effective.The time value of

a purchased option is not a component of the forecast

transaction that impacts profit or loss.Therefore, if an entity

designates an option in its entirety as a hedge of a one-

sided risk arising from a forecast transaction, hedge

ineffectiveness will arise. Alternatively, an entity may choose

to exclude time value as permitted by IAS 39 to improve

hedge effectiveness.

This amendment is not expected to have an impact on the

Group’s results.

• IFRIC 13 – Customer Loyalty Programmes

IFRIC 13 addresses accounting by entities that grant

loyalty award credits to customers who buy other goods

or services. Specifically, it explains how such entities

should account for their obligations to provide free or

discounted goods or services (‘awards’) to customers

who redeem award credits. The interpretation is not

applicable to the business of the Group.

• IFRIC 15 – Agreements for the Construction of Real Estate

The interpretation standardises accounting practice

across jurisdictions for the recognition of revenue by real



estate developers for sales of units, such as apartments or

houses,“off plan” – that is, before construction is

complete. The interpretation is not applicable to the

business of the Group.

• IFRIC 16 – Hedges of a Net Investment in a Foreign

Operation

The interpretation clarifies three main issues:

1. Whether risk arises from (a) the foreign currency

exposure to the functional currencies of the foreign

operation and the parent entity, or from (b) the foreign

currency exposure to the functional currency of the

foreign operation and the presentation currency of the

parent entity’s consolidated financial statements.

IFRIC 16 concludes that the presentation currency

does not create an exposure to which an entity may

apply hedge accounting. Consequently, a parent entity

may designate as a hedged risk only the foreign

exchange differences arising from a difference

between its own functional currency and that of its

foreign operation.

2. Which entity within a group can hold a hedging

instrument in a hedge of a net investment in a foreign

operation and in particular whether the parent entity

holding the net investment in a foreign operation

must also hold the hedging instrument.

IFRIC 16 concludes that the hedging instrument(s)

may be held by any entity or entities within the group.

3. How an entity should determine the amounts to be

reclassified from equity to profit or loss for both the

hedging instrument and the hedged item when the

entity disposes of the investment.

IFRIC 16 concludes that while IAS 39 must be applied

to determine the amount that needs to be reclassified

to profit or loss from the foreign currency translation

reserve in respect of the hedging instrument, IAS 21

must be applied in respect of the hedged item.

This interpretation is not expected to have an impact

on the Group’s results.

• IFRIC 17 – Distributions of Non-cash Assets to Owners

IFRIC 17 applies to the entity making the distribution, not

to the recipient. It applies when non-cash assets are

distributed to owners or when the owner is given a

choice of taking cash in lieu of the non-cash assets. This

interpretation is not expected to have an impact on the

Group’s results.

• IFRIC 18 – Transfers of Assets from Customers

The interpretation clarifies the requirements of IFRS for

agreements in which an entity receives from a customer

an item of property, plant and equipment that the entity

must then use either to connect the customer to a

network or to provide the customer with ongoing access

to a supply of goods or services (such as a supply of

electricity, gas or water). The interpretation is not

applicable to the business of the Group.

Use of estimates and judgements

The preparation of financial statements to conform with

IFRS requires management to make judgements, estimates

and assumptions that affect the application of policies and

reported amounts of assets and liabilities, income and

expenses. The estimates and associated assumptions are

based on historical experience and various other factors

that are believed to be reasonable under the

circumstances. These estimates form the basis of

judgements pertaining to the carrying values of assets and

liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on

a continuous basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised if

the revision affects only that period, or in the period of the

revision and future periods if the revision affects both

current and future periods.

In particular, information about significant areas of

estimation uncertainty and critical judgements in applying

accounting policies that have the most significant effect on

the amounts recognised in the financial statements are

described in note 38.

The accounting policies set out below have been applied

consistently to all periods presented in these consolidated

and separate financial statements.

The accounting policies have been applied consistently by

Group entities.



Significant Accounting Policies

Basis of consolidation

Subsidiaries Subsidiaries are entities controlled by the IDC. Control existswhen the IDC has the power, directly or indirectly, to governthe financial and operating policies of an entity so as toobtain benefits from its activities. In assessing control,potential voting rights that are presently exercisable orconvertible are taken into account. The financial statementsof subsidiaries are included in the consolidated financialstatements from the date that control commences until thedate that control ceases.

Intercompany transactions, balances and unrealised gainson transactions between Group companies are eliminatedon consolidation.

Unrealised losses are eliminated in the same way asunrealised gains, but only to the extent that there is noevidence of impairment.

Investments in subsidiaries in the Corporation’s separatefinancial statements, are carried at fair value as available-for-sale financial assets.

Special-purpose entitiesThe Group has established a number of Special-Purpose

Entities (SPEs) for trading and investment purposes. SPEs are

entities that are created to accomplish narrow and well-

defined objectives. An SPE is consolidated if, based on an

evaluation of the substance of the relationship with the

Group and the SPE’s risks and rewards, the Group concludes

that it controls the SPE. SPEs controlled by the Group are

generally those established under terms that impose strict

limitations on the decision-making powers of the SPE’s

management and that result in the Group receiving the

majority of the benefits related to the SPE’s operations and

net assets.

Investments in SPEs in the Corporation’s separate financial

statements are carried at fair value as available-for-sale

assets.

AssociatesAssociates are those entities in which the Group has

significant influence, but not control, over the financial and

operating policies. The consolidated financial statements

include the Group’s share of the total recognised gains and

losses of associates on an equity-accounted basis, after

adjustments to align accounting polices with those of the

Group, from the date that significant influence commences

until the date it ceases. When the Group’s share of losses

exceeds its interest in an associate (equity-accounted

investee), 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 an associate.

Unrealised gains and losses arising from transactions withequity-accounted investments are eliminated against theinvestment to the extent of the Group’s interest in theinvestment. Unrealised losses are eliminated only to theextent that there is no evidence of impairment.

Investments in incorporated associates in the Corporation’sseparate financial statements are carried at fair value asavailable-for-sale assets.

Joint ventures and partnershipsJoint ventures and partnerships are those entities overwhose activities the Group has joint control, established bycontractual agreement and requiring unanimous consentfor strategic and operating decisions. The consolidatedfinancial statements include the Group’s share of the totalrecognised gains and losses of joint ventures on an equity-accounted basis, from the date that joint control isestablished by contractual agreement until the date that itceases. When the Group’s share of losses exceeds its interestin a joint venture, the Group’s carrying amount is reducedto nil and recognition of further losses is discontinuedexcept to the extent that the Group has incurred legal orconstructive obligations or made payments on behalf of ajoint venture.

Unrealised gains and losses arising from transactions withequity-accounted joint ventures and partnerships areeliminated against the investment to the extent of theGroup’s interest in the investment.

Investments in incorporated joint ventures in theCorporation’s separate financial statements are carried atfair value as available-for-sale assets.

Financial assetsThe Group classifies its financial assets into the followingcategories: financial assets at fair value through profit orloss; loans and receivables; held-to-maturity investments;and available-for-sale financial assets. Managementdetermines the classification of its financial assets at initialrecognition.

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 throughprofit or loss at inception.

A financial asset is classified as held-for-trading if acquiredprincipally for the purpose of selling in the short term or ifso designated by management. Derivatives are alsocategorised as held-for-trading unless they are designatedas hedging instruments.

The Group designates financial assets at fair value throughprofit or loss when:

• the assets are managed, evaluated and reportedinternally on a fair value basis;

• the designation eliminates or significantly reduces anaccounting mismatch, which would otherwise arise; or



• the asset contains an embedded derivative that

significantly modifies the cash flows that would

otherwise be required under the contract.

Loans and receivables Loans and receivables are non-derivative financial 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.

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.

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.

Recognition and measurementPurchases 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.

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.

Available-for-sale financial assets and financial assets at fair

value through profit or loss are subsequently carried at fair

value. Loans and receivables and held-to-maturity

investments are carried at amortised cost using the

effective interest method. Gains and losses arising from

changes in the fair value of the financial instruments

through profit or loss category are included in the income

statement 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 equity until

the financial asset is disposed of, derecognised or impaired,

at which time the cumulative gain or loss previously

recognised in equity should be recognised in profit or loss.

However, interest calculated using the effective interest rate

method is recognised in the income statement for

available-for-sale debt investments. Dividends on available-

for-sale equity instruments are recognised in the income

statement when the entity’s right to receive payment is

established.

The fair values of quoted investments in active markets are

based on current bid prices.

If the market for a financial asset is not active (and for

unlisted securities), the Group establishes fair value by using

valuation techniques. These include the use of recent arm’s

length transactions, discounted cash flow analysis, option-

pricing models and other valuation techniques commonly

used by market participants. Any instrument that does not

have a quoted market price in an active market and whose

fair value cannot be reliably measured is stated at its cost,

including transaction costs, less impairment.

Financial liabilitiesFinancial 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 stated at

amortised cost and interest is recognised over the period of

the borrowing using the effective interest rate.

Where the Group classifies certain liabilities at fair value

through profit or loss, changes in fair value are recognised

in the income statement. 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; or

• 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 derecognition 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.



Significant Accounting Policies_continued

Financial guaranteesFinancial guarantees are contracts that require the Group tomake specified payments to reimburse the holder for a lossit incurs because a specified debtor fails to make paymentwhen due in accordance with the terms of a debtinstrument. Financial guarantee liabilities are initiallyrecognised at their fair value and the initial fair value isamortised over the life of the financial guarantee. Theguarantee liability is subsequently carried at the higher ofthis amortised amount and the present value of anyexpected payment (when payment under the guaranteehas become probable). Financial guarantees are includedwith other liabilities.

Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amountreported in the balance sheet when there is a legallyenforceable right to offset the recognised amounts andthere is an intention to settle on a net basis, or realise theasset and settle the liability simultaneously.

Income and expenses are presented on a net basis onlywhen permitted by the accounting standards, or for gainsand losses arising from a Group of similar transactions suchas in the Group’s trading activity.

Impairment of financial assets carried at amortised costThe Group assesses whether there is objective evidence that afinancial asset or Group of financial assets not carried at fairvalue through profit or loss are impaired at each balancesheet date. A financial asset or Group of financial assets isimpaired and impairment losses are incurred if, and only if,there is objective evidence of impairment as a result of one ormore events that have occurred after the initial recognition ofthe asset (a loss event) and that loss event (or events) has animpact on the estimated future cash flows of the financialasset or Group of financial assets that can be reliablyestimated. Impairment losses are recognised in the incomestatement and reflected in an allowance account againstloans and advances.

Objective evidence that a financial asset or a group ofassets is impaired includes observable data that comes tothe 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 ininterest or principal payments.

• the Group granting to the borrower, for economic orlegal reasons relating to the borrower’s financial difficulty,a concession that the lender would not otherwiseconsider.

• it becoming probable that the borrower will enterbankruptcy or other financial reorganisation.

• the disappearance of an active market for that financialasset resulting in financial difficulties.

• observable data indicating that there is a measurabledecrease in the estimated future cash flows from a groupof financial assets since the initial recognition of thoseassets, although the decreases cannot yet be identifiedwith the individual financial assets in the Group.

The Group first assesses whether objective evidence ofimpairment exists individually for financial assets that areindividually significant, referred to as specific impairments,and individually or collectively for financial assets that arenot individually significant. If the Group determines that noobjective evidence of impairment exists for an individuallyassessed financial asset, whether significant or not, itincludes the asset in a group (portfolio) of financial assetswith similar credit risk characteristics and collectivelyassesses them for impairment. Assets that are individuallyassessed for impairment and for which an impairment lossis, or continues to be, recognised are not included in acollective assessment of impairment.

The amount of specific impairments raised is the amountneeded to reduce the carrying value of the asset to thepresent value of the expected ultimate fair value less coststo sell, taking into consideration the financial status of theunderlying client and any security in place for therecoverability of the financial asset.

The recoverable amount of the assets is calculated as thepresent value of estimated future cash flows, discounted atthe original effective interest rate (ie the effective interestrate 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 riskcharacteristics (ie on the basis of the Group’s grading processthat considers asset type, industry, geographical location,collateral type, past-due status and other relevant factors).Those characteristics are relevant to the estimation of futurecash flows for groups of such assets by being indicative ofthe debtors’ ability to pay all amounts due according to thecontractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that arecollectively evaluated for impairment are estimated on thebasis of the contractual cash flows of the assets as well ashistorical loss experience for assets with credit riskcharacteristics similar to those in the Group as well ashistorical loss experience is adjusted on the basis of currentobservable data to reflect the effects of current conditions,which did not affect the period on which the historical lossexperience is based.This also serves to remove the effects ofconditions in the historical period that do not exist currently.

Estimates of changes in future cash flows for groups ofassets should reflect and be directionally consistent withchanges 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 occurringsubsequently and the decrease can be related objectivelyto an event occurring after the impairment was recognised(such as an improvement in the debtor’s credit rating), thenthe previously recognised impairment loss is reversedthrough the income statement with a correspondingincrease in the carrying amount of the underlying asset.The reversal is limited to an amount that does not state theasset at more than what its amortised cost would havebeen in the absence of impairment.

Impairment of available-for-sale financial assetsThe Group assesses at each balance sheet date whetherthere is objective evidence that a financial asset or a Groupof financial assets is impaired. In the case of equityinvestments classified as available-for-sale, a significant orprolonged decline in the fair value of the security below itscost is considered in determining whether the assets areimpaired.

If any such evidence exists for available-for-sale financialassets, the cumulative loss – measured as the differencebetween the acquisition cost and the current fair value, lessany impairment loss on that financial asset previouslyrecognised in profit or loss – is removed from equity andrecognised in the income statement. Impairment lossesrecognised in the income statement on equity instrumentsare not reversed through the income statement. Anyincrease in the fair value after an impairment loss has beenrecognised is treated as a revaluation and is recogniseddirectly in equity.

If, in a subsequent period, the fair value of a debt instrumentclassified as available-for-sale increases and the increase canbe objectively related to an event occurring after theimpairment loss was recognised in profit or loss, theimpairment loss is reserved through the income statement.

Impairment of non-financial assetsThe carrying amounts of the Group’s non-financial assets,other than deferred tax assets and investment property, arereviewed at each balance sheet date to determine whetherthere is any indication of impairment. If such indicationexists, the assets’ recoverable amount is estimated.

An impairment loss is recognised whenever the carryingamount of an asset or its cash-generating unit exceeds itsrecoverable amount.

Cash-generating unitsA cash-generating unit is the smallest identifiable user

group that generates cash flows that are largely

independent from other assets and groups.

For an asset whose cash flows are largely dependent on

those of other assets, the recoverable amount is determined

for the cash-generating unit to which the asset belongs.The

recoverable amount of a cash-generating unit is the greater

of its value in use and its fair value less costs to sell.

Impairment losses recognised in respect of cash-generating

units are allocated first to reduce the net book value of any

goodwill allocated to cash-generating units or a group of

units and then to reduce the net book value of the other

assets in the unit of a group of units on a pro rata basis.

GoodwillThe recoverable amount for goodwill is estimated at each

balance sheet date. Impairment losses are recognised in the

income statement. Impairment losses relating to goodwill

are not reversed.

Other non-financial assetsThe recoverable amount of other non-financial assets is the

greater of fair value less cost to sell and its value in use. Fair

value less cost to sell is the amount obtainable from the

sale of an asset or a cash-generating unit in an arm’s length

transaction between knowledgeable, willing parties, less the

costs of disposal. In assessing value in use, the expected

future cash flows from the asset are 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. For an asset that does not

generate largely independent cash inflows, the recoverable

amount is determined for the cash-generating unit to

which the asset belongs.

Impairment losses are recognised in the income statement,

except to the extent that they reduce revaluations

recognised in equity.

The recoverable amount for intangible assets that have an

indefinite useful life or intangible assets that are not yet

available for use is estimated at each balance sheet date.

Impairment losses recognised in the prior periods are

assessed at each reporting date for any indications that the

loss has decreased or no longer exists.

An impairment loss is reversed if there has been a change

in the estimates used to determine the recoverable amount

and 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.




Derivative financial instrumentsCertain Group companies use derivative financialinstruments to hedge their exposure to foreign exchangerate risks arising from operational, financing and investmentactivities.

The derivates that do not meet the requirements for hedgeaccounting are accounted for as trading instruments.

Hedge accountingThe following hedge relationships are applied:

Fair value hedge – a hedge of exposure to changes in fairvalue 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.

MeasurementIf the hedge meets the conditions to qualify for hedge

accounting during the period, it is subsequently accounted

for as follows:

Classification Hedging instrument Hedged item

Fair value hedge Fair value, with changes in fair value Fair value in respect of the hedged risk. Any

recognised in the income statement. adjustments to the carrying amount related to

the hedged risk are recognised in the income

statement.

Cash flow hedge Fair value, with the effective portion No adjustments are made to the carrying amount

of changes in its fair value recognised of the hedged item.

directly in a separate component of

equity through the statement of

changes in equity and the ineffective

portion of the gain or loss

recognised in the income statement.

The change in fair value recognised

directly in equity is transferred to the

income statement when the future

transaction affects profit or loss.

Discontinuation of hedge accountingThe 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 equity is recognised

immediately in the income statement).

• the hedge no longer meets the conditions for hedge

accounting.

• the Group revokes the designation.

Intangible assetsGoodwillAll business combinations are accounted for by applying

the purchase method. Goodwill acquired in a business

combination is initially measured at cost, being the

difference between the cost of the business combination

over the interest of the IDC in the fair value of the net

identifiable assets acquired.

Negative goodwill arising on acquisition is recognised

directly in the income statement. Goodwill is subsequently

stated at cost less any accumulated impairment losses.

Goodwill is allocated to cash-generating units and tested

annually for impairment, or more frequently if events or

changes in circumstances indicate that it might be

impaired. Gains and losses on the disposal of an entity

include the carrying amount of goodwill relating to the

entity sold.

Foreign currency translationFunctional and presentation currencyThe Group’s presentation currency is South African Rand.

The functional currency of each Group entity is the

currency of the primary economic environment where

each entity in the Group has their main activity. The

consolidated financial statements are presented in South

African Rand, which is IDC’s functional and presentation

currency.



Transactions and balancesTransactions in foreign currencies are translated into SouthAfrican Rand at the foreign exchange rate prevailing at thedate of the transaction.

Monetary assets and liabilities denominated in foreigncurrencies at the balance sheet date have been translatedinto South African Rand at the rates ruling at that date.Non-monetary assets and liabilities that are measured interms of historical cost in a foreign currency are translatedusing the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreigncurrencies that are stated at fair value are translated toRands at foreign exchange rates ruling at the dates the fairvalue was determined.

Foreign exchange differences arising on translation arerecognised in the income statement.

Financial statements of foreign operationsAll foreign operations have been accounted for as foreignoperations. Assets and liabilities of foreign operations,including goodwill and fair value adjustments arising onconsolidation are translated into South African Rand atforeign exchange rates ruling at the balance sheet date.Income statement items are translated at the averageforeign exchange rates, provided these rates approximatethe actual rates, for the year. Exchange differences arisingfrom the translation of foreign operations are recogniseddirectly in the foreign currency translation reserve (aseparate component of equity). When a foreign operation isdisposed of, in part or in full, the relevant amount in theforeign currency translation reserve is transferred to profitor loss.

Investment propertyInvestment property is property held either to earn rentalincome or for capital appreciation, or both.

MeasurementInvestment property is measured initially at cost, includingtransaction costs and directly attributable expenditure inpreparing the asset for its intended use. Subsequently, allinvestment properties are stated at fair value.

Currently valuation takes place annually, based on theaggregate of the net annual rental receivable from theproperties, considering and analysing rentals received onsimilar properties in the neighbourhood, less associatedcosts (insurance, maintenance, repairs and managementfees). A capitalisation rate which reflects the specific risksinherent in the net cash flows is applied to the net annualrentals to arrive at the property valuations.

The fair value of undeveloped land held as investmentproperty is based on comparative market prices afterintensive market surveys.

Gains or losses arising from a change in fair value arerecognised in the income statement.

External, independent valuers having appropriate,recognised professional qualifications and recentexperience in the location and category of the propertybeing valued and value the portfolio every three years.

Property, plant and equipmentMeasurementAll items of property, plant and equipment recognised asassets are measured initially at cost. Cost includesexpenditures that are directly attributable to the acquisitionof the asset. The cost of self-constructed assets includes thecost of material and direct labour and any other costdirectly attributable to bringing the asset to a workingcondition for its intended use, and the cost of dismantlingand removing the items and restoring the site on whichthey are located.

Except for the item land and buildings, all other items ofproperty, plant and equipment are subsequently measuredat cost less accumulated depreciation and anyaccumulated impairment losses.

Land and buildings are revalued by external, independentvaluers having appropriate recognised professionalqualifications and recent experience in the location andcategory of the property being valued, and value theportfolio every three years.

Any surplus in excess of the net book value is transferred toa revaluation reserve net of deferred tax. Surpluses onrevaluation are recognised as income to the extent thatthey reverse revaluation decreases of the same assetsrecognised as expenses in the previous periods. Deficits onrevaluation are charged directly against the revaluationreserves only to the extent that the decrease does notexceed the amount held in the revaluation reserves inrespect of that same asset. Other deficits are recognised inthe income statement.

Where parts of an item of property, plant and equipmenthave significantly different useful lives, they are accountedfor as separate items of property, plant and equipment.Although individual components are accounted forseparately, the financial statements continue to disclose asingle asset.

Subsequent costThe Group recognises the cost of replacing part of such an

item of property, plant and equipment in net book value

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 the income statement as

an expense as they are incurred.




DepreciationDepreciation is recognised in the income statement 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. The

estimated useful lives for the current and comparative

periods are as follows:

Components Useful lives

Land and buildingsLand Indefinite

Building structure 50 years

Elevators 10 years

Air-conditioning systems 5 years

Plant and equipmentAircraft 5 years

Heavy plant and machinery 10 – 20 years

Equipment 8 – 10 years

Factory equipment 4 – 5 years

Capital insurance spares 10 – 16 years

Mining assetsMining footprint The mining footprint is depreciated over the estimated

remaining life of the mine, up to a maximum of 20 years.

OtherMotor vehicles 1 – 5 years

Office furniture and equipment 1 – 5 years

The residual values, useful lives and depreciation methodare reassessed at each financial year-end.

DerecognitionThe net book value of items of property, plant andequipment are derecognised on disposal or when no futureeconomic benefits are expected from their use or disposal.

Gains or losses arising from derecognition are determinedas the difference between the net disposal proceeds andthe net book value of the item of property, plant andequipment and included in the income statement whenthe items are derecognised.

Biological assetsA biological asset is a living animal or plant.

MeasurementA biological asset is measured initially and at balance sheetdate at its fair value less estimated point-of-sale costs. If thefair value of a biological asset cannot be determinedreliably at the date of initial recognition, it is stated at costless any accumulated deprecation and impairment losses.

Gains or losses arising on the initial recognition of abiological asset at fair value less estimated point-of-salecosts, and from a change in fair value less estimated point-of-sale costs of biological assets, are included in the incomestatement for the period in which they arise.

LeasesOperating leasesLeases of assets under which the lessor effectively retains all

the risks and benefits of ownership are classified as

operating leases.

Group as lessorReceipts 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

balance sheet according to the nature of the assets.

Group as lesseeLease payments arising from operating leases are

recognised in the income statement on a straight-line basis

over the lease term. Lease incentives received are

recognised in the income statement as an integral part of

the total lease expense.

Finance leasesLeases of assets under which the lessee assumes all the risks

and benefits of ownership are classified as finance leases.

Minimum lease payments made under finance leases are

apportioned between the finance expense and the

reduction of the outstanding liability. The finance expense

is allocated to each period during the lease term so as to



produce a constant periodic rate of interest on theremaining balance of the liability.

InventoriesSpares and consumablesSpares 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.

Raw materials and finished goodsRaw materials and finished goods consisting of phosphate

rock, phosphoric acid and other minerals, are valued at the

lower of either 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.

The valuation of inventory held by agents or in transit

includes forwarding costs, where applicable.

Cash and cash equivalentsFor 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 carried at amortised cost in

the balance sheet.

ProvisionsProvisions are recognised when the Group has a present

legal or constructive obligation as a result of a past event,

from which it is probable that an outflow of economic

benefits will be required to settle the obligation and the

obligation can be estimated reliably. If the effect is material,

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, where

appropriate, the risks specific to the liability.

Decommissioning provisionThe 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 anasset arises on the initial recognition of the asset, the cost iscapitalised to the asset and amortised over the useful life ofthe asset. The cost of an item of property, plant andequipment includes not only the ‘initial estimate’ of thecosts relating to dismantlement, removal or restoration ofproperty, plant and equipment at the time of installing theitem but also amounts recognised during the period of use,for purposes other than producing inventory.

If an obligation to restore the environment or dismantle anasset arises after the initial recognition of the asset, then aprovision is recognised at the time that the obligation arises.

Onerous contractsA provision for onerous contracts is recognised when theexpected benefits to be derived by the Group from acontract are lower than the unavoidable cost of meeting itsobligations under the contract. The provision is measuredat the present value of the lower of the expected cost ofterminating the contract and the expected net cost ofcontinuing with the contract.

Before a provision is established, the Group recognises anyimpairment loss on the assets associated with the contract.

Contingent liabilities and commitmentsContingent liabilitiesA contingent liability is a possible obligation that arisesfrom past events and whose existence will be confirmedonly by the occurrence or non-occurrence of one or moreuncertain future events not wholly within the control of theGroup.

Contingent liabilities are not recognised in the balancesheet of the Group but disclosed in note 35.

CommitmentsItems are classified as commitments where the Group hascommitted itself to future transactions.

Commitments are not recognised in the balance sheet ofthe Group, but disclosed in note 33.

TaxationIncome taxIncome tax on profit or loss for the year comprises currentand deferred tax. Income tax is recognised in the incomestatement except to the extent that it relates to itemsrecognised directly in equity, in which case it is recognisedin equity. Additional income tax that arises from thedistribution of dividends is recognised at the same time asthe liability to pay the related dividend.

The charge for current tax is based on the results for theperiod as adjusted for items which are not taxable ordisallowed. It is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date.




Current tax also includes any adjustment to tax payable inrespect of previous years.

Deferred taxDeferred income tax and deferred capital gains tax areaccounted for on the comprehensive basis, using theliability method for all temporary differences arisingbetween the net book value of assets and liabilities in thefinancial statements and the corresponding tax bases usedin the computation of taxable income. In principle, deferredtax liabilities are recognised for all taxable temporarydifferences and deferred tax assets are recognised to theextent that it is probable that future taxable profit will beavailable against which unused tax deductions can beutilised. Deferred tax assets are reviewed at each reportingdate and are reduced to the extent that it is no longerprobable that the related tax will be realised.

Deferred tax is not recognised if the temporary differencesarise from goodwill or from the initial recognition (otherthan in a business combination) of other assets andliabilities in a transaction that affects neither taxableincome nor accounting income. Deferred tax is also notrecognised in respect of temporary differences relating toinvestments in associates, subsidiaries and joint ventures tothe extent that it is probable that they will not reverse inthe foreseeable future and the timing of the reversal of thetemporary difference is controlled.

Deferred tax is measured at the tax rates that are expectedto be applied to temporary differences when they reverse,based on the laws that have been enacted or substantivelyenacted by the reporting date.

Deferred tax is charged or credited in the incomestatement, except when it relates to items credited orcharged directly to equity, in which case the deferred tax isalso recognised in equity.

RevenueRevenue comprises net invoiced sales to customers,dividends, interest, rentals and fee income, but excludesvalue-added tax, and is measured at the fair value of theconsideration received or receivable, net of returns andallowances, trade discounts and volume rebates.

Sales to customersRevenue from sale of goods is recognised in the incomestatement when the significant risks and rewards ofownership have been transferred to the customer, recoveryof the consideration is probable, associated costs andpossible return of goods can be estimated reliably and thereis no continuing managerial involvement with the goods.

DividendsDividends receivable, declared but not received, areincluded in income on the basis of the last date of

registration. Capitalisation shares received are notrecognised as income.

InterestInterest income is recognised in the income statementusing the effective interest rate method. The effectiveinterest rate is the rate that exactly discounts the estimatedfuture cash payments and receipts through the expectedlife of the financial asset (or, where appropriate, a shorterperiod) to the carrying amount of the financial asset. Theeffective interest rate is established on initial recognition ofthe financial asset and is not revised subsequently.

RentalSee policy on leases.

Borrowing costsBorrowing costs are expensed in the period in which theyare incurred, except to the extent that they are capitalisedwhen directly attributable to the acquisition, constructionor production of a qualifying asset.

Employee benefitsDefined contribution plansThe majority of the Group’s employees are members ofdefined contribution plans, and contributions to theseplans are recognised in the income statement in the yearto which they relate.

Defined benefit planA Group company operates a defined benefit plan, theassets of which are held in a separate trustee-administeredfund. The scheme is generally funded through payments tothe trustee-administered fund as determined by theperiodic actuarial valuations. A defined benefit plan is apension plan that defines an amount of pension benefit tobe provided, usually as a function of one or more factorssuch as age, years of service or compensation.

Where the calculation in respect of the defined benefit planresults in a benefit to the Group, the recognised asset islimited to the net total of any unrecognised actuarial lossesand past-service costs and the present value of any futurerefunds from the plan or reductions in future contributionsto the plan.

The liability in respect of defined benefit pension plans isthe present value of the defined benefit obligation at thebalance sheet date minus the fair value of the plan assets,together with adjustments for actuarial gains/losses andpast-service costs. The defined benefit obligation iscalculated annually by the independent actuaries using theprojected unit credit method. The present value of thedefined benefit obligation is determined by the estimatedcash outflows, using interest rates of government securities,which have terms to maturity approximating the terms ofthe related liability.



Actuarial gains and losses arising from experienceadjustments and the effects of changes in actuarialassumptions to the defined benefit plans are recognised inincome to the extent that cumulative unrecognisedactuarial gains and losses at the end of the previousreporting period exceed the greater of 10% of:

• the present value of gross defined benefit obligation atthat date; and

• the fair value of any plan assets at that date.

Actuarial gains and losses arising from experienceadjustments, changes in actuarial assumptions andamendments to pension plans are charged or credited toincome over the average remaining service life of therelated employees.

Post-retirement medical benefitsSome Group companies provide post-employmenthealthcare benefits to its retirees. The entitlement to post-employment healthcare benefits is based on the employeeremaining in service up to retirement age. The expectedcosts of these benefits are accrued over the period ofemployment, using the projected unit of credit method.Valuations of these obligations are carried out every thirdyear by independent qualified actuaries.

Segment reportingA segment is a distinguishable component of the Groupthat is engaged either in providing products or services(primary segment), or in providing products or serviceswithin a particular economic environment (geographicalsegment), which is subject to risks and rewards that aredifferent from those of other segments.

The Group’s segment report is presented in the form ofbusiness analysis (primary segment) and geographicallocation (geographical segment).

The business analysis is presented in terms of the Group’sprincipal business, services and other activities.

The geographical segmental analysis is based on thelocation of assets and the source of revenue.

Discontinued operations and non-current assets held-for-saleDiscontinued operationsA discontinued operation is a component of the Group’sbusiness that represents a separate major line of businessor geographical area of operations or is a subsidiaryacquired exclusively with a view to resale.

Classification as a discontinued operation occurs upondisposal or when the operation meets the criteria to beclassified as held-for-sale, if earlier. A disposal group that isto be abandoned may also qualify.

Non-current assets held-for-saleNon-current assets and disposal groups are classified asheld-for-sale if their carrying amount will be recovered

through a sale transaction rather than continuing use. Thisclassification is only met if the sale is highly probable andthe assets are available for immediate sale.

MeasurementImmediately before classification as held-for-sale, themeasurement of the assets (and all assets and liabilities in adisposal group) is brought up to date in accordance withthe applicable IFRS. Then, on initial classification as held-for-sale, the non-current assets and disposal groups arerecognised at the lower of carrying amount and fair valueless costs to sell. Any impairment loss on a disposal group isfirst allocated to goodwill and then to remaining assets andliabilities on a pro rata basis, except that no loss is allocatedto inventories, financial assets, deferred tax assets, employeebenefit assets, investment property and biological assets,which continue to be measured in accordance with theGroup’s accounting policies.

Impairment losses on initial classification as held-for-saleare included in profit and loss, even when there is arevaluation. The same applies to gains and losses onsubsequent measurement.

ReclassificationThe non-current asset held-for-sale will be reclassifiedimmediately when there is a change in intention to sell.At that date, it will be measured at the lower of:

• its net book 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.

Related partiesThe IDC operates in an economic environment, togetherwith other entities directly or indirectly owned by theSouth African government. As a result of the constitutionalindependence of all three spheres of government in SouthAfrica, only parties within the national sphere ofgovernment will be considered to be related parties.

Key management is defined as individuals with theauthority and responsibility for planning, directing andcontrolling the activities of the entity. All individuals fromthe level of Executive Management up to the Board ofdirectors are regarded as key management per thedefinition of the standard.

Close family members of key management personnel areconsidered to be those family members who may beexpected to influence, or be influenced by, keymanagement individuals in their dealings with the entity.

Other related-party transactions are also disclosed in termsof the requirements of IAS 24.



Balance Sheetsas at 31 March 2009

GROUP IDC(R’m) Notes 2009 2008 2009 2008

AssetsCash and cash equivalents 2 5 607 5 370 5 133 3 964

Derivative assets 16 42 448 27 373

Trade and other receivables 3 1 796 1 166 297 157

Income tax receivable 132 5 122 –

Loans and advances 4 8 820 6 133 7 011 4 773

Non-current assets held-for-sale 5 – 91 – –

Inventories 6 816 1 032 10 15

Investments 7 42 355 61 245 27 665 40 490

Investments in subsidiaries 8 29 816 31 897

Investments in associates, partnerships and joint ventures 9 10 704 11 553 9 275 15 510

Deferred taxation asset 10 14 335 – –

Investment property 11 45 44 9 9

Property, plant and equipment 12 3 038 3 002 181 87

Biological assets 13 6 8 2 4

Intangible assets 14 2 1 – –

Total assets 73 377 90 433 79 548 97 279

EquityShare capital 15 1 393 1 393 1 393 1 393

Reserves 63 294 74 410 63 105 75 734

Total equity attributable to the holders of the parent 64 687 75 803 64 498 77 127

Minority shareholders’ interests 358 45

Total equity 65 045 75 848 64 498 77 127

LiabilitiesBank overdrafts 14 14 – –

Derivative liabilities 16 101 63 68 –

Other liabilities 17 1 339 1 651 502 374

Income tax payable 108 17 – 7

Loans 18 5 165 5 825 11 234 11 145

Liabilities directly associated with non-current assets

held-for-sale 5 – 12 – –

Deferred taxation liability 10 1 171 6 609 3 048 8 434

Provisions 19 228 194 59 59

Employee benefit liability 36 206 200 139 133

Total liabilities 8 332 14 585 15 050 20 152

Total equity and liabilities 73 377 90 433 79 548 97 279

IDC 2 Fin final.qxd 8/18/09 12:35 PM Page 118


Income Statementsfor the year ended 31 March 2009


Revenue 20 14 985 7 299 6 449 3 181

Cost of sales 5 162 2 773 4 –

Gross profit 9 823 4 526 6 445 3 181

Financing costs 21 570 499 571 505

Gross profit after financing costs 9 253 4 027 5 874 2 676

Net capital gains 23 128 488 325 492

Other income – 314 3 –

Operating expenses 4 067 2 674 2 636 1 422

Net operating income 24 5 314 2 155 3 566 1 746

Share of profit/(loss) of equity-accounted investments 1 132 1 950 – (13)

Profit before tax 6 446 4 105 3 566 1 733

Taxation 26 825 154 9 (143)

Profit for the year 5 621 3 951 3 557 1 876

Attributable to:

Equity holders of the parent 5 352 3 941 3 557 1 876

Minority interest 269 10

Profit for the year 5 621 3 951 3 557 1 876



Statements of Changes in Equityfor the year ended 31 March 2009

Foreign MinorityRevalu- Associated currency share-

Share ation entities translation Retained holders’ Total (R’m) capital reserve* reserve reserve earnings interest equity

GROUPBalance at 1 April 2007 1 393 29 151 4 788 64 17 140 38 52 574Total income/(expenses) for the year 19 071 3 941 10 23 022

Profit for the year 3 941 10 3 951Total income/(expenses) recognised directly in equity 19 071 19 071

Revaluation of investments to fair value– Fair value adjustments 21 576 21 576Deferred taxation (2 552) (2 552)Revaluation of property,plant and equipment to fair value 28 28Revaluation of investment property to fair value (2) (2)Reversal of previous equity impairments 21 21

Minority interest on acquisition of subsidiaries (3) (3)Share of profits of equity-accounted investments accounted for directly in equity 152 178 330Dividends paid (75) (75)

Balance at 31 March 2008 1 393 48 222 4 940 242 21 006 45 75 848Total income/(expenses) for the year (15 114) 5 352 269 (9 493)

Profit for the year 5 352 269 5 621Total income/(expenses) recognised directly in equity (15 114) (15 114)

Revaluation of investments to fair value– Fair value adjustments (20 374) (20 374) – Impairment losses (200) (200)Revaluation of property,plant and equipment to fair value 221 221 Reversal of previous equity impairments 20 20 Deferred taxation 5 219 5 219

Minority interest on acquisition of subsidiaries 239 239Share of (losses)/profits of equity-accounted investments accounted for directly in equity (1 897) 643 (1 254)Dividends paid (100) (195) (295)

Balance at 31 March 2009 1 393 33 108 3 043 885 26 258 358 65 045

* The revaluation reserve comprises revaluations recognised in respect of land and buildings and available-for-sale investments.



Revalu- AssociatedShare ation entities Retained Total

(R’m) capital reserve* reserve earnings equity

IDCBalance at 1 April 2007 1 393 36 041 204 9 560 47 198 Total income/(expenses) for the year 28 169 1 876 30 045

Profit for the year 1 876 1 876Total income/(expenses) recognised directly in equity 28 169 28 169

Revaluation of investments to fair value

– Fair value adjustments 32 368 32 368

Deferred taxation (4 117) (4 117)

Reversal of previous equity

impairments (82) (82)

Share of losses of equity-accounted investments accounted for directly in equity (41) (41)

Dividends paid (75) (75)

Balance at 31 March 2008 1 393 64 210 163 11 361 77 127 Total income/(expenses) for the year (16 033) 3 557 (12 476)

Profit for the year 3 557 3 557 Total income/(expenses) recognised directly in equity (16 033) (16 033)

Revaluation of investments to fair value

– Fair value adjustments (21 257) (21 257)– Impairment losses (200) (200)Revaluation of property,

plant and equipment to

fair value 26 26 Reversal of previous equity impairments 5 5Deferred taxation 5 393 5 393

Share of losses of equity-accounted

investments accounted for

directly in equity (53) (53) Dividends paid (100) (100)

Balance at 31 March 2009 1 393 48 177 110 14 818 64 498

* The revaluation reserve comprises revaluations recognised in respect of land and buildings and available-for-sale investments.


Cash Flow Statementsfor the year ended 31 March 2009


Net cash inflows from operating activities 6 329 1 620 5 046 1 341

Cash generated by/(utilised by) operations 28 2 307 (99) (510) (899)

Dividends received 3 451 1 303 4 621 1 990

Interest received 1 877 1 140 1 637 987

Interest paid (570) (499) (571) (505)

Taxation paid 29 (736) (225) (131) (232)

Change in operating funds (3 380) (1 072) (2 161) (685)

Increase in operating assets (2 758) (1 095) (2 318) (1 157)

(Decrease)/increase in operating liabilities (622) 23 157 472

Cash generated by operating activities 2 949 548 2 885 656

Net cash (outflows)/inflows from investing activities (2 597) 422 (1 616) (217)

Additions to property, plant and equipment (709) (490) (149) (7)

Proceeds on the disposal of property, plant and equipment 88 35 67 –

Removal of biological assets 2 – 2 –

Additions to intangible assets (32) (6) – –

Acquisition of investments (2 126) 303 (1 334) (794)

Proceeds on realisation of investments 30 180 580 377 584

Net cash outflows from financing activitiesDividends paid (100) (75) (100) (75)

Net increase in cash and cash equivalents 252 895 1 169 364

Cash and cash equivalents at the beginning of the year 5 356 4 461 3 964 3 600

5 608 5 356 5 133 3 964

Relating to subsidiaries acquired and sold 31/32 (15) – – –

Cash and cash equivalents at the end of the year 5 593 5 356 5 133 3 964

Comprises:

Cash and cash equivalents 2 5 607 5 370 5 133 3 964

Bank overdrafts (14) (14) – –

5 593 5 356 5 133 3 964


Segmental Report – Primary Segmentsfor the year ended 31 March 2009

Financing Foskoractivities (Pty) Limited Other Total

(R’m) 2009 2008 2009 2008 2009 2008 2009 2008

IncomeInterest received 1 667 1 016 224 125 (14) (1) 1 877 1 140

Dividends received 5 313 2 305 – – (1 862) (1 002) 3 451 1 303

Fee income 175 201 – – 2 (2) 177 199

Farming, manufacturing and

mining income 15 6 9 267 4 488 198 163 9 480 4 657

Revenue 7 170 3 528 9 491 4 613 (1 676) (842) 14 985 7 299

Share of profits of equity-

accounted investments 15 26 4 – 1 828 2 208 1 847 2 234

Other income 3 1 – 295 (3) 18 – 314

Net capital gains 325 492 – – (197) (4) 128 488

ExpensesFinancing costs (538) (473) (25) (5) (7) (21) (570) (499)

Operating expenses (961) (763) (5 919) (3 744) (278) (227) (7 158) (4 734)

Share of losses of equity-

accounted investments (15) (38) – (2) (700) (244) (715) (284)

Taxation (27) 124 (768) (282) (30) 4 (825) (154)

Depreciation (16) (24) (163) (123) (19) (20) (198) (167)

Impairment of property, plant

and equipment and project

feasibility expenses (86) (155) (600) – 1 29 (685) (126)

Net movement in impairments (1 571) (485) – – 383 65 (1 188) (420)

Profit for the year 4 299 2 233 2 020 752 (698) 966 5 621 3 951

Total assets 100 155 97 362 4 601 5 912 (31 379) (12 841) 73 377 90 433

Interest in equity-accounted investments 9 275 15 510 30 – 1 399 (3 957) 10 704 11 553

Total liabilities 16 857 17 791 1 445 2 106 (9 970) (5 312) 8 332 14 585

Capital expenditure 149 7 485 360 29 45 663 412

Capital expenditure commitments – 115 2 067 273 310 117 2 377 505

Financing activities – includes the IDC, Findevco, Impofin, Konoil and the Export-Import Finance Corporation of SA.

Other – includes Dymson Nominee, Kindoc Investments, Kindoc Sandton Properties, Konbel, Prilla 2000, certain other

subsidiaries and consolidation adjustments.

All revenue is from external customers.



Segmental Report – Geographical Segmentsfor the year ended 31 March 2009

South Africa Rest of Africa Other Total (R’m) 2009 2008 2009 2008 2009 2008 2009 2008

IncomeInterest received 1 647 1 065 227 73 3 2 1 877 1 140

Dividends received 3 374 1 277 43 – 34 26 3 451 1 303

Fee income 177 199 – – – – 177 199

Farming, manufacturing and

mining income 9 480 4 657 – – – – 9 480 4 657

Revenue 14 678 7 198 270 73 37 28 14 985 7 299

Share of profits of equity-

accounted investments 1 093 1 411 754 823 – – 1 847 2 234

Other income – 314 – – – – – 314

Net capital gains 128 488 – – – – 128 488

ExpensesFinancing expenses (570) (499) – – – – (570) (499)

Operating expenses (7 158) (4 734) – – – – (7 158) (4 734)

Share of losses of equity-

accounted investments (715) (284) – – – – (715) (284)

Taxation (825) (154) – – – – (825) (154)

Depreciation (198) (167) – – – – (198) (167)

Impairment of property, plant

and equipment and project

feasibility expenses (685) (126) – – – – (685) (126)

Net movement in impairments (1 188) (420) – – – – (1 188) (420)

Profit for the year 4 560 3 027 1 024 896 37 28 5 621 3 951

Total assets 66 360 85 858 6 149 3 748 868 827 73 377 90 433

Interest in equity-accounted investments 7 701 9 039 3 003 2 514 – – 10 704 11 553

Total liabilities 8 332 14 585 – – – – 8 332 14 585

Capital expenditure 663 412 – – – – 663 412

Capital expenditure commitments 2 377 505 – – – – 2 377 505

Other – includes all countries outside the African continent.



1. FINANCIAL ASSETS AND LIABILITIESThe table below sets out the Group’s and Corporation’s classification of each class of financial assets and liabilities, and

their fair values.

Held- Loans Available- Other Non- Total for- and for- amortised financial carrying Fair

(R’m) Notes trading receivables sale cost items value value

GROUP31 March 2009Cash and cash equivalents 2 5 607 5 607 5 607Loans and advances to clients 4 8 820 8 820 8 820 Investments – listed equities 7 32 479 32 479 32 479 Investments – unlisted equities 7 2 621 2 621 2 621 Investments – preference shares 7 323 6 932 7 255 7 255Derivative assets 16 42 42 42 Trade and other receivables 3 1 155 641 1 796 1 796

865 15 582 42 032 641 58 620 58 620

Loans 18 5 165 5 165 5 165 Derivative liabilities 16 101 101 101 Bank overdrafts 14 14 14Accounts payable 17 968 968 968

101 6 147 6 248 6 248

31 March 2008Cash and cash equivalents 2 5 370 5 370 5 370

Loans and advances to clients 4 6 133 6 133 6 133

Investments – listed equities 7 53 203 53 203 53 203

Investments – unlisted equities 7 2 819 2 819 2 819

Investments – preference shares 7 192 5 031 5 223 5 223

Derivative assets 16 448 448 448

Trade and other receivables 3 1 008 158 1 166 1 166

640 12 511 61 053 158 74 362 74 362

Loans 18 5 825 5 825 5 825

Derivative liabilities 16 63 63 63

Bank overdrafts 14 14 14

Accounts payable 17 1 313 1 313 1 313

63 7 152 7 215 7 215

Notes to the Financial Statementsfor the year ended 31 March 2009



Notes to the Financial Statements_continuedfor the year ended 31 March 2009

Held- Loans Available- Other Non- Total for- and for- amortised financial carrying Fair

(R’m) Note trading receivables sale cost items value value

1. FINANCIAL ASSETS AND LIABILITIES (continued)IDC31 March 2009Cash and cash equivalents 2 5 133 5 133 5 133 Loans and advances to clients 4 7 011 7 011 7 011 Investments – listed equities 7 17 831 17 831 17 831 Investments – unlisted equities 7 2 579 2 579 2 579 Investments – preference shares 7 323 6 932 7 255 7 255Investment in subsidiaries 8 29 816 29 816 29 816Investments in associates,

partnerships and joint ventures 9 9 102 9 102 9 102 Derivative assets 16 27 27 27 Trade and other receivables 3 297 297 297

350 12 441 66 260 79 051 79 051

Loans 18 11 234 11 234 11 234 Derivative liabilities 16 68 68 68 Accounts payable 17 240 240 240

68 11 474 11 542 11 542

31 March 2008Cash and cash equivalents 2 3 964 3 964 3 964

Loans and advances to clients 4 4 773 4 773 4 773

Investments – listed equities 7 32 505 32 505 32 505

Investments – unlisted equities 7 2 762 2 762 2 762

Investments – preference shares 7 192 5 031 5 223 5 223

Investment in subsidiaries 8 31 897 31 897 31 897

Investments in associates,

partnerships and joint ventures 9 15 233 15 233 15 233

Derivative assets 16 373 373 373

Trade and other receivables 3 157 157 157

565 8 894 87 428 96 887 96 887

Loans 18 11 145 11 145 11 145

Accounts payable 17 128 128 128

11 273 11 273 11 273



GROUP IDC(R’m) 2009 2008 2009 2008

2. Cash and cash equivalentsCash and balances with banks 972 1 372 498 83

Negotiable securities 4 635 3 998 4 635 3 881

5 607 5 370 5 133 3 964

Cash and negotiable securities earn interest at market-related rates.

Negotiable securities all mature within three months.

3. Trade and other receivablesTrade receivables 1 155 1 008 297 157

Prepayments 18 10 – –

Other receivables 623 148 – –

1 796 1 166 297 157

4. Loans and advancesLoans and advances to clients* 10 621 7 863 8 809 6 491

Specific impairment of loans and advances (1 637) (1 578) (1 637) (1 571)

Portfolio impairment of loans and advances (164) (152) (161) (147)

8 820 6 133 7 011 4 773

* Interest rates range between 5% and 20%.

Specific allowances for impairmentBalance at beginning of the year 1 578 1 475 1 571 1 445

Impairment loss for the year:

– Charge for the year 610 324 613 325

– Recoveries (16) (8) (16) (7)

– Effect of foreign currency movements – (1) – (1)

Write-offs (535) (212) (531) (191)

Balance at the end of the year 1 637 1 578 1 637 1 571

Portfolio allowance for impairmentBalance at beginning of the year 152 145 147 140

Impairment charge for the year 12 7 14 7

Balance at the end of the year 164 152 161 147

Total allowances for impairment 1 801 1 730 1 798 1 718




GROUP IDC(R’m) 2009 2008 2009 2008

4. Loans and advances (continued)Maturity of loans and advances– due within three months 916 1 205 900 1 176

– due after three months but within one year 1 372 1 273 1 355 1 252

– due after one year but within two years 2 253 1 090 2 224 1 055

– due after two years but within three years 1 177 1 334 1 163 1 303

– due after three years but within four years 1 131 656 1 131 642

– due after four years but within five years 903 489 903 490

– due after five years 2 869 1 816 1 133 573

– impairment of loans and advances (1 801) (1 730) (1 798) (1 718)

8 820 6 133 7 011 4 773

5. Non-current assets held-for-saleAssets classified as held-for-sale

Property, plant and equipment – 28 – –

Inventory – 44 – –

Trade and other receivables – 19 – –

– 91 – –

Liabilities classified as held-for-sale

Provisions – 3 – –

Other liabilities – 9 – –

– 12 – –

Net non-current assets held-for-sale – 79 – –

The assets, liabilities and profit relating to the Zirconia Division of

Foskor (Pty) Limited (operations based in Phalaborwa – Limpopo province)

had been presented as held-for-sale following the final approval of

dilution, and revised shareholdings, by the Board of Directors on

6 May 2008. Altogether 51% of Foskor Zirconia (Pty) Limited was

subsequently sold on 1 August 2008 to Carborundum Universal Limited.

6. InventoriesConsumable stores 252 243 10 15

Raw materials 247 537 – –

Finished goods 202 191 – –

Minerals 91 15 – –

Work in progress 13 3 – –

Ore stock piling 11 43 – –

816 1 032 10 15

Group inventory to the value of R398,5 million was written down as a net realisable value adjustment at 31 March 2009

(2008: nil).

Inventory pledged as securityGeneral notorial bonds are registered over inventories to the value of R40 000 000 as at 31 March 2009 (2008: nil).



GROUP IDC(R’m) 2009 2008 2009 2008

7. InvestmentsListed equities 32 661 53 234 18 013 32 536Impairment of listed equities (182) (31) (182) (31)Unlisted equities 2 708 2 916 2 666 2 859Impairment of unlisted equities (87) (97) (87) (97)Preference shares 7 566 5 195 7 566 5 195Preference shares – option value 323 192 323 192Impairment of preference shares (634) (164) (634) (164)

42 355 61 245 27 665 40 490

Specific allowance for impairment – listed equitiesBalance at beginning of the year 31 16 31 16 Impairment charge for the year 151 15 151 15


Specific allowance for impairment – unlisted equitiesBalance at beginning of the year 97 33 97 33 Impairment (reversals)/charge for the year (10) 64 (10) 64


Specific allowance for impairment – preference sharesBalance at beginning of the year 164 107 164 107 Impairment charge for the year 470 57 470 57


Comprises:Impairment of listed equities 182 31 182 31 Impairment of unlisted equities 87 97 87 97 Impairment of preference shares 634 164 634 164

903 292 903 292

8. Investment in subsidiariesFair value of investments 29 155 29 678 Impairment of shares (30) (14)Loans receivable 1 073 2 404 Impairment of loans receivable (382) (171)

Subsidiaries (refer to annexure A) 29 816 31 897

9. Investments in associates, partnerships and joint venturesAssociated companies (refer to annexure B) 10 531 11 276 9 102 15 233

Fair value of investments – listed shares in associates 1 156 3 857Fair value of investments – unlisted shares in associates 6 991 10 703Impairment of investments (516) (275)Net asset value at acquisition 214 1 221 Accumulated equity-accounted income 13 600 11 823 Accumulated equity-accounted losses and impairments (5 437) (3 537)Goodwill 643 1 224 Accumulated impaired goodwill and impairments (188) (688)Loans receivable 2 048 1 595 1 983 1 503Impairment of loans receivable (349) (362) (512) (555)




GROUP IDC(R’m) 2009 2008 2009 2008

9. Investments in associates, partnerships and joint ventures (continued)Partnerships and joint ventures (refer to annexure C) 173 277 173 277

Partners’ capital 220 227 220 227

Accumulated profits (30) 60 (30) 60

Impairment of partners’ capital (17) (10) (17) (10)

10 704 11 553 9 275 15 510

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:

Foskor Limited – At cost – – 8 8

Sasol Limited – At cost 131 131 – –

A register of investments is available and is open for inspection at the

IDC’s registered office.

10. Deferred taxationComposition of deferred taxation asset is as follows:Capital and other allowances 12 257 – –

Calculated taxation losses 2 78 – –

14 335 – –

Balance at the beginning of the year 335 35 – –

Transfer from income statement:

Calculated taxation losses (76) 257 – –

Temporary differences (245) 43 – –

– Mining assets (32) 32 – –

– Forward exchange contracts (17) 17 – –

– Other (196) (6) – –

Balance at the end of the year 14 335 – –

Composition of deferred taxation liability is as follows:Capital and other allowances 94 389 (254) (260)

Capital gains and losses and fair value adjustments 1 097 6 242 3 303 8 697

1 191 6 631 3 049 8 437

Reduced by taxation on:

Unutilised capital expenditure – (3) – (3)

Calculated taxation losses (20) (19) (1) –

1 171 6 609 3 048 8 434



GROUP IDC(R’m) 2009 2008 2009 2008

10. Deferred taxation (continued)Balance at the beginning of the year 6 609 3 640 8 434 4 483

Transfer from income statement/reserves:

Calculated taxation losses (1) 354 (1) –

Temporary differences (5 440) 2 591 (5 338) 3 927

– Fixed assets (152) 104 (15) 6

– Provisions (5) 38 (6) (23)

– Mining assets (45) 73 – –

– Impairments 26 (9) 26 (9)

– Capital gains and losses and fair value adjustments (5 145) 2 382 (5 393) 3 953

– Other (119) 3 – –

Unutilised capital expenditure 3 24 3 24

Balance at the end of the year 1 171 6 609 3 048 8 434

Unrecognised deferred tax assetsDeferred tax assets have not been recognised in respect of the following items:Deductible temporary differences 8 5 8 5

Deferred tax assets have not been recognised in respect of these

items because it is not probable that future taxable profit will be

available against which the Group can utilise the benefits therefrom.

Cost/valuation Fair value Cost/valuation (R’m) 31 March 2008 adjustments 31 March 2009

11. Investment propertyGROUPLand and buildings leased to industrialists 8 – 8Land held for development 20 – 20Farming land and buildings 16 1 17

44 1 45

IDCLand and buildings leased to industrialists 9 – 9




Cost/valuation Fair value Cost/valuation (R’m) 31 March 2008 adjustments 31 March 2009

11. Investment property (continued)GROUPLand and buildings leased to industrialists 8 – 8

Land held for development 20 – 20

Farming land and buildings 18 (2) 16

46 (2) 44

IDCLand and buildings leased to industrialists 9 – 9

GROUP IDC(R’m) 2009 2008 2009 2008

Rental income from investment property – 1 – –

Valuation methods and assumptions used in determining the fair value of investment propertyCapitalisation methodThe 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 on the estimated rentals such

a property would fetch, ie the market-related rental between a willing landlord and tenant. 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.

An initial yield rate required by investors of 13,5% was adopted.

Comparative methodThe 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.

A unit price between R3,00 and R100,00 per square metre has been used for the purpose of the valuations.

Residual land valuation methodThis 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.

A unit price of R50,00 per square metre has been used for the purpose of these valuations.

Independent valuers were used to determine all the fair values of investment property. All valuers used have

appropriate qualifications, including diplomas in property valuation, diplomas in advanced property practice and

BSc Honours (land economy). Valuers used have between five and 30 years’ experience.



Cost/ Cost/valuation Subsi- valuation

GROUP 31 March diaries Re- 31 March(R’m) 2008 acquired Additions Disposals valuation 2009

12. Property, plant and equipmentPlant and equipment 3 247 93 332 (20) – 3 652Land and buildings 1 169 24 46 (7) 195 1 427Capital work in progress 333 – 80 – – 413Aircraft 101 – 197 (101) 26 223Office furniture and equipment 31 8 7 (1) – 45Motor vehicles 8 1 1 – – 10

4 889 126 663 (129) 221 5 770

Accumu- Accumu-lated lated

depreciation depreciationand impair- Charged and impair-

ment Subsi- to ment31 March diaries income Impair- 31 March

2008 acquired statement Disposals ment 2009

Plant and equipment 1 556 71 158 (2) 606 2 389Land and buildings 260 7 28 (1) 294Aircraft 35 – 4 (36) – 3Office furniture and equipment 30 2 7 – – 39Motor vehicles 6 – 1 – – 7

1 887 80 198 (39) 606 2 732

Carrying value 3 002 3 038

Plant, equipment and vehicles include the following lease where a Group company is the lessee under a finance lease:

31 March 2009 31 March 2008

Cost-capitalised finance lease 42 42

Accumulated depreciation (10) (8)

Carrying value 32 34




Cost/ Cost/valuation valuation

IDC 31 March Re- 31 March(R’m) 2008 Additions Disposals valuation 2009

12. Property, plant and equipment (continued)Land and buildings 7 – – – 7 Plant and equipment 134 8 – – 142Aircraft 101 132 (101) 26 158Office furniture and equipment 25 8 – – 33 Motor vehicles 4 1 – – 5

271 149 (101) 26 345


depreciation depreciationand impair- Charged and impair-

ment to ment31 March income Re- 31 March

2008 statement Disposals valuation 2009

Land and buildings – – – – –Plant and equipment 120 6 – – 126Aircraft 35 2 (36) – 1Office furniture and equipment 25 7 – – 32Motor vehicles 4 1 – – 5

184 16 (36) – 164


Cost/ Cost/valuation Subsi- Impair- valuation

GROUP 31 March diaries ment Re- 31 March (R’m) 2007 acquired Additions Disposals reversal valuation 2008

Plant and equipment 3 170 27 203 (153) – – 3 247

Land and buildings 1 023 47 36 (8) – 71 1 169

Capital work in progress 164 – 169 – – – 333

Aircraft 101 – – – – – 101

Office furniture and equipment 27 1 3 – – – 31

Motor vehicles 4 3 1 – – – 8

4 489 78 412 (161) – 71 4 889



depreciation- depreciationand impair- and impair-

ment Subsi- Charged to Impair- mentGROUP 31 March diaries income ment Re- 31 March(R’m) 2007 acquired statement Disposals reversal valuation 2008

12. Property, plant and equipment (continued)Plant and equipment 1 810 – 132 (131) (255) – 1 556

Land and buildings 236 – 24 – – – 260

Aircraft 30 – 5 – – – 35

Office furniture and equipment 26 – 4 – – – 30

Motor vehicles 4 – 2 – – – 6

2 106 – 167 (131) (255) – 1 887

Carrying value 2 383 3 002

IDC Cost/valuation Cost/valuation(R’m) 31 March 2007 Additions Disposals 31 March 2008

Land and buildings 7 – – 7

Plant and equipment 254 3 (123) 134

Aircraft 101 – – 101

Office furniture and equipment 22 3 – 25

Motor vehicles 3 1 – 4

387 7 (123) 271

Accumulated Accumulateddepreciation Charged to depreciation

and impairment income and impairment31 March 2007 statement Disposals 31 March 2008

Land and buildings – – – –

Plant and equipment 228 15 (123) 120

Aircraft 30 5 – 35

Office furniture and equipment 22 3 – 25

Motor vehicles 3 1 – 4

283 24 (123) 184


Registers containing details of land and buildings, including details of any revaluations and encumbrances, are kept at

the registered offices of the companies concerned.




GROUP IDC(R’m) 2009 2008 2009 2008

13. Biological assetsPlanted pistachio trees*Carrying amount at the beginning of the year 4 3 4 3

Removal of trees (2) – (2) –

Carrying amount at the end of the year 2 3 2 3

Farming development cost – 1 – 1

Total carrying amount at the end of the year 2 4 2 4

Planted walnut trees**Carrying amount at the beginning of the year 4 4 – –

Total carrying amount at the end of the year 4 4 – –

Carrying value at the end of the year 6 8 2 4

* The fair value of the pistachio trees cannot be determined reliably at present, as this is

a new project with a lengthy period to maturity and all the trees have not yet matured .

The trees take eight years to start producing nuts. As a result the pistachio trees are

carried at cost less accumulated depreciation and impairment losses. Biological assets

are depreciated on a straight-line basis over 30 years.

** The fair value of the walnut trees cannot be determined reliably at present, as this is a

new project with a lengthy period to maturity. No depreciation has been expensed to

date as the planted walnut trees are not yet producing walnuts. As a result, the walnut

trees are carried as cost less accumulated depreciation and impairment losses.

14. Intangible assetsGoodwillCost 527 497 – –


Arising on acquisition of subsidiaries 30 5 – –

Accumulated impairment of goodwill 527 497 – –


Current year impairment of goodwill 30 5 – –

Carrying value at the end of the year – – – –

OtherCost 5 3 – –


Additions 2 1 – –

Accumulated amortisation and impairment of other intangible assets 3 2 – –


Current year impairment 1 – – –

Carrying value at the end of the year 2 1 – –

Carrying value of intangible assets 2 1 – –



GROUP IDC(R’m) 2009 2008 2009 2008

15. Share capitalAuthorisedA shares of R1 each – 1 000 000 1 1 1 1

B shares of R1 each – 1 499 000 000 1 499 1 499 1 499 1 499

1 500 1 500 1 500 1 500

IssuedA shares – 1 000 000 (2008: 1 000 000) 1 1 1 1

B shares – 1 391 969 357 (2008: 1 391 969 357) 1 392 1 392 1 392 1 392

1 393 1 393 1 393 1 393

A shares are not transferable other than by an act of Parliament, however

the B shares may be sold with the authorisation of the President.

The A shares held by the State shall entitle it to a majority vote.

16. Derivative financial instrumentsDerivative assetsForeign exchange contract assets 42 435 27 373 Derivative option contracts – 13 – –

42 448 27 373

Derivative liabilitiesForeign exchange contract liability 75 63 68 –Derivative option contracts 26 – – –

101 63 68 –

17. Other liabilitiesAccounts payable 968 1 313 240 128Accruals

Bonuses 295 278 217 203Leave pay 76 60 45 43

1 339 1 651 502 374

Movement in accrualsBonusesBalance at the beginning of the year 278 180 203 127Additional accruals raised during the year 253 258 175 190Utilised during the year (236) (160) ( 161) ( 114)


Leave payBalance at the beginning of the year 60 58 43 37 Additional accruals raised during the year 40 20 16 17 Utilised during the year (24) (18) (14) (11)





GROUP IDC(R’m) 2009 2008 2009 2008

18. LoansLong-term loansForeign loans 2 882 3 392 2 703 3 149 Domestic loans 60 75 5 651 5 283

2 942 3 467 8 354 8 432 Short-term loansForeign loans 1 096 1 193 1 023 1 012 Domestic loans 1 127 1 165 1 857 1 701

5 165 5 825 11 234 11 145

Foreign loans Interest rate– US Dollar 1,0 to 5,2% 2 173 2 832 1 994 2 630– Euro 0,75 to 6,18% 1 107 905 1 034 783– Japanese Yen 1,4 to 1,45% 135 153 135 153– SA Rand-denominated 9,82 to 13,55% 563 695 563 595

3 978 4 585 3 726 4 161

Maturity of foreign loans– due within one year 1 096 1 193 1 023 1 012– due after one year but within five years 2 010 2 778 1 834 2 548– due after five years 872 614 869 601

3 978 4 585 3 726 4 161

Long-term domestic loansSecured loans– WesBank Corporate Finance – Division

of FirstRand Bank Limited Prime less 2% 1 1 – –This represents loans taken to purchase

certain items of plant and equipment and

motor vehicles. This loan is repayable in monthly instalments of approximately R365 000.

– Mhlatuzi Water Board 14,4% 25 28 – –

This represents loans taken to purchase certain

items of plant and equipment. It is repayable in monthly instalments of approximately R736 000.

Unsecured loans– Loans from BHP Billiton Limited

No dates for repayment have been set Interest-free – 12 – –– Loan from Seardel Investment

Corporation Limited

No dates for repayment have been set Interest-free 34 34 – –

Unsecured loans from subsidiaries– Loans with no fixed terms of repayment Interest-free 5 328 4 637– Loans with no fixed terms of repayment 9,94% 323 646

60 75 5 651 5 283


GROUP IDC(R’m) 2009 2008 2009 2008

18. Loans (continued)Short-term domestic loans– Loans with no fixed terms of Money market-

repayment related 227 265 422 266

– Loans with no fixed terms of repayment Interest-free – – 535 535 – Loans with no fixed terms of repayment 10,071% 900 900 900 900

1 127 1 165 1 857 1 701

Interest and non-interest-bearing loans 5 131 5 779 5 371 5 973

– Long-term interest-bearing loans 2 908 3 421 3 026 3 795

– Short-term interest-bearing loans 2 223 2 358 2 345 2 178

34 46 5 863 5 172

– Long-term interest-free loans 34 46 5 328 4 637 – Short-term interest-free loans – – 535 535

5 165 5 825 11 234 11 145

19. ProvisionsEnvironmental rehabilitation liability

Liability and other closure costs 297 254 59 59

Balance at the beginning of the year 254 211 59 59

Additional provisions 45 51 2 8

Utilised during the year (2) (8) (2) (8)

Trust fund (69) (60) – –

Balance at the beginning of the year (60) (57) – –

Growth for the year (9) (3) – –

228 194 59 59

Environmental rehabilitation liabilityA group company continually contributes to the Environmental Rehabilitation Trust to ensure that adequate funds are

available to pay for mine closure and reclamation costs. The Trust is regarded as a special-purpose entity and is

consolidated as part the Group company. This note compares the net present value of the rehabilitation liability to the

assets held by the Trust.

The assets held by the Trust are intended to fund the environmental rehabilitation liability of the Group company and

are not available for general purposes of the Group.

The directors are aware of the estimated cost of rehabilitation and are satisfied that adequate provision is being made

to meet this obligation. A contingent liability has been disclosed for the issuing of guarantees to the Department of

Minerals and Energy (refer to note 35).




20. RevenueDividends received on available-for-sale financial assets 3 451 1 303 4 621 1 990

Listed 2 150 998 1 458 684

Unlisted 1 301 305 2 406 301

Associated companies – – 757 1 005

Interest income 21 1 877 1 140 1 637 987

Fee income 22 177 199 176 198

Farming, manufacturing and mining income 9 480 4 657 15 6

14 985 7 299 6 449 3 181

Dividends received from the investments made in terms

of section 3(a) of the Industrial Development Act.

Sasol Limited 692 314 – –

21. Net interest incomeInterest incomeCash and cash equivalents 633 512 438 394

Loans and advances to clients 1 223 622 1 199 590

Other 21 6 – 3

Total interest income 1 877 1 140 1 637 987

Financing costsLoans 367 404 421 448

Finance leases 5 5 – –

Net exchange losses 110 68 89 54

Other 88 22 61 3

Total financing costs 570 499 571 505

Net interest income 1 307 641 1 066 482

Interest income on impaired financial assets 176 178 174 174

22. Net fee incomeFee income

Margin earned 40 106 40 106

Guarantee fees 19 11 19 11

Other contract-related fees 101 65 101 65

Other fees 17 17 16 16

Total fee income 177 199 176 198

Net fee income 177 199 176 198



GROUP IDC(R’m) 2009 2008 2009 2008

23. Net capital gainsCapital gains on disposal of available-for-sale investments 326 495 326 495

Capital losses on disposal of available-for-sale investments (198) (7) (1) (3)

Net capital gains 128 488 325 492

24. Net operating incomeIs arrived at after taking into account the following, amongst others:

Impairment of goodwill relating to subsidiaries 30 5

Amortisation of other intangible assets 1 – – –

Auditors’ remuneration – fees 12 9 7 5

(Deficit)/surplus on revaluation of investment property (1) 2 – –

Depreciation of property, plant and equipment 198 167 16 24

Directors’ emoluments (non-executive) – fees for services

as directors (refer to note 25) 2 2 2 2

Executive members’ remuneration (refer to note 25) 73 55 49 36

– Basic salary 24 23 13 13

– Payments for conversion to fixed-term contracts – 5 – 5

– Performance bonuses 41 21 29 15

– Termination benefits – 2 – –

– Contributions to medical aid, retirement benefits,

insurance and other benefits 8 4 7 3

Financing costs 570 499 571 505

Interest expense 460 431 482 451


Impairment of property, plant and equipment 606 – – –

Impairment reversal of property, plant and equipment – 255 – –

Project feasibility expenses (27) 126 (237) 161

Net (profit)/loss on the disposal of property, plant and equipment 2 (5) (2) –

Operating lease rentals 9 13 3 8

Net movement in impairments 1 188 420 1 600 486

– Net increase in impairments 606 191 1 022 278

– Bad debts written off 582 229 578 208

Rental income earned from investment property (1) (1) – –

Operating expenses incurred on investment property 16 19 1 1




GROUP IDC(R’m) 2009 2008 2009 2008

24. Net operating income (continued)Net movement in impairmentsNet increase in impairments 606 191 1 022 278

Food, Beverage and Agro Industries 5 (50) 16 (61)

Public-private Partnerships (88) 2 (88) 2

Mining 299 30 316 89

Chemicals 47 (212) 49 (256)

Metals (4) (64) (8) (40)

Textiles and Clothing (35) 252 94 345

Wood, Paper and Other 107 (52) 338 (79)

Media and Motion Pictures (168) 81 (168) 80

Tourism 16 (30) 32 (31)

Healthcare and Education (87) (21) (89) (50)

Techno Industries 348 91 348 91

Franchising 14 55 14 55

Transportation, Financial Services and Other (19) 3 (19) 3

2010! and Construction 76 1 78 1

Venture Capital 27 45 40 79

Other 68 60 69 50

Bad debts written off 582 229 578 208

Food, Beverage and Agro Industries 3 44 3 43

Public-private Partnerships 108 3 108 3

Mining 31 38 31 38

Chemicals 24 25 24 23

Metals 5 3 4 3

Textiles and Clothing 5 2 2 2

Wood, Paper and Other 4 33 4 34

Media and Motion Pictures 183 22 183 22

Tourism 5 4 5 4

Healthcare and Education 82 7 82 7

Techno Industries 35 9 35 9

Franchising 67 13 67 13

Transportation, Financial Services and Other 24 26 24 7

2010! and Construction 5 – 5 –

Other 1 – 1 –

1 188 420 1 600 486


(R’000) 2009 2008

25. Non-executive directors’ remunerationFees for services as directors

WYN Luhabe Chairman 279 257

MC Nkuhlu Deputy Chairman** 273 150

JR Barton 176 129

NG Nika 167 129

BN Njobe 164 128

JC Mtshali 152 128

NN Nokwe 140 129

MS Moloko 120 128

DH Lewis Deputy Chairman** 102 203

Resigned on 30 September 2008

Adv FA du Plessis Resigned on 30 September 2008 91 182

LR Pitot Appointed on 1 October 2008 89 –

LI Bethlehem Appointed on 1 October 2008 87 –

SK Mapetla Appointed on 1 October 2008 80 –

LL Dhlamini Appointed on 1 October 2008 74 –

LT Kunene Resigned on 30 September 2008 64 128

P Graham Resigned on 30 September 2008 64 128

MW Hlahla* – –

2 122 1 819

* The director has waived her right to earn director’s fees.

** DH Lewis was Deputy Chairman until 30 September 2008 and MC Nkuhlu is Deputy Chairman from 1 October 2008.




Contri-butions

to medicalaid, retire-

Payments for Long- ment bene-conversion to term Perfor- fits, insurance

Basic fixed-term incentive mance and other Total(R’000) salary contracts* bonus bonuses** benefits 2009

25. Executive members’ remuneration MG Qhena 2 673 – 2 544 4 392 688 10 297 GS Gouws 1 826 – 1 413 2 354 1 347 6 940 G van Wyk 1 230 – 1 054 1 748 848 4 880U Khumalo 1 210 – 1 018 1 705 579 4 512 SS Sibisi 1 088 – 759 1 371 1 153 4 371 LWJ Matlhape 1 161 – 874 1 573 496 4 104 K Schumann 1 052 – 809 1 442 456 3 759 LP Mondi 955 – 764 1 407 517 3 643 SAU Meer 1 210 – 634 1 412 260 3 516 NV Sowazi 935 – 688 1 254 437 3 314

IDC 13 340 – 10 557 18 658 6 781 49 336 FOSKOR 10 507 92 – 11 556 1 670 23 825

AM Pitse 2 146 – – 2 385 346 4 877JW Horn 1 519 – – 1 588 77 3 184 TJ Koekemoer 1 150 – – 1 223 239 2 612 G Skhosana 1 040 – – 1 222 243 2 505 K Cele 1 117 – – 1 110 180 2 407 JWT Potgieter 1 091 – – 987 256 2 334 J Vaidhiyanathan Retired 31 March 2009 990 52 – 988 117 2 147 XS Luthuli 960 – – 961 133 2 054 H Malhotra Resigned 6 July 2008 278 40 – 1 092 50 1 460 MP Mosweu Appointed 1 February 2009 216 – – – 29 245

GROUP 23 847 92 10 557 30 214 8 451 73 161

* Represents amounts paid to certain executive members for migrating from permanent employment contracts to fixed-term contracts.

** 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 performance of the corporate, team and individuals.



Contri-butions

to medicalaid, retire-

Payments for Long- ment bene-conversion to term Perfor- fits, insurance Termi-

Basic fixed-term incentive mance and other nation Total(R’000) salary contracts* bonus bonuses** benefits benefits 2008

25. Executive members’remuneration (continued)MG Qhena 2 448 685 360 3 294 472 – 7 259

GS Gouws 1 698 1 631 579 1 830 533 – 6 271

G van Wyk 1 315 649 311 1 364 416 – 4 055

LWJ Matlhape 1 240 943 396 1 131 265 – 3 975

NV Sowazi 928 608 277 890 266 – 2 969

U Khumalo 1 205 – – 1 319 387 – 2 911

K Schumann 1 010 – 109 1 047 348 – 2 514

LP Mondi 930 – – 989 315 – 2 234

SS Sibisi 1 077 – – 983 165 – 2 225

SAU Meer 1 105 – – 546 150 – 1 801

IDC 12 956 4 516 2 032 13 393 3 317 – 36 214

FOSKOR 9 600 – – 5 989 1 215 2 149 18 943

AM Pitse 1 782 – – 1 466 293 – 3 541

JW Horn 1 457 – – 954 19 – 2 430

ND Naidoo Resigned 31 April 2007 70 – – – 16 2 149 2 235

TJ Koekemoer 1 002 – – 771 174 – 1 947

G Skhosana 987 – – 715 127 – 1 829

K Cele 874 – – 591 108 – 1 573

J Vaidhiyanathan 837 – – 619 101 – 1 557

H Malhotra 841 – – 618 91 – 1 550

XS Luthuli 840 – – 255 101 – 1 196

JWT Potgieter 910 – – – 175 – 1 085

GROUP 22 556 4 516 2 032 19 382 4 522 2 149 55 157

* Resigned on 30 September 2008.

** Financing in the form of equity stakes, not loans.




GROUP IDC(R’m) 2009 2008 2009 2008

26. TaxationSouth African normal taxation

Current – current year 679 21 – 1

Current – prior year 1 17 1 22

Current – STC 19 – – –

Deferred – current year 145 115 21 (166)

Deferred – prior year (20) – (14) –

Deferred – tax rate change – 1 – –

Foreign taxation 1 – 1 –

825 154 9 (143)

Tax rate reconciliation % % % %

South African normal tax rate 28 29 28 29

The normal rate of taxation for the year has been

adjusted as a consequence of:

– dividend income (9) (9) (33) (33)

– capital gains and losses (3) (4) (8) (8)

– provisions and impairments 3 4 8 7

– calculated taxation losses (2) (6) – –

– other permanent differences (4) (10) 5 (3)

Effective tax rate 13 4 – (8)

27. Financial and operating leasesFinance leases – Group as lesseeThe 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:

Land and buildings:

– due within one year 7 8 – –

– due after one year but within five years 21 24 – –

– due after five years 28 32 – –

Total minimum lease payments 56 64 – –

Amount representing finance charges (28) (33) – –

Present value of minimum lease payments 28 31 – –

Current portion 3 3 – –

Long-term portion 25 28 – –

28 31 – –

The finance lease is between Foskor (Pty) Limited and Mhlathuze 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 17 years remaining at 31 March 2009. 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.



GROUP IDC(R’m) 2009 2008 2009 2008

27. Financial and operating leases (continued)Operating leases – Group as lesseeCertain items of computer and office equipment are

leased by the Group.

Commitments for future minimum rentals payable under

non-cancellable leases are as follows:

– due within one year 7 4 4 –

– due after one year but within five years 12 4 3 –

19 8 7 –

The company leases photocopiers and faxes under various

agreements, which terminate between 2008 and 2009.

28. Cash generated/(utilised) by operationsProfit before tax 6 446 4 105 3 566 1 733

Share of (profit)/loss of equity-accounted investments (1 132) (1 950) – 13

Net operating income 5 314 2 155 3 566 1 746

After providing for:

Impairment of goodwill relating to subsidiaries 30 5

Amortisation of other intangible assets 1 – – –

Impairment of goodwill relating to associated entities 83 25 – –

Depreciation of property, plant and equipment 198 167 16 24

Loss/(profit) on disposal of property, plant and equipment 2 (5) (2) –

Impairment of property, plant and equipment 606 (255) – –

(Deficit)/surplus on revaluation of investment property (1) 2 – –

Dividends received (3 451) (1 303) (4 621) (1 990)

Interest income (1 877) (1 140) (1 637) ( 987)

Interest expense 460 431 482 451

Non-cash portion of project feasibility expenses (27) 105 ( 23) 156

Net capital gains (128) (488) (325) (492)


Specific and portfolio impairments 1 188 420 1 600 486

2 508 187 (855) (552)

Changes in working capital:

(Increase)/decrease in other receivables (224) (606) 206 (442)

Decrease/(increase) in inventories 216 (332) 5 (9)

Decrease/(increase) in non-current assets held-for-sale 91 (91) – –

(Decrease)/increase in other payables (272) 731 134 104

(Decrease)/increase in liabilities directly associated with non-current

assets held-for-sale (12) 12 – –

2 307 (99) (510) (899)




GROUP IDC(R’m) 2009 2008 2009 2008

29. Taxation paidNet owing at the beginning of the year (12) (199) (7) (216)

Normal tax provided in income statement (refer to note 26) (700) (38) (2) (23)

Net (receivable)/owing at the end of the year (24) 12 (122) 7

(736) (225) (131) (232)

30. Proceeds on realisation of investmentsOriginal cost 52 92 52 92

Net capital gain on disposal of investment 128 488 325 492

180 580 377 584

31. Acquisition of subsidiariesProperty, plant and equipment 45 78

Other receivables 24 5

Inventories 54 12

Other payables (41) (3)

Bank overdraft (15) –

Loans (67) (92)

Total purchase consideration – –

Less: cash and cash equivalents acquired (15) –

Cash outflow on acquisition of shares (15) –

32. Disposal of subsidiariesOther receivables – 4

Loss on disposal of investments – (4)

Selling price – –

Less: cash and cash equivalents disposed of – –

Net cash received – –



GROUP IDC(R’m) 2009 2008 2009 2008

33. CommitmentsIn respect of

Undrawn financing facilities approved 22 103 15 982 22 103 15 982

Undrawn guarantee facilities approved 241 410 241 410

Capital expenditure approved – contracted – 115 – 115

Capital expenditure approved by subsidiaries 2 134 276

– Contracted 2 131 276

– Not contracted 3 –

Capital expenditure approved by equity-accounted

investments 243 114

– Contracted 146 78

– Not contracted 97 36

Total commitments 24 721 16 897 22 344 16 507

Less: counter-guarantees obtained from partners in respect of

financing and guarantees to be provided to major projects 121 104 121 104

Commitments net of counter-guarantees 24 600 16 793 22 223 16 403

Commitments will be financed by loans and internally generated funds.

GROUP IDC(R’m) 2009 2008 2009 2008

34. Guarantees and counter-guaranteesGuarantees in respect of foreign loans taken up by wholly owned

subsidiaries – – 236 392

Guarantees issued in favour of third parties in respect of finance

provided to industrialists 1 368 631 968 645

Total industrial financing guarantees 1 368 631 1 204 1 037

Less: counter-guarantees obtained from partners in respect of

financing and guarantees to be provided to major projects 65 94 65 94

1 303 537 1 139 943

Sundry guarantees issued by subsidiaries 242 140

Guarantees issued by equity-accounted investments 126 37

Guarantees net of counter-guarantees 1 671 714 1 139 943




GROUP IDC(R’m) 2009 2008 2009 2008

35. Contingent liabilitiesWater clean-up and waste disposal* 24 15 24 15

Estimated costs to complete dismantling and

decontamination of plant 8 2 8 2

Estimated costs to treat Cr6 + liquors 5 1 5 1

Estimated cost of rehabilitation agreement 3 4 3 4

Annual cost of abstraction and disposing of groundwater

for approximately 14 years 8 8 8 8

Contingent liabilities of subsidiariesA subsidiary had mine rehabilitation guarantees amounting to

R200 million at year-end. In line with the requirements set out by the

Department of Minerals and Energy (“DME”), this amount needs to be

increased to R250 million by 31 July 2009. However, these guarantees

and the agreement reached with the DME were based on the

environmental rehabilitation and closure costs assessment that was

performed during the 2008 financial year.The guarantees will be increased

by R60 million before July 2010, and R40 million before July 2011 to equal

the R351 million net shortfall for the mine closure costs.

A subsidiary has appealed to the Income Tax Court for tax appeals for

resolution of the revised 1999 income tax assessment.The assessment

raised includes the F100 mining ore stockpiles as trading stock, and has

given rise to a potential additional tax charge of R60,6 million as well as

interest of R51,2 million. The hearing was held during the financial year

under review, and the presiding judge ruled in favour of the subsidiary.

The judgement was received in December 2008.The South African Revenue

Service has appealed the merits of the decision and the interest charge

is not expected to be challenged on appeal. It is likely that the matter will

be heard in the Appellate Division of the Supreme Court in the second half

of 2009.

Cotton contracts entered into with various cotton suppliers are

binding and could result in liabilities for a subsidiary if they are

cancelled or if they are not utilised for operational purposes but

instead realised for a price lower than their cost.

Contingent liabilities of joint ventures and partnerships 6 – 6 –

A fund’s investment committee has approved an investment

transaction to acquire a 35% shareholding in Mangwanani

Group (Pty) Limited, subject to fulfilment of certain conditions precedent.

These conditions precedent were not fulfilled before the year ended on

31 March 2009 and prior to the finalisation of the fund’s financial

statements at that date.

Contingent liabilities of equity-accounted investments 5 5



35. Contingent liabilities (continued)An equity-accounted investment, had the following contingent liabilities at year-end:

Fire: Several claims from third parties were lodged against a group company in respect of damages allegedly caused by a

bush fire. A court case addressing these claims was scheduled for early 2009.The total value for these claims amounted to

R3,3 million at the balance sheet date. The group company is fully insured for third-party claims.

Suretyship: A group company participates in the pooled banking facilities granted by FirstRand Bank Limited. As such,

the Group has provided suretyship in favour of FirstRand Bank Limited in respect of its obligations to the bank.

Global Forest Products Provident Fund Guarantee: Some employees of the Group are members of the Global Forest

Products Provident Fund. The Mondi Provident Fund valuation report has disclosed that part of the contingency

reserves, after approval from the Financial Services Board, must be allocated to the employees who transferred from the

Mondi Provident Fund to the Global Forest Products Provident Fund. Management of the Group has decided to include

the value of the contingency reserves to be allocated to the employees who transferred from the Mondi Provident

Fund to the Global Forest Products Provident Fund in the benefit statements of the individual members and that the

companies York Timbers (Pty) Limited and South African Plywood (Pty) Limited, will stand good for these amounts.

* As a result of the process used in the manufacturing of chemical products produced by a subsidiary, the groundwater has become contaminated with a by-product,

Chrome 6. In terms of the minimum requirements of the Water Act, 37 of 1998, part 5, Section 20, and the Environment Conservation Act, 73 of 1989, part V,

subsection 21, the subsidiary is required to remove the contamination and dispose of the waste material.

36. Retirement benefit informationPension and provident schemesThe 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 the income statement represent contributions payable to the scheme by the Group at rates

specified in the rules of the scheme.

Defined contribution schemesEmployees and group companies contribute to the provident funds on a fixed-contribution basis. No actuarial valuation

of these funds is required. Contributions, including past-service costs, are charged to the income statement when

incurred.

Defined benefit schemeA 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 2006.




GROUP(R’m) 2009 2008

36. Retirement benefit information (continued)The amounts recognised in the balance sheet are as follows:

Present value of funded obligations 314 319

Fair value of plan assets (298) (324)

Present value of unfunded obligations 16 (5)

Unrecognised actuarial (losses)/gains (16) 5

Liability recognised – –

The movement in the defined benefit obligation:

Opening balance 319 278

Current-service cost 1 –

Interest cost 27 18

Actuarial (gains)/losses (7) 47

Benefits paid (26) (24)

Closing balance 314 319

Movement in plan asset:

Fair value of plan assets at the beginning of the year 324 314

Expected return on asset 30 23

Actuarial (loss)/gain recognised during the year (56) (17)

Contributions paid into plan – 4

Fair value of plan assets at the end of the year 298 324

The amounts recognised in the income statement are as follows:

Current-service cost 1 1

Interest cost 27 18

Expected return on assets (30) (23)

Net actuarial loss recognised during the year 23 38

Total included in operating expenses 21 34

The actual return on plan assets was:

Expected return on plan assets 29 602 22 745

Actuarial (losses)/gains on plan assets (30 012) 9 098

Actual return on plan assets (410) 31 843

Plan assets are comprised as follows:

Equity instruments 40% 54%

Cash 25% 37%

Debt instruments 17% 8%

Other 18% 1%

100% 100%

The principal actuarial assumptions for accounting purposes were:

Discount rate (%) 7,50 8,75

Expected return on plan assets (%) 8,00 9,50

Fund salary increases (%) 4,00 5,50

Future pension increases (%) 3,00 3,75

Normal retirement age 60 60



36. Retirement benefit information (continued)

The sensitivity of the overall pension liability to changes in the weighted principal assumptions is:

IMPACT ON OVERALL LIABILITY 2009 2008

Inflation rate (increase of 1%) 8,86% increase 9,3% increase

Inflation rate (decrease of 1%) 9,28% decrease 7,7% decrease

The expected contributions to the post-employment pension scheme for the year ending 31 March 2010 are

R393 120.

GROUP IDC(R’m) 2009 2008 2009 2008

Post-retirement medical benefitsSome 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 the income statement.

The amounts recognised in the balance sheet are as follows:

Present value of unfunded obligation:

Discovery Health members 206 200 139 133

Present value of unfunded obligation 206 200 139 133

Movement in the liability recognised in the balance sheet:

At the beginning of the year 200 176 133 108

Contributions paid (12) (8) (6) (5)

Current-service costs 3 3 3 2

Interest cost 18 15 12 9

Non-current medical obligation classified as held-for-sale – (3) – –

(Surplus)/deficit (3) 17 (3) 19


The principal actuarial assumptions used for accounting

purposes were:

– Discount rate (%) 8,25 8,75 8,25 8,75

– General inflation rate (%) 4,50 6,00 4,50 6,00

– Medical inflation rate (%) 6,50 7,50 6,50 7,50

– Normal retirement age 58/60/65 58/60/65 58/60/65 58/60/65

The expected contributions to post-employment medical plans for the year ending 31 March 2010 are R13,13 million.




37. Related-party transactions

Financing Type of balance Interest/ financing/

(R’m) Financing funding repayment Year ofDirector Company approved 2009 2008 rate terms Directors’ interest approval

WYN Women’s 50 35 34 Not Equity** Chairman of the fund. 2002Luhabe# Private applicable 33% shareholder in the

Equity Fund management company Trust of the fund.

LT Guma 537 537 – Variable rate Redeemable 50% holding in Ziyazi 2008Kunene* Tourism linked to preference Investment (Pty) Limited,

Holdings prime shares** which has a 5% stake in (Pty) Limited a consortium that holds

35% in Guma Tourism Holdings (Pty) Limited.

MW Praxley 14 14 14 RATIRR Redeemable 14% in Praxley Consortium 2007Hlahla Consortium of 8% preference Five (Pty) Limited.

Five shares**(Pty) Limited

On Digital 275 – – Not Equity** 6,66% holding in Lereko 2008Media (Pty) applicable Media (Pty) Limited, whichLimited has a 30% stake in On

Digital Media (Pty) Limited.

LI Hans 100 83 89 Not Equity** A trustee of the Hans 1999Bethlehem Merensky applicable Merensky Foundation, the

Holdings controlling body with a (Pty) 57,4% interest in HansLimited Merensky Holdings (Pty)

Limited.

NN Neotel (Pty) 600 – 600 Three- Redeemed Holds 0,333% of the 2006Nokwe Limited month March 2009 BEE consortium that

JIBAR holds 5% of Neotel rate (Pty) Limited.

+ 1,25%100 47 – Three- Repayable 2008

month after JuneJIBAR rate 2013

+ 4,75%800 376 – Three- Repayable 2008

month after JuneJIBAR rate 2013

+6%300 141 – Minimum Repayable 2008

of 8% of after JuneRATIRR + 2019

50%of increase

in market value



37. Related-party transactions (continued)Related-party within the national sphere of government

Financing Type of balance Interest/ financing/

(R’m) Financing funding repayment Year ofCompany approved 2009 2008 rate terms approval

Landbank 25 5,4 10 7% Monthly repayments 2000of R416 665 on loan

* Resigned on 30 September 2008

** Financing in the form of equity stakes, or preference shares not loans

# The 5% holding in Women’s Investment Portfolio Holdings was disposed of.

Related party within the National Receiving of Purchase of OutstandingSphere of Government services goods balances

2009Eskom Limited – 427 –Transnet Limited 418 – –South African Airways (Pty) Limited 19 – –Telkom Limited 4 – –

441 427 –

2008Eskom Limited – 94 –Transnet Limited 424 – –South African Airways (Pty) Limited 13 – –Telkom Limited 6 – –

443 94 –

The remuneration information of key management personnel and directors is disclosed in note 25. All employees, includingkey management personnel, are precluded from conducting transactions with the Corporation in terms of the Corporation’sCode of Business Ethics.

38. Critical accounting estimates and assumptionsEstimates and judgements are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances.

The Corporation makes estimates and assumptions concerning the valuation and impairment of financial assets. Theresulting valuation estimates will, by definition, not be equal to the related actual value. The estimates and assumptionsthat have a significant risk of causing a material adjustment to the value of the financial assets are discussed below.

Valuation and impairment of financial assetsListed equities are valued based on their listed value (fair value) on 31 March 2009.

Unlisted equities are valued using various valuation methods, including the free cash flow, price earnings (PE) and netasset value (NAV) bases.

Judgements and assumptions in the valuations and impairments include:– free cash flow of investees– replacement values– determining the discount or premium applied to the IDC’s stake in investees– sector/subsector betas– debt weighting – this is the target interest-bearing debt level– determining the realisable value of assets– probabilities of failure in using the NAV model

39. Comparative figuresComparative figures have been reclassified in notes 7, 12 and 24 to the financial statements to achieve better presentation.


IDC netIssued Percent- Shares at IDC net indebtedness

Share share age cost and indebtedness to by holdingclass capital interest fair value holding company company

(R’m) 2009 2008 2009 2008 2009 2008

IDC subsidiariesDymson Nominee

(Pty) Limited Ordinary – 100 2 2 17 16 – –

Findevco (Pty) Limited Ordinary – 100 – – – 223 (323) (646)

Foskor (Pty) Limited Ordinary 9 85 8 8 – 1 450 – –

Herdmans SA (Pty) Limited Ordinary – 100 – – 63 59 – –

Impofin (Pty) Limited Ordinary – 100 – – – – (87) (89)

Kindoc Investments Limited Ordinary – 100 – – 154 154 – –

Kindoc Sandton

Properties (Pty) Limited Ordinary – 100 – – 93 86 – –

Konbel (Pty) Limited Ordinary – 100 – – – – (10) (10)

Konoil (Pty) Limited Ordinary – 100 – – – – (5 215) (4 523)

Prilla 2000 (Pty) Limited Ordinary 4 100 14 14 174 122 – –

Sustainable Fibres Solutions

(Pty) Limited Ordinary – 67 – – 85 70 – –

South African Fibre Yarn Rugs

(Pty) Limited Ordinary 37 69,4 15 – 172 – – –

WM Eachus (Pty) Limited Ordinary – 80 – – – – – –

Other subsidiaries Ordinary – 100 1 1 315 224 (16) (15)

40 25 1 073 2 404 (5 651) (5 283)

Fair value adjustment 29 115 29 653

Impairment adjustment (30) (14) (382) (171)

Fair value 29 125 29 664 691 2 233 (5 651) (5 283)

Opening fair value 29 664 14 086

Movement in fair value during the year

Findevco (Pty) Limited 48 42

Foskor (Pty) Limited 98 7 720

Kindoc Sandton Properties (Pty) Limited 104 (2)

Konoil (Pty) Limited (835) 7 805

Other 46 13

Closing fair value 29 125 29 664

The aggregate net profits and losses after taxation

of subsidiaries attributable to the IDC were as follows:

Profits 2 957 1 116

Losses (110) (50)

2 847 1 066

All subsidiaries have the same reporting date as the holding company, except for Sustainable Fibre Solutions has a year end of June.


Annexure A: Subsidiariesfor the year ended 31 March 2009



Annexure B: Equity-accounted Associated Entitiesfor the year ended 31 March 2009

Total TotalGROUP Accounting Percentage exposure exposure(R’m) periods* interest 2009 2008

Companies

Broadband Infraco (Pty) Limited Provides telecommunication

infrasructure 01/03/08 – 28/02/09 26,0 337 –

Broodkraal Landgoed (Pty) Limited Farms table grapes 01/07/07 – 30/06/08 32,0 120 113

Capensis Management Operates a hospital 31,1 210 –

Chuma/Malibongwe/

Savannah Platinum SPV Mining and processing

(Pty) Limited of platinum metals 01/07/07 – 30/06/08 26,1 681 773

Duferco Steel Processing

(Pty) Limited Processes steel coil 01/10/07 – 30/09/08 50,0 152 224

Eastern Produce Farms tea, coffee

Malawi Limited and macadamia nuts 01/01/08 – 31/12/08 26,8 90 105

Hans Merensky Holdings Holds investments in timber

(Pty) Limited and agricultural industries 01/01/08 – 31/12/08 42,6 387 307

Hernic Ferrochrome Operates a ferrochrome

(Pty) Limited plant 21,3 567 438

Hulamin Limited Asset-leasing company 01/01/08 – 31/12/08 25,7 966 1 048

Incwala Resources (Pty) Limited Platinum mining 01/10/07 – 30/09/08 23,6 1 878 3 846

Karsten Boerdery (Pty) Limited Farms table grapes

and dates 01/06/07 – 31/05/08 36,6 152 109

Merafe Limited Operates chrome and

alloys plant 01/01/08 – 31/12/08 22,3 566 335

Micawber 325 (Pty) Limited Investment holding

and property rental company – 308

Mozal S.A.R.L. Produces primary

aluminium metal 01/07/07 – 30/06/08 24,0 2 913 2 450

Sheba’s Ridge Platinum Produces base metals

and platinum group metals 01/01/08 – 31/12/08 26,0 16 16

Umicore Autocat South Manufactures automotive

Africa (Pty) Limited catalysts 01/01/08 – 31/12/08 45,0 441 397

The York Timber Organisation

Limited Core business is sawmilling 01/07/07 – 30/06/08 29,8 470 387

Other associates various 585 420

10 531 11 276

* The accounting periods for which the financial statements of the associated entities have been prepared, where they are different from that of the investor, are

disclosed above.



Annexure B: Equity-accounted Associated Entities_continuedfor the year ended 31 March 2009

Total Total IDC exposure exposure(R’m) 2009 2008

Opening fair value 14 285 11 368

Movement in fair value during the yearChuma/Malibongwe/Savannah Platinum SPV (Pty) Limited (916) (123)

Duferco Steel Processing (Pty) Limited – (142)

Eastern Produce Malawi (15) (22)

Hans Merensky Holdings (Pty) Limited (190) 72

Hernic Ferrochrome (Pty) Limited (111) 150

Hulamin Limited (903) 702

Incwala Resources (Pty) Limited (1 298) 221

Merafe Limited (1 351) 1 003

Micawber 325 (Pty) Limited (515) 54

Mozal S.A.R.L. (663) 217

Umicore SA (Pty) Limited (205) 359

York Timber Limited (448) 572

Other (39) (146)

Closing fair value 7 631 14 285

The aggregate amounts were as follows:

Balance sheetNon-current assets 41 608 43 442

Current assets 16 859 14 246

58 467 57 688

Equity 31 890 33 762

Non-current liabilities 15 668 14 460

Current liabilities 10 909 9 466

58 467 57 688

Income statementRevenue 33 541 22 011

Profits 4 203 3 093

Losses (578) (219)



Annexure C: Partnerships and Joint Venturesfor the year ended 31 March 2009

Percentage Total exposure Total exposure(R’m) interest 2009 2008

Partnerships and joint ventures*Wholesale Venture Capital Funds various 173 277

173 277

The aggregate net profits and losses after taxation of

partnerships and joint ventures attributable to the

IDC were as follows:

Profits 15 26

Losses (15) (38)

– (12)

* Carrying value includes long-term interest-free partners’ loans.



Annexure D: Financial Risk Management for the year ended 31 March 2009

Introduction and overview

A fundamental shift in the perception of risk management

has taken place globally over the past few years. It has

moved from a back office reporting/control/cost centre

into a strategic competitive weapon. Modern risk

management is now perceived as playing a key role in the

major strategic decisions of an organisation.

Risk management approach

Enterprise-wide risk managementIn line with sectoral best practice, the IDC has instituted a

robust Enterprise-Wide Risk Management (EWRM) process,

founded on a framework that is shareholder value-based,

organisationally embedded, supported and assured, and

reviewed on a continuous basis. EWRM is a process that

involves staff members at every level of the Corporation in

setting strategy and making operational decisions based on

an analysis of events that may impact the IDC. Accordingly,

risk management at the IDC is both decentralised and

centralised, with every member of staff of the Corporation

being responsible for risk management. EWRM is designed

to assist the IDC with the identification, quantification and

prioritisation of material risks that have the ability to impact

the business. The EWRM methodology implemented

encompasses the following components:

• shareholder-based risk identification and prioritisation;

• risk framework embedding;

• risk assurance; and

• board risk review.

The objective of EWRM is to ensure that these components

provide a continuous, reiterative process of risk

identification, validation, management and review. The

EWRM process focuses on the main strategic risks that the

IDC is exposed to.

A common “risk universe” comprising four major categories

– strategic, financial, compliance and operational risk

categories – has been identified and clearly communicated

to all stakeholders. Moreover, the full alignment of the

three-year audit plan of the Internal Audit Department to

the annual risk assessment findings further entrenches the

risk assurance process.

The IDC’s business model strives to maximise financial and

developmental returns while maintaining an acceptable

risk profile.

Risk appetiteOne of the key practices of risk management is the

determination/quantification of an organisation’s risk

appetite (also known as its risk tolerance) on an enterprise-

wide basis. Risk appetite is defined by the extent to which an

organisation tolerates risks as described by performance

indicators, operational parameters and process controls in

the pursuit of increased shareholder’s value.The

determination of the IDC’s risk appetite plays an important

role in the successful implementation of its EWRM

framework. It is also considered by the IDC to be a leading

best practice methodology to assist the Corporation to

achieve its strategic objectives while maintaining a sound

platform for future viability and continued growth.

Defining the IDC’s risk appetite assists it to:

• make more informed business decisions;

• focus on those risks that exceed the defined appetite for

risk;

• develop a business culture with a high awareness of risk;

and

• strike a balance between daring and prudence.

The IDC’s risk appetite is linked and aligned to its mandate

and business objectives and is an agreement between its

business goals and the related risks.

Risk Management Department

The Risk Management Department (RMD) of the IDC

proactively promotes risk awareness, while monitoring and

overseeing the management of key risks facing the

Corporation on the basis of the EWRM framework

mentioned above. RMD’s primary objectives are:

• to support the receipt of appropriate financial and

development returns while maintaining an acceptable

risk profile;

• to support the application of best practice principles in

order to analyse and manage risks so as to ensure the

strongest protection for the Corporation’s assets, its

financial results and, consequently, its capital;

• to promote a culture of increased risk awareness

throughout the Corporation utilising/applying EWRM

activities/techniques;

• to establish, review and implement various risk

management policies, systems and/or frameworks;

• to improve the operational effectiveness of the

department; and

• to attract, retain and develop RMD’s human capital

resources.

The key roles and responsibilities of the RMD include:

• playing a catalytic role in instituting and promoting a

sustainable and robust EWRM process;

• coordinating the risk management programme

throughout the Corporation, including the annual review

and assessment of the IDC’s risk profile;



• inculcating a corporate-wide culture of risk awareness;

• developing corporate-wide monitoring, assurance and

reporting processes for risk management;

• regularly reporting to the Chief Risk Officer, Exco, the Board

Risk Management Committee and the IDC Board on

critical risk areas identified, on progress with regard to the

mitigation of these risks, and on any fundamental breaches

of approved risk management policy guidelines;

• assisting in refining the IDC’s risk appetite and aligning it

to the IDC’s mandate as well as corporate and

operational targets, whilst ensuring the translation of

such a risk appetite into appropriate systems of control;

• creating awareness of the long-term effects of

investment decisions and setting investment, exposure

and risk limits; and

• advising strategic business units and support

departments within the IDC on risk management

matters, including mitigating controls, processes and

procedures.

Major risk categories identified at IDC

The key risks facing the IDC have been classified according

to the following six broad risk categories:

• Strategic,

• Financial – Credit,

• Financial – Market,

• Liquidity,

• Operational,

• Capital management.

Strategic risk

This category refers to the risk of an organisation’s value

collapsing, stagnating or migrating as a result of a failure to

adapt to changing industry profit patterns. Key risks include

macroeconomic risk, which has recently increased

significantly due to, inter alia, power disruptions, oil price

volatility and surging inflation, changing customer priorities,

competitive threats, brand risk, changes in access to

financial capital, evolving distribution channels, legal and

regulatory changes, and geographical developments.

Other risks included in this category are reputational risk,

developmental risk and stakeholder management risk, ie

failing to meet the Corporation’s mandate.

The IDC Board and Executive Management have the

responsibility for defining the strategic direction of the IDC

and ensuring that it is managed in a manner consistent

with this strategy. The challenge is for the global strategic

and risk perspectives to be communicated and understood

by others at all levels of the Corporation such that

combined there is sufficient information to reflect the

overall attitude to risk and to determine whether or not

risks should be accepted, mitigated or avoided. This

challenge can be addressed through the definition and

measurement of the Corporation’s risk appetite mentioned

above.

Approach to managing strategic riskThe management of the Corporation’s strategic risks

include:

• ongoing review and analysis of the Corporation’s risk

appetite including determining whether or not risks

should be accepted, mitigated or avoided;

• undertaking and reviewing on an annual basis, the

annual EWRM assessment, which includes shareholder-

based risk identification and prioritisation; risk framework

embedding; risk assurance and risk review;

• evaluating the adequacy and efficiency of the risk

policies, procedures, practices and controls applied within

the Corporation in the day-to-day management of its

business;

• developing a risk mitigation strategy to ensure that the

Corporation manages the risks in an optimal manner;

• introducing measures that may serve to enhance the

adequacy and efficiency of the risk management policies,

procedures, practices and controls applied within the

Corporation; and

• determining and reviewing the maximum mandate levels

for the various credit and asset liability committees.

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 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 and

financial compliance risk, as well as credit and settlement

risk related to the potential for counterparty default. Other

financial risks faced by the Corporation include investment

concentration risk in certain sectors, regions or

counterparties as well as the risk of overdependency on a

limited number and/or types of products and the risk of

margin erosion due to inappropriate pricing relative to the

cost of funding capital. 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,

either because of bankruptcy or for any other reason,

thereby causing the asset holder to suffer a financial loss.



Annexure D: Financial Risk Management_continuedfor the year ended 31 March 2009

Approach to managing credit riskThe 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 business partners 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 provision of loans,

advances, quasi-equity, equity investments and guarantees

represent the Corporation’s core business.

The IDC may be exposed to various forms of credit risk

concentration which, if not properly managed, could cause

significant losses that could threaten its financial health.

Accordingly, the IDC considers the management (including

measurement and control) of its credit concentrations of vital

importance. IDC currently has various established

methodologies for the management of the credit

concentrations it is exposed to, including counterparty

(individual and group), sector and region/country.The IDC

has established risk concentration limits and policies on

individual and group counterparties, geographical locations

and sector exposures in accordance with its credit risk

strategy.The status of the IDC investment book is reported to

the IDC Executive Management, the Board Risk Management

Committee and the IDC Board on a regular basis.

Credit approval committeesCredit risk is managed by means of clearly defined

mandates and delegated authorities. The IDC Board’s

responsibilities include considering significant financial

applications and monitoring significant investment

decisions. In terms of the IDC delegation matrix, the IDC

Board has delegated credit-approving authority to two

committees, ie the Credit Committee and Special Credit

Committee, which each has its own mandate. All

transactions above R250 million, as well as exceptions to

policies and limits and issues with major strategic

implications, are considered by the IDC Board.

Due diligence and investment screeningThe IDC completes a thorough due diligence process, by a

multidisciplinary team, prior to approving a facility. This

covers financial, technical, legal, marketing, management

and, where appropriate, environmental risks, which are

reported on as part of the submission for approval to the

relevant decision-making structures. Financial viability of a

business’s and owners’ commitment are some of the key

factors when considering an application for finance. Prior to

a due diligence commencing, all applications for funding

are subject to a screening process to determine whether

they meet the basic criteria for IDC finance.

When feasibility studies are completed on larger projects,

risks taken into consideration include marketing,

technology, financial, environmental and manufacturing

risks. The robustness of the project is evaluated and

sensitivity analyses are performed on various aspects.

Financial viability of a project and a strong financial

structure are key factors for project approval. Once project

finance has been approved, the IDC appoints

representatives to the project steering and finance

committees during the construction period. IDC employees

subsequently closely monitor such investments.

Post-investment monitoringThe IDC’s loan and equity books are reviewed on a

continuous basis so as to proactively monitor and manage

the quality of the book and identify any developing

deterioration signals. A number of pre-emptive signals are

reviewed to ensure timeous action to prevent/limit

financial losses. This includes the receipt and analysis of

clients’ financial statements to compare against projections

and monitoring of adherence to predetermined covenants

and milestones.

Where considered necessary, the IDC may appoint directors

to the boards of directors of companies where the IDC has

an equity investment.

Clients with high-risk profiles are identified and given

special attention within the strategic business units, and

ailing companies are transferred to the Workout and

Restructuring Department to manage the IDC’s exposure

and minimise potential losses and maximise sustainable

development returns. This department also assists

companies in recovering from difficulties in order to limit

any job losses due to business closures. Two investment

monitoring committees (IMC), namely IMC Equity and IMC

Loans, meet regularly to monitor the performance of the

IDC’s equity and loan investments and decide on the

appropriate course of action to be taken with regard to

non-performing clients.

Other measures to ensure that credit risk is effectively

managed include:

• reviewing of the impairment policy and the adequacy of

impairments and related accounting policy in

consultation with the Board Audit Committee where

necessary;

• reviewing the status of the investment book in line with

the risk appetite of the Corporation;

• determining and reviewing of credit collections policies;

• recommending credit mandates to the Board; and

• ensuring that investment products are adequately priced

for risk incorporating development returns achieved.



Sectoral analysis

GROUP IDCLoans and Investment Loans and Investment

advances to clients securities advances to clients securities

(R’m) 2009 2008 2009 2008 2009 2008 2009 2008

Carrying amount as per

notes 4 and 7* 8 820 6 133 42 355 61 245 7 011 4 773 27 665 40 490

Concentration by sector:Agriculture and food 728 556 102 215 589 539 102 215

Chemicals and petroleum 391 426 16 070 21 869 308 411 1 380 1 114

Finance and insurance 140 1 204 995 825 117 5 995 825

Metals and machinery 525 332 10 406 18 044 403 311 10 406 18 044

Mining 1 154 502 11 711 17 407 918 493 11 711 17 407

Other manufacturing 575 313 364 1 502 452 304 364 1 502

Other services 800 315 2 328 1 192 624 294 2 328 1 192

Trade, catering and accommodation 1 907 1 279 70 10 1 556 1 249 70 10

Transport, communication and utilities 2 600 1 206 309 181 2 044 1 167 309 181

8 820 6 133 42 355 61 245 7 011 4 773 27 665 40 490

* Carrying value of available-for-sale investments, excluding investments in subsidiaries, associates and joint ventures.

The above graph represents the IDC’s investment portfolio on an economic sector basis. The portfolio is reasonably well

spread with concentration in three main sectors: Mining, Metals and Machinery, and Finance and Insurance. The

concentration in the Metals sector comprise BHP Billiton, Mittal and Mozal; in the Mining sector Sishen Iron Ore (Kumba);

and in the Finance and Insurance sector, the IDC’s investment in Konoil.

The Corporation analyses its exposure to various business sectors and has predetermined boundaries for each sector.

IDC’s loans, advances and investmentexposure per economic sector

as at 31 March 2009Agriculture and food (2%)

Chemicals and petroleum (5%)

Finance and insurance (3%)

Metals and machinery (31%)

Mining (36%)

Other manufacturing (2%)

Other services (8%)

Trade, catering and accommodation (5%)

Transport, communication and utilities (7%)




Geographical analysis


advances to clients securities advances to clients securities(R’m) 2009 2008 2009 2008 2009 2008 2009 2008


notes 4 and 7* 8 820 6 133 42 355 61 245 7 011 4 773 27 665 40 490

Concentration by location:Outside Africa 254 246 854 1 755 211 242 854 1 755

SADC 2 524 564 511 392 2 082 553 511 392

South Africa 5 076 4 664 40 990 59 044 3 940 3 330 26 300 38 289

Sub-Saharan 966 659 – 54 778 648 – 54

8 820 6 133 42 355 61 245 7 011 4 773 27 665 40 490


The above graph represents the IDC’s investment portfolio on a regional basis. When excluding the concentration resulting

from the exposure to Konoil (Mpumalanga) and Sishen Iron Ore (Gauteng), the portfolio is reasonably well balanced on a

regional basis.

Internal rating model and pricingThe IDC is progressing well in developing internal credit ratings and probability of default calculation methodologies. The

methodologies are principally based on Moody’s KMV products, including risk analyst, RiskCalc South Africa, together with

the internal rating templates (IRTs). To date IRTs have been developed and implemented for SME and middle-market

business partners. The probabilities of default produced by the models are one of the tools utilised in determining the

credit risk and appropriate pricing structure for facilities, including consideration for the investments or loans’ development

returns.

IDC’s loans, advances and investmentexposure on a regional basis

as at 31 March 2009KwaZulu-Natal (21%)

Northern Cape (1%)

Outside Africa (3%)

Rest of Africa (3%)

SADC (8%)

Eastern Cape (7%)

Western Cape (2%)

Gauteng (53%)

Mpumalanga (1%)

Limpopo (2%)

North West (1%)



Credit risk exposure


advances to clients securities advances to clients securities(R’m) 2009 2008 2009 2008 2009 2008 2009 2008


notes 4 and 7* 8 820 6 133 42 355 61 245 7 011 4 773 27 665 40 490

Individually impairedLow risk 959 788 1 690 902 959 788 1 690 902

Medium risk 560 329 537 38 560 319 537 38

High risk 385 759 14 67 385 755 14 67

Gross amount 1 904 1 876 2 241 1 007 1 904 1 862 2 241 1 007

Allowance for impairment (1 637) (1 578) (903) (292) (1 637) (1 571) (903) (292)

Carrying amount 267 298 1 338 715 267 291 1 338 715

Past due but not impairedLow risk 40 20 40 20

Medium risk 39 66 37 64

High risk 58 16 58 16

Carrying amount 137 102 135 100

Past due comprises:

0 – 30 days 36 12 36 12

31 – 60 days 27 15 25 14

61 – 90 days 3 2 3 2

91 – 120 days 3 32 3 32

120 days + 68 41 68 40

Carrying amount 137 102 135 100

Neither past due nor impairedLow risk 4 908 4 351 29 163 60 455 3 873 3 045 14 473 39 700

Medium risk 3 332 1 510 11 854 75 2 628 1 461 11 854 75

High risk 340 24 269 24

Carrying amount 8 580 5 885 41 017 60 530 6 770 4 530 26 327 39 775

Portfolio impairment (164) (152) (161) (148)

Total carrying amount 8 820 6 133 42 355 61 245 7 011 4 773 27 665 40 490

Carrying value of

renegotiated loans 928 684 864 640





Impaired loans and investmentsImpaired 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 loansLoans 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 impairmentThe 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 loansLoans 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.

CollateralThe 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:

Loans and advances to clientsIDC Mini Group (R’m) 2009 2008

Against impaired assetsGeneral notarial bond 95 238

Guarantees – 42

Mortgage bond 346 407

Pledged shares – 364

Special notarial bond 19 57

Other 25 103

485 1 211

Gross value of impaired loans as

at 31 March 1 904 1 876

Loans and advances to clients(R’m) 2009 2008

Against loans past due but not impairedGeneral notarial bond 32 –

Mortgage bond – –

Special notarial bond 31 –

Other – –

63 –

Gross value of loans in arrears not

impaired as at 31 March 137 102

Financial: Market riskThis is the risk that the market price of an asset or a liabilitymay change, resulting in a capital gain or loss upon thesubsequent realisation of the asset or liability. This mayresult from changes in economic factors (interest rates,share prices, exchange rates) or environmental factors(political, social, regulatory and speculative), ie a decline invalue due to factors other than default or delayed payment.

Approach to managing market riskThe objective is to derive, approve and monitor the mostappropriate strategy for the Corporation with reference tothe material market risks identified, being liquidity, currency,interest rate and equity price risks by means of:

• determining the strategy for the Corporation in terms ofthe mix of assets and liabilities;

• ensuring that the following are applied by the Asset andLiability Committee (ALCO):

• assessing the Corporation’s current and projected balancesheet and income statement positions with respect tocurrency, interest, liquidity and equity price risks;

• simulated scenario analysis;– assessing appropriate asset liability management

strategies, policies and limits, and monitoring actionsregularly to ensure adherence to strategies, policiesand limits agreed to;

– given environmental volatility, re-evaluation of currentstrategies, policies and limits on a regular basis todetermine their appropriateness; and

– the Research and Information Department preparinga monthly economic outlook analysis.

Money market transactionsThe IDC’s risk in this regard is perceived to be low due tothe following factors:

• The primary objectives of the money market is to investtemporary cash holdings, to limit any possible capitallosses and to ensure the timely availability of funds.

• Funds are only invested with approved financial andpublic sector institutions according to limits approved bythe IDC Board.

• Dealing in money market derivative instruments is notallowed unless prior approval is obtained from the IDCBoard.



Foreign currency riskForeign currency risk is limited by means of the IDC Board’spolicy, which states that forward exchange cover is requiredfor all foreign currency exposures, unless a facility is madeavailable in foreign currency and matched to the lending ofthe foreign borrowings.

Liquidity riskThe IDC’s risk in this regard is perceived to be low due tothe following factors:

• The IDC gearing level is low, accordingly it has excellentcapacity to raise funding especially when combined withits credit rating.

• The IDC’s policy of holding sufficient liquid assets toenable the IDC to meet all probable cash flowrequirements for a rolling three-month horizon.

Interest rateInterest rate risk is monitored, reported and managed, as areall identified market risks, by a formalised asset and liabilitymanagement process. The IDC’s interest rate risk policy is tocontain the negative impact of adverse interest ratemovements on the Corporation’s net income to within anacceptable risk profile.

Price-equity riskThe IDC has a significant portfolio of listed and unlistedequity investments, which represent the majority, by value,of its asset portfolio. Price-equity risk is monitored andreported in the asset and liability management process. Tomanage price-equity risk, the IDC’s equity investments are

valued on a regular basis based on established policies andmethodologies, in addition hedging and diversificationpolicies are also revised on a regular basis.

Exposure to interest rate riskMarket risk exposure involves the management of thepotential adverse effect of interest rate movements on netinterest income. The interest rate risk is caused by thevarying repricing characteristics of the IDC’s assets andliabilities.

The principal analytical technique used to quantify theIDC’s interest rate risk is ”Gap Analysis”. The repricing gapsfor the IDC’s non-trading portfolio are shown below. Thisview is for the purpose of illustration only, as positions aremanaged by currency to take account of the fact thatinterest rates are unlikely to move together. All assets,liabilities and derivative instruments are categorised in gapintervals/time buckets based on their repricingcharacteristics. Assets and liabilities for which no specificcontractual repricing or maturity dates exist, are placed ingap maturity buckets based on management’s discretionand the most likely repricing behaviour.

Comparing the repricing gaps/interest rate mismatches asat March 2009 and March 2008 below, it is evident that theIDC is asset sensitive and although the asset sensitivity hasdecreased marginally in 2008, due in part to a greaterportion of foreign liabilities maturing within the mediumterm, the IDC is appropriately positioned for an increasinginterest rate environment.

Interest rate sensitivity mismatch – March 2009

Within After three After six GreaterIDC three months but months but than (R’m) months within six months within a year a year

2009Assets 5 618 460 874 5 501Liabilities 753 108 1 137 3 022

Interest rate sensitivity mismatch 4 865 352 (263) 2 479

Cumulative interest rate sensitivity mismatch 4 865 5 217 4 954 7 433

Cumulative interest rate sensitivity mismatch

as a percentage of total assets 6,1 6,5 6,2 9,3

2008Assets 4 445 366 871 3 674

Liabilities 1 199 504 430 3 822

Interest rate sensitivity mismatch 3 246 (138) 441 (148)

Cumulative interest rate sensitivity mismatch 3 246 3 108 3 549 3 401

Cumulative interest rate sensitivity mismatch

as a percentage of total assets 3,4 3,2 3,7 3,5




The monitoring of interest rate risk is supplemented by monitoring the sensitivity of the IDC’s financial assets and liabilities

to various interest rate scenarios. An analysis of the IDC’s sensitivity to a 100 basis points increase/(decrease) in market

interest rates is as follows:

Effect of a 100 basis points increase/(decrease) in market ratesIDC Pound(R’m) Rand US Dollar Euro Sterling Yen Total

March 2009100 bps rate shock – assets 125,6 11,8 0,3 0,0 0,0 137,8100 bps rate shock – liabilities (50,9) (15,3) (9,6) 0,0 0,0 (75,9)

March 2009 Net – effect+ 100 bps rate shock 74,7 (3,5) (9,3) 0,0 0,0 61,9- 100 bps rate shock (74,7) 3,5 9,6 0,0 0,0 (61,6)

March 2008100 bps rate shock – assets 74,6 0,6 0,7 0,0 18,8 94,7

100 bps rate shock – liabilities (51,6) (3,5) (0,7) 0,0 (18,8) (74,6)

March 2008 Net – effect+ 100 bps rate shock 23,0 (2,9) 1,4 0,0 0,0 21,5

- 100 bps rate shock (23,0) 2,9 (1,4) 0,0 0,0 (21,5)

It is evident from the tables above that a parallel 100 basis points increase in all rates would increase the forecasted net

interest income of the IDC for the next financial year by R61,9 million (2008: R21,5 million), while parallel decreases in all

rates would decrease the forecast net interest income by R61,9 million (2008: R21,5 million).

Exposure to foreign currency riskForeign currency risk is limited by means of the IDC Board’s policy, which states that forward exchange cover is required for

all foreign currency exposure, unless a facility is made available in foreign currency and matched to foreign borrowings.

Currency risk arises from the volatility in exchange rate movements, which could have a negative impact on the economic

value of the IDC. The IDC’s foreign currency exposure is attributed to the corporate responsibility to implement the South

African government’s mandate in SADC and the rest of Africa where the aforesaid significant investments are denominated

in US Dollars (USD). Similarly the IDC offers ZAR and other foreign currency loans as part of its financing portfolio, whilst also

sourcing funds in USD, EUR, GBP, JPY as well as in ZAR.

Foreign currency risk is mitigated by means of the IDC policy which states that forward exchange cover is required for all

foreign currency exposure, unless a facility is made available in foreign currency and matched to foreign borrowings. In

practice the Corporate Treasury’s short-term hedging policy utilises six-month rolling forward exchange contracts (FECs)

and or natural hedges, such as back-to-back, and on lent foreign currency loans. For long-term hedging, Corporate Treasury

utilises CCIRS (cross-currency interest rate swaps) and/or back-to-back loans with the same maturity profiles, currency, basis

risks, etc. All currency risk management hedging strategies are approved by Exco, following a recommendation from the

subcommittees.

Comparing the currency risk mismatches for the following foreign currency exposures, namely US Dollar, Euro and Japanese

Yen as at year-end, demonstrates that the US Dollar and Euro exposures are hedged in the six-month area using rolling six-

month FECs, while the Japanese Yen exposure is hedged using CCIRS. All exposures are covered 100% in line with the

IDC’s policy.



Within After three After six Greaterthree months but months but than

(R’m) months within six months within a year a year Total

Currency US Dollar mismatch – March2009Assets 7,2 9,1 21,6 208,2 246,2Liabilities (71,2) (9,5) (12,8) (135,1) 228,6

Currency mismatch before hedging (64) (0,4) 8,8 73,1 17,6Hedging – FECs 4,7 10,4 – – 15,2

Currency mismatch after hedging (68,8) (10,8) 8,8 73,1 2,4Cumulative currency mismatch (68,8) 79,6 70,8 2,4 0

2008Assets 6 8 13 128 155

Liabilities (153) (52) (13) (131) (349)

Currency mismatch before hedging (147) (44) – (3) (194)

Hedging – FECs 132 62 – – 194

Currency mismatch after hedging (15) 18 – (3) –

Cumulative currency mismatch (15) 3 3 – –

After three After six GreaterWithin months but months but than

(R’m) three months within six months within a year a year Total

Currency Euro mismatch – March2009Assets – – – – –Liabilities 8 1 7 69 84

Currency mismatch before hedging (8) (1) (7) (69) (84)Hedging – FECs 50 35 – – 85

Currency mismatch after hedging 42 34 (7) (69) 1Cumulative currency mismatch 42 76 69 – 1

2008Assets – – – – –

Liabilities 9 6 15 38 68

Currency mismatch before hedging (9) (6) (15) (38) (68)

Hedging – FECs 63 5 – – 68

Currency mismatch after hedging 54 (1) (15) (38) –

Cumulative currency mismatch 54 53 38 – –




Within After three After six Greaterthree months but months but than

(R’m) months within six months within a year a year Total

Currency Japanese Yen mismatch – March2009Assets – – – – –Liabilities 237 – 237 930 1 403

Currency mismatch before hedging (237) – (237) (930) (1 403)Hedging – cross-currency swap 237 – 237 930 1 403

Currency mismatch after hedging – – – – –Cumulative currency mismatch – March – – – – –

2008Assets – – – – –

Liabilities 237 – 237 1 403 1 877

Currency mismatch before hedging (237) – (237) (1 403) (1 877)

Hedging – cross-currency swap 237 – 237 1 403 1 877

Currency mismatch after hedging – – – – –

Cumulative currency mismatch – – – – –

Equity sensitivity analysisSensitivity analyses were performed on the company’s equity portfolio, to indicate the possible effect on the fair value

should a range of variables change, eg 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 follow:

• 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 R6 792 billion increase in the

equity values as at 31 March 2009 (2008: R9 987 billion) and a 10% decrease will lead to a R9 866 billion decrease in the

equity values (2008: R2 925 million).

Period 10% increase 10% decrease

31 March 2009 R6 792 million (R2 925 million)31 March 2008 R9 987 million (R9 866 million)

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations from its financial liabilities.

Management of liquidity riskThe IDC’s liquidity requirements are governed by both the liquidity policy as well as the risk tolerance guidelines. The

Corporate Treasury unit is responsible for the daily activities of managing liquidity requirements of the IDC with ultimate

responsibility lying with the Chief Financial Officer of the Corporation.

If market conditions or any other event, or series of events, cause the IDC to experience cash flow problems, the short-term

liquidity buffer will be used to ensure that the IDC can meet its short-term cash flow commitments whilst the cash flow

crisis is addressed. The IDC’s operational outflows are primarily monthly items and therefore evenly spread.



The short-term liquidity buffer is used as a source of liquidity to meet the aggregate net cash outflows for the IDC for the

next three months in the event of the IDC not being able to generate sufficient working capital surpluses or utilise available,

sufficient short-term banking facilities.

Repricing risk in this portfolio is kept to a minimum as it is designed to protect the cash values for the three-month period

in question.

The approved financial instruments used to provide short-term liquidity could include the following:

• Listed shares portfolio

• Unlisted shares portfolio

• Money market investments with approved counterparties

• Overdraft facilities

• Call loan facilities with approved counterparties

Exposure to liquidity risk

The IDC financing activitiesPeriod Liquidity cover required Performance

31 March 2009 R1 245,0 million 5,40 times31 March 2008 R1 471,0 million 3,79 times

Contractual maturities of financial liabilities31 March 2009GROUP EURO RAND FOREIGN RAND USD JAPANESE YEN

Principal 86 1 226 236 229 1 403Interest 10 284 91 15 35

96 1 510 327 244 1 438

Payable within one year 10 1 510 73 99 491Due after one year but within five years 49 – 208 118 947Due after five years 37 – 46 27 –

GROUP EURO RAND FOREIGN RAND USD JAPANESE YEN

31 March 2008Principal 68 1 226 369 348 1 877

Interest 10 302 106 28 68

78 1 528 475 376 1 945

Payable within one year 27 142 169 247 1 673

Due after one year but within five years 50 1 386 215 63 272

Due after five years 1 – 91 66 –

Foreign Rand – Rand facilities arranged with counterparties outside South Africa.

USD – Included in the USD principal amounts are short-term Dollar liabilities (USD67,919 million) arranged with local

counterparties with a maximum 180 days’ maturity period.

Interest rates EUR = EURIBOR SA Rand = JIBAR USD = 6M LIBOR JPY

Range 0,750% to 5,738% 9,225% to 13,558% 1,170% to 5,520% 1,400%

The previous table shows the undiscounted cash flows on the Group’s financial liabilities and unrecognised loan

commitments on the basis of their earliest possible contractual maturity, in the applicable foreign currency.




Operational risk

The IDC has adopted the Basel II (2004) definition for

operational risk, which is defined as the risk of loss resulting

from inadequate or failed internal processes, people and

systems and from external events. This definition includes

legal risk but excludes systemic and reputational risk. This

risk category relates to the IDC’s reliance on systems,

processes and people.

The seven main operational risks identified are:

• internal theft and fraud;

• external theft and fraud;

• employment practices and workplace safety;

• clients, products and business practices;

• damage to physical assets;

• business disruption and system failures; and

• execution delivery and process management.

Approach to managing operational riskThe purpose of operational risk management in the IDC is

to reduce the likelihood and consequences of avoidable

operational risk events. An operational risk management

framework, which has been approved by the IDC Board, has

been developed to ensure that operational risks are

consistently and comprehensively identified, assessed,

mitigated, controlled, monitored and reported.

The IDC operational risk management framework

comprises:

• the operational risk strategy and policies;

• the risk governance process;

• risk identification and assessment;

• risk measurement;

• the operational risk capital charge;

• determining and monitoring key risk indicators;

• risk reporting; and

• risk mitigation/controls.

At the IDC, we safeguard ourselves against operational risks

through:

• a defined operational risk framework and operational risk

policy;

• regularly updating systems and procedures, which are

subject to approval by the Internal Audit Committee;

• regular internal and external audits;

• regular review of the comprehensive Business Continuity

Plan (BCP), which incorporates a Disaster Recovery Plan

(DRP) for information technology (IT) recovery and a

working Business Continuity Management Office that

meets regularly;

• recovery of IT is addressed in the Data Recovery Plan

(DRP) and other risks are addressed by:

– the IT security policy; and

– prudent and scrupulous recruitment policies;

• internal audit reviews of all information technology

aspects, eg strategy, systems development, change

management, hardware and software contracts and

security policy;

• insurance of fidelity guarantees, legal risks, public liability

and other identified insurable risks including those of

fixed assets, which coverage is reviewed annually; and

• the commitment of all employees to a code of conduct

that encourages honesty, integrity and effectiveness.

The Corporation accepts that technology has a

fundamental impact on the way in which business is

conducted and businesses are measured. Therefore the IDC

ensures that:

• risks associated with the IT environment and projects are

continuously evaluated and appropriate plans are in

place and implemented to mitigate these risks to an

acceptable level;

• IT expenditure is motivated by sound commercial

principles rather than strategic instinct only, ie that the

business strategies and IT strategies are aligned;

• a long-term IT plan is developed and the appropriateness

thereof reviewed to ensure that it supports and does not

inhibit the long-term strategy of the Corporation;

• developments in the IT industry are continuously

monitored and potential impact thereof on the

Corporation’s long-term strategy is evaluated; and

• the necessary skills are in place to ensure that the internal

control systems are adequately applied across the entire

IT environment.

The IDC has a Fraud Prevention Plan in place and the Fraud

and Corruption Prevention Committee comprising staff

from the Legal Services, Internal Audit, Financial

Management, Risk Management and Human Resources

departments meets regularly. The IDC’s Fraud Prevention

Plan forms part of its Corporate Crime Prevention and

Detection Plan.

Capital management

The IDC is accountable to its sole Shareholder, the

Department of Trade and Industry. The performance as well

as management of the 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 capitalThe 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 1956 dictates that the IDC can be

geared up to a 100% of its capital.

Risk appetiteThe 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.

Fair values

The determination of fair values of financial assets and

financial liabilities is based on quoted market prices for

financial instruments traded in active markets. For all other

financial instruments, fair value is determined by using

valuation techniques. Valuation techniques include the net

asset value method, the price-earnings method, the

discounted cash flow method and comparison to similar

instruments for which market observable prices exist. The

IDC uses widely recognised valuation models for

determining the fair value of unlisted equity instruments.

For these financial instruments, some, or all of the inputs

into these models, may not be market observable, and are

derived from market prices or rates or are estimated based

on assumptions.

When entering into a transaction, the financial instrument is

recognised initially at the transaction price, which is the

best indicator of fair value, although the value obtained

from the valuation model may differ from the transaction

price. This initial difference, usually an increase, in fair value

indicated by valuation techniques is recognised in income

depending upon the individual facts and circumstances of

each transaction and not later than when the market data

becomes observable.

The value produced by a model or other valuation

technique is adjusted to allow for a number of factors as

appropriate, because valuation techniques cannot

appropriately reflect all factors market participants take into

account when entering into a transaction. Management

believes that these valuation adjustments are necessary

and appropriate to fairly state financial instruments carried

at fair value on the balance sheet.



Abbreviations

AADFI Association of African Development Finance Institutions

ADS Agency Development and Support department

AFRO African Romance

APCA Automated Paediatric Cardiac Auscultation

APDP Automotive Production and Development Programme

Asgi-SA Accelerated and Shared Growth Initiative for South Africa

BAA Business Assistance Agreement

B-BBEE Broad-based Black Economic Empowerment

BDM Broadcasting Digital Migration

BEE Black Economic Empowerment

BPs Business Partners

BPO Business Process Outsourcing

BPO&O Business Process Outsourcing & Offshoring

BSP Business Support Programme

CA Chartered Accountant

CC Close Corporation

CCC Cosmo City Corporation (Pty) Limited

CDM Cleaner Development Mechanism

CEF Central Energy Fund

CFL Coromandel Fertilisers Limited

CIDB Construction Industry Development Board

COPES-SA Community Based Prevention and Empowerment Strategies-SA

CSI Corporate Social Investment

CSIR Council for Scientific and Industrial Research

CTCP Clothing and Textiles Competitive Programme

DBSA Development Bank of Southern Africa

DFIs Development Finance Institutions

DoE Department of Education

DRC Democratic Republic of Congo

dti Department of Trade and Industry (the dti)ECIC Export Credit Insurance Corporation

EGS Environmental, Goods and Services

EHS Environmental, Health and Safety

EIB European Investment Bank

EPM Eastern Produce Malawi Limited

EU European Union

GDP Gross Domestic Product

GEMS Government Employee Medical Scheme

HFHSA Habitat for Humanity South Africa

HMH Hans Merensky Holdings

ICASA Independent Communications Authority of South Africa

ICTE Information Communication Technology and Electronics

IDC Industrial Development Corporation

IDZ Industrial Development Zone

IDC-DF IDC Development Foundation

IPAP Industrial Policy Action Plan



ISRDP Integrated Sustainable Rural Development Programme

ITRI Industry Technology Research Institute of Taiwan

JIPSA Joint Initiative on Priority Skills Acquisition

JIS John Ingham & Sons Limited

KKC Kalahari Kid Corporation

KkW Kilowatt(s)

LED Local Economic Development

LPP Linton Park Plc

MIDP Motor Industry Development Programme

MIS Management Information System

MK Malawian Kwacha

MoU Memorandum of Understanding

MW Megawatt(s)

NCPG Northern Cape Provincial Government

NEF National Empowerment Fund

NEPAD New Partnership for Africa's Development

NHI Natural Health Insurance

NIPF National Industrial Policy Framework

ODM On Digital Media

PBMR Pebble Bed Modular Reactor

PBO Public Benefit Organisation

PFMA Public Finance Management Act

PIMD Post-investment Monitoring Department

PPD Product Process Development

PPP Public-Private Partnership

PST Public Service Telephone

RCF Risk Capital Facility

SACU Southern African Customs Union

SADC Southern African Development Community

SBU Strategic Business Unit

SED Socio-Economic Development

SEDA Small Enterprise Development Agency

SHIP Strategic High Impact Projects

SME Small and Medium Enterprises

SMME Small, Medium and Microenterprise

SPII Support Programme for Industrial Innovation

TDM Tool, Die and Mould

TES Transformation and Entrepreneurial Scheme

the Codes B-BBEE Codes of Good Practice

TOPP Training Outside Public Practice

UNEP FI United Nations Environmental Programme Financial Initiative

UN-ITC United Nations-International Trade Centre

VC Venture Capital

WMS Warehouse Management System



Administration

Secretary and registered office

E Moeti-Motlhamme

19 Fredman Drive

Sandown

PO Box 784055

Sandton 2146

Telephone: +27 11 269 3000

Telefax: +27 11 269 3116

Telex: 4-27174SA

Email: [email protected]

Auditors

KPMG Inc.

SizweNtsaluba VSP

Registration number

1940/01201/06

Call centre

For all financing enquiries:

Telephone: 086 069 3888 (shared cost)

Email: [email protected]

Website address

http://www.idc.co.za

Regional offices

Bloemfontein

46, 1st Avenue, Westdene,

Bloemfontein

Private Bag X11, Suite 25, Brandhof, 9324

Tel: 051 411 1450

Fax: 051 447 4895

Polokwane

43 Biccard Street, Suite 6, Biccard Office Park

Postnet Suite 422, Private Bag X9307, Polokwane, 0699

Tel: 015 299 4080 – 4099

Fax: 015 295 4521

Rustenburg

1st Floor, Sunetco Building, 32B Heystek Street, Rustenburg

Postnet Suite 290, Private Bag X82245, Rustenburg, 0030

Tel: 014 591 9660/1

Fax: 014 592 4485

Kimberley

Block D, Sanlam Business Complex, 13 Bishops Avenue,

Kimberley, 8301

PO Box 808, Kimberley, 8300

Tel: 053 807 1050

Fax: 053 832 7395

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

Durban

Suite 2305, 23rd Floor, The Embassy Building,

199 Anton Lembede Street, Durban

PO Box 2411, Durban, 4000

Tel: 031 337 4455

Fax: 031 337 4790

East London

1st Floor, Quarry Office Park, Hammer Mill House,

Lukin Rd, Berea, East London

PO Box 19048, Tecoma, 5214

Tel: 043 721 0733/4777

Fax: 043 721 0735

Mpumalanga

Upper level, Nelcity Building, cnr Samora Machel

and Paul Kruger Streets

PO Box 3740, Nelspruit, 1200

Tel: 013 752 7724

Fax: 013 752 8139


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Head Office

19 Fredman Drive, Sandton, 2196PO Box 784055, Sandton, 2146, South AfricaTelephone: +27 11 269 3000, Fax: +27 11 269 3116Call Centre: 0860 693 888Email: [email protected] Website: www.idc.co.za

Industrial Developm

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Sustaining development in extraordinary tim

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