IDC Africa Strategy
Presentation by : Lizeka Matshekga
Divisional Executive : Agro , Infrastructure &
New Industries
Africa Business Forum
JSE Sandton | 3rd May 2018
2
Overview of IDC
o Established: 1940
o Type of organisation: Development Finance Institution (DFI)
o Ownership: State owned company, 100% owned by the SA
government
o Total assets: R129.8 billion (31 March 2017 - group)
o Total liabilities: R41.5 billion (31 March 2017 - group)
o Funding status: Fund operations and growth from investments, pay
dividends and income tax
o Credit rating: Baa2 (Moody’s)
o Main business area: Providing funding for entrepreneurs and
projects contributing to industrialisation
o Geographic activities: South Africa and the rest of Africa
o Products: Custom financial products above R1m to suit project’s
needs including debt, equity, guarantees or a combination
o Small and Micro enterprise coverage: sefa (fully owned subsidiary)
o Stage of investment: Project identification and development, feasibility,
commercialisation, expansion, modernisation
o Number of employees: 849 (March 2018)
Operational
Footprint:
o Head Office -
Johannesburg
o 20 Regional and
Satellite offices
3
The Role of DFIs DFIs’ Positioning within the South African Financial Landscape
• Non-commercial focus
• Fiscal transfers and grants
• Development objectives (social)
Government / NGOs
• High commercial focus
• Private sector capital
• Financial objectives
• Known risks
Commercial Financiers
• Commercial and development focus
• Sharing risk
• Internally generated funds, government funds, loans
DFIs
Greater importance on financial objectives
Greater importance on social and developmental objectives
DFIs should not compete with other institutions, but should
instead encourage cooperation to achieve their goals
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Summary of IDC’s Main Activities
Activities Customers Business
lifecycle
Sectoral
involvement
Funding
products
Regional
involvement
Provision of
development
finance
Project
development
Research and
policy inputs
Fund
management
Non-financial
forms of business
support
Capacity building
Business
Government
Other DFIs
Conceptual
Pre-feasibility
Feasibility
Product
commercialisation
Establishment
Expansion
Mature
Manufacturing
Agricultural value-
add
Mining and mineral
beneficiation
Industrial
infrastructure
Tourism, cultural
industries and other
productive services
General debt
Quasi-equity
Equity
Export/import
finance
Short-term trade
finance
Bridging finance
Guarantees
Wholesale funding
through
intermediaries
South Africa
Rest of Africa
Global imports
of South African
capital
equipment
• IDC’s main activity is the provision of industrial finance to businesses throughout the business lifecycle in
various sectors aligned with industrial policy priorities as well as developing projects in these industries.
• In addition, it is involved in other activities such as research, policy inputs and fund management for government
departments; non-financial support for business; and capacity building for other DFIs.
5
For IDC to assume Leadership in Industrial Development, it must position itself more centrally in identified sectors….
Reactive industry funder Proactive industry developer
• Before, we invested in industry players across the SA economic landscape in a predominantly reactive way
Respond to activity Drive activity
Relevant industry body
Other DFIs SOEs
Producers
Govt.
RoA
Relevant industry
body
Industry partners
Value Chains
Producers
Govt.
RoA
Enabling activity
• Now, we want to take greater ownership and leadership for developing the most important parts of the economy to drive desired outcomes
Commercial banks and
other financial institutions
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IDC Sectorial Focus Areas
Metals Value
Chain
Chemicals Value
Chain
Agro
Value Chain
Basic Metals and Mining
Machinery and Equipment
Automotive and Transport Equipment
Basic and Specialty Chemicals
Chemical Products and Pharmaceuticals
Clothing & Textiles Media & Motion
Pictures
High Impact
Sectors
Heavy Manufacturing
Light Manufacturing & Tourism
Value Chains are earmarked for special attention including proactive project
development, whilst High Impact Sectors are exclusively reactive
Enablers
Industrial Infrastructure
New Industries
Special High
Impact Sectors
Agro-processing and Agriculture
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• Sustainable Industrial Development
• Sustainable Localization and Industrialization
• Sustainable Job Creation
• Supporting Targeted Groups (e.g. Black Industrialists, Youth & Women)
• Supporting the development of Value-Chains and Regional Value Chains
• Supporting South African companies conducting business in Rest of Africa and
accessing new markets in the region
Developmental Outcomes
0
5 000
10 000
15 000
20 000
25 000
30 000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
R'm
Actual Estimate Base Target
Actual Estimate Base Target
2016/17 to 2020/21 Corporate Plan – Funding Approvals &
Disbursements
Capital Allocation by SBU – 2016/17 to 2020/21 Historical Approvals and Capital Allocated
• Targeting to grow funding to R100 billion over the next five years subject to improving economic conditions;
• 12% of total allocation towards investments outside of SA, in the continent;
• Highest portion of capital allocated to priority value chains i.e. metals and mining, chemicals and pharmaceuticals,
and agro-processing and agriculture;
Metals and mining32%
Chemicals and pharmaceuticals
19%Agro-processing and agriculture
8%
New industries2%
Industrial infrastructure
23%
Clothing and textiles
3%
Media and motion pictures
2%
High impact industries
11%
Approvals:
Disbursements:
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• Support industrial development in the Rest of Africa through funding projects in line
with IDC’s core value chain mandate
• Unlock regional integration opportunities to increase intra-trade
• Focus on regional integration value chain approach vs South Africa
• Support South African companies conducting business in Rest of Africa
• Promote local/indigenous participation on projects
IDC Africa Strategy
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• Collaboration with local/regional DFIs
• Provide funding to third party funds focusing to Rest of Africa
• Projects and transactions must demonstrate direct and indirect linkages and
benefits to South Africa
- Direct in a form of goods and services
- Indirect in a form of security of supply
IDC Africa Strategy (continued)
Summary of the Rest of Africa Score-Card
• Projects can be categorized as follows :
Industry Development Goals aligned projects The extent of investment in support of sector development goals is used to measure the development
impact of a Rest of Africa transaction which is deemed to be fully aligned to an SBUs value chains
strategy
Non-Industry Development Goals The development score card below will be used to assess the development impact. The final score is
measured out of 5 (100% of the scorecard weighting) with 2 as the hurdle score.
IDC's Rest of Africa Development Scorecard
Development score calculation
Actuals Weight Score Weighted Score
Jobs created for South Africans 1 15% 1.00 0.15
Jobs created for Host Country Nationals 3 15% 3.00 0.45
Priority Country Ghana 10% 1.00 0.10
SA Benefit USD 26.00 35% 2.00 0.70
African Ownership 49% 15% 0.00 0.00
Pollution prevention 3 5% 3.00 0.15
Emissions & Energy Consumption 3 5% 3.00 0.15
OVERALL SCORE: 100% 1.7
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Exposure : ca R12.9 billion; in
42 projects in 16 countries.
IDC Activity in the Rest of Africa
The IDC’s rest of Africa portfolio as at 31 December 2017
Rest of Africa Strategy: Linking the IDC to the RoA
Ivory Coast 1%
Mali 1%
Malawi 2%
Ethiopia 2%
Sudan 3% DRC
3% Namibia
3%
Tanzania 4%
Zimbabwe 5%
Senegal 5%
Nigeria 7%
Zambia 8%
Ghana 11%
Uganda 11%
Kenya 13%
Mozambique 21%
IDC RoA Exposure (incl. Commitments) by country as at 31 December 2017
Outcome of this partnership
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• Collaborate with JSE-listed companies and SMEs conducting business in RoA
• IDC to promote regional value chains by funding projects that source inputs from the RoA or
export products into the RoA that fall within the IDC’s priority value chains namely Agro-
Processing; Chemicals and Metals.
• Practical examples:
• Development of industrial parks for businesses operating in Africa in support of a value-
chain from South Africa e.g. Supplier park for mining suppliers in DRC and Zambia
• Funding Agro-processing where inputs come from South Africa (vice versa) or the end-
product is sold back to South Africa or value addition in South Africa
• Supporting mining developments and industrialisation in the ROA
• Provide industrial infrastructure (telecoms, energy, water & telecoms) funding support to
projects in the Rest of Africa
Thank you