Presentation on theme: "Industrial Development Corporation"— Presentation transcript:
1Industrial Development Corporation Corporate Plan 2013/14 to 2017/1813 August 2013
2Structure of Presentation BackgroundRevisions to IDC’s StrategyLeading Industrial Development by Driving Implementing the NGP and IPAPBalancing increased impact with sustainability of investmentsTargetsIDC portfolio
4Overview Activities Customers Business lifecycle Sectoral involvement Funding productsRegional involvementProvision of development financeProject developmentResearch and policy inputsFund managementNon-financial forms of business supportCapacity buildingBusinessGovernmentOther DFIsConceptualPre-feasibilityFeasibilityProduct commerciali-sationEstablishmentExpansionMatureManufacturingAgricultural value-addMining and mineral beneficiationGreen industriesIndustrial infrastructureTourism, cultural industries and other productive servicesGeneral debtQuasi-equityEquityExport/import financeShort-term trade financeBridging financeGuaranteesVenture capitalWholesale funding through intermediariesSouth AfricaRest of AfricaGlobal imports of South African capital equipment
6Changes to objective and outcomes to reflect changing priorities and expectations To 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”VisionThe IDC is 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.MissionObjectiveSupport industrial capacity developmentLead industrial capacity developmentPrimary: Facilitate sustainable direct and indirect employmentSecondary:Improving regional equity, including the development of South African rural areas, poorer provinces and industrialisation in the rest of Africa;Growing the entrepreneurial and SME sectorsExpansionary and/or broad-based black economic empowermentEnvironmentally sustainable growthGrowing sectoral diversity and increased localisation of productionPrimary: Facilitate sustainable direct and indirect employmentSecondary:Improving regional equity, including the development of South African rural areas, poorer provinces and industrialisation in the rest of Africa;Growing the entrepreneurial and SME sectorsTransformational impact on communities and growing black industrialistsEnvironmentally sustainable growthGrowing sectoral diversity and increased localisation of productionOutcomesValuesPassionProfessionalismPartnership
7Leadership in Industrial Development – 2013/14 onwards Increasing Industrial Development ImpactEnsuring Long-Term SustainabilityFinancial CapitalHuman, Social, Natural and Manufactured CapitalStrengthen sector development objectives and strategiesAlign IDC with the sector objectives of NGP and IPAPIncreased project development and implementationProvide industrial finance to further achievement of sector development objectivesIncrease regional industrial integration through the development of value chainsEnsure effective and efficiently operating sefaPlan investment return and risk profile to ensure sufficient growth to replace existing cash generatorsEnsure that appropriate pricing and fee structures are in placeManage risk through appropriate investments, pricing and management of the portfolioHuman resourcesEnsure appropriately skilled and capacitated human resourcesStakeholdersImprove customer serviceBuild partnerships with other financiers to leverage off different strengths and mandatesIncrease engagement with sector players to identify opportunitiesStrengthen IDC expertise to shape and influence policyBuild strong communities around projects that IDC fundNatural environmentReduce IDC’s negative environmental impactReduce industry’s negative environmental impactUtilisation of resourcesImprove efficiencies through improved systems and processesPriorities have been revised and the strategy has been repackaged to emphasise the balance between increasing IDC’s impact and ensuring sustainability
8Leading Industrial Development by Driving Implementing the NGP and IPAP
9Context of IDC’s strategy IDC is one of the main drivers of the implementation of the New Growth Path (NGP) and Industrial Policy Action Plan (IPAP);Over the past two years, it has been aligning its operations to support the priority sectors identified by these policies.Logistics, infrastructure and cross-sector projectsThe green economyLogisticsIndustrial infrastructureGreen and energy saving industriesBio fuelsTourism, creative industries and high-level servicesCraft and filmBusiness process servicesBiotechnologyAgricultural value chainTourismAgro-processingForestry, paper & pulp, furnitureMining related technologiesHealthcareICTManufacturing activitiesAutomotives, components, medium and heavy commercial vehiclesMetals fabrication, capital and transport equipmentThe mining value chainMiningDownstream mineral beneficiationAdvanced manufacturingPlastics and chemicalsClothing, textiles, footwear, leatherPharmaceuti-calsOil and gas
10Sectoral focus areas –Resources Mining and Minerals BeneficiationSteel and steel related inputsEarly stage project development of mining linked to beneficiationRest of Africa‘New age’ mineralsAgro-IndustriesLocalisationLand utilisationInnovationSHIPIndustrial infrastructureHigh impact logisticsNew sector developmentLines of credit and end-user financeGreen-IndustriesEnergy efficiencyRenewable energyFuel based green powerEmissions & pollution mitigationBio-fuels
11Sectoral focus areas –Manufacturing TextilesConducive environmentCompetitive local / regional value chainStabilise major IDC investmentsForestry and Wood ProductsForestrySawmillingPulp and paperValue added productsChemicalsMineral BeneficiationAgricultural inputsInfrastructure InputsOil and gasDevelop plastics value chainMetalsSOE Capex programTooling, die and mould industryFoundriesAutomotive componentsMedium and heavy commercial vehicles,
12Sectoral focus areas – Services TourismUnderdeveloped tourism nodes suitable and affordable to the domestic marketRest of AfricaICTBroadbandICT GreenElectronic sectorHealthcarePharmaceuticalsMedical DevicesHospital PPPsMediaFilm productionProduction infrastructure developmentAudience developmentAnimation HubPan African Television Broadcasters
13Sectoral allocation Capital Allocation – 2013/14 to 2017/18 By IDC Business UnitBy NGP Jobs DriverIn line with its focus on industrial development, the manufacturing industry, driven mainly by the metals and chemicals industries will receive the largest share of IDC’s allocation;The mining value chain, green industries and agricultural value chain are also expected to contribute significantly to funding over the next five years.
14Leading Industrial Capacity Development To truly lead industrial capacity development, IDC needs to continue:Being proactive;Developing deliberate strategies with clear objectives for different industries;Collaborating and cooperating with different role-players in the private sector, government and financial sector to implement these strategies.The impact of IDC playing a leading role is illustrated in the following slides
15Case Study: Localising manufacturing of components for the renewable energy build programme DCD Wind Tower FactoryAfter feasibility studies proved the viability, IDC is co-investing with DCD, a local company to set up a facility to build towers for wind turbines in the Coega IDZ.This investment was made possible by the Renewable Energy Procurement Programme which allocated 1 850MW to onshore wind projects. The Eastern Cape is a well suited location for the project given that the bulk of the wind power generation projects that has preferred bidder status is located in this province.The project will create 203 permanent jobs and increase localisation of components for renewable energy generation projects.Localising productionPoorer provinceNew industry
16Case Study: Localising manufacturing of automotive components MSSL Global RSA Module Engineering LimitedThe company manufactures plastic moulded components for local motor vehicle assemblers such as Toyota, Nissan and Ford. Given the drive to increase local production of motor vehicle components, the Indian based company will be setting up a factory in Durban to manufactureInterior and exterior plastic components.The products that will be produced used to be imported previously additional people will be employed by the company as part of the expansion and the project will add to the downstream beneficiation of plastics.Localising productionImport replacement
17Case Study: Ensuring competition in the supply of steel Scaw MetalsScaw, a company operating in the steel industry, employs about people in with four divisions manufacturing grinding media, wire rod products, cast products, and rolled products.The grinding media division is the only large scale African manufacturer of grinding media used in mining industries, with the wire rod products division manufactures specialised rods and chains destined for the mining and construction sectors. The cast products division manufactures specialised products also targeting the mining, rail and power generation sectors and the products manufactured by the rolled products division are destined for the mining, infrastructure, construction and power generation sectors.IDC acquired Scaw from Anglo-American PLC in 2012 in pursuit of its strategy to intervene in the South African steel industry to ensure competitively priced steel supplies to downstream industries and increase localisation.Scaw is well positioned to capture growth in the mining, railway and power generation sectors. Scaw is the only producer of locomotive frames in Southern Africa and one of a few in the world.Modernising industryDownstream development
18Case Study: Establishment of new industries BioethanolIDC is the sole shareholder in a R2 billion project to produce bioethanol in the Eastern Cape;The project will construct a 100 million litres per annum bioethanol production plant utilising grain sorghum as feedstock;This will be the first significant production facility for biofuels in the country and will create jobs for people during the construction and operational phases in a rural area in a poor province;The project is at a phase where it will start to source equipment needed for construction.Rural developmentPoorer provinceNew industryJob creation
19Case Study: Establishment of new industries Conduct TelecomsConduct Telecommunications builds, owns, manages and leases last mile dark optic fibre using an open access model. The company previously approached the IDC to fund pilot sites for their network.These sites have been completed and is participating in funding the roll-out of additional sites jobs will be created during the installation of the cables. The company is increasing broadband penetration.Increasing competitivenessJob creation
20Balancing increased impact with sustainability of investments
21Sustainable development impact Increasing industrial development impact- Financial- Communities- Environment- JobsSustainability:ImpactSustainability
22Balancing a greater impact with sustainability Increasing its industrial development impact should be done responsibly and the corporation needs to consider the following:Increasing leverage of funding from other sources including private sector financiers and other DFIs;Ensuring that our projects and clients are sustainable:Maximising the direct impact on communities;Development of small business to further increase the impact;Monitoring and managing investments to identify potential problems at client businesses and intervene timeously where required;Identify opportunities for growth to increase clients’ development impact;Minimising the negative impact that projects have on the environment;By ensuring client sustainability, job creation is guaranteed and IDC’s financial sustainability is strengthened.
23Sustainable communities and regional equity IDC OfficesSeveral of the sectors that IDC support have a strong direct or indirect presence in rural areas.These include agro-processing, tourism and mining among others.IDC is strengthening its processes to ensure that projects deliver the maximum benefit to local communities.Part of this includes the development of SMEs that take advantage of the benefits that the project brings to the area. In this regard, sefa will play an important role in the future.
24Case Study: Rural development through agro-processing Russellstone Soy Crushing PlantThe project comprises the development of a green-fields soya crushing facility in the Bronkhorstspruit Industrial Area. The plant will have a capacity of c.a tons per annum and will convert soya beans into high quality soya oil cake, soya hulls, and crude soya oil for distribution into the animal feed and industrial sectors. This will be the first dedicated oil cake focussed commercial-scale soya crushing facility in South Africa replacing c.a tons of imported soya cake per annum, creating 48 permanent job opportunities, and having a direct and beneficial impact on the local cultivation of soya beans. The project will require the dry-land cultivation of ca ha soya, which would also promote disease management and improve soil nutrition if used as part of a rotational crop. The indirect employment impact in the agricultural sector is conservatively estimated at jobs.Rural developmentImport replacementJob creation
25Case Study: Development of value chains benefiting rural areas Coega CheeseIn 2011, IDC approved funding for the establishment of a dairy in the Coega IDZ. The project is operating and IDC was more recently approached to provide funding for the establishment of a cheese factory adjacent to the dairy.The project is further beneficiating agricultural projects in addition to the value-add that the dairy already provided, with an additional 46 jobs being created.Poorer provinceDownstream development
26Case Study: Funding for renewable energy IDC Participation in Rounds 1 and 2 of the Renewable Energy Procurement ProgrammeTechnologyNumber of projectsValue (R’m)MWSolar Photo-Voltaic71 048138Wind2 011452Concentrated Solar23 448150Hydro118810Total176 695750IDC is one of the largest funders for projects qualifying under the first two rounds of the REIPP programme.It will continue to participate, ensuring that localisation and community development around projects receive the highest priority.Rural developmentPoorer provincesNew industry
27Environmental impactDFIs across the world are playing a leading role to transform economies to be less energy intensive.South Africa has one of the least energy efficient economies in the world.Recent and expected future electricity price increases are impacting the competitiveness of local industry negatively.In addition to energy and the resulting carbon emissions, several other natural systems, including water is also being put under pressure. This is specifically important for a water-scarce country such as South Africa.Given IDC’s close association with industry and the fact that this is a fairly new market, it is in a prime position to assist in providing funding to businesses seeking to realise the benefits of improving processes and equipment to lessen their impact on the environment.To achieve this, the organisation has already launched the Green Energy Efficiency Scheme, but plans to further improve processes to entrench an approach that considers environmental impacts in all its approval and monitoring processes.
28Rural development through agro-processing SA Calcium CarbideSA Calcium Carbide, located in Newcastle, is the only producer of calcium carbide in Africa. IDC previously provided funding for the company to assist with the installation of a co-generation facility, utilising furnace off- gas currently being flared, to reduce the company’s reliance on the national grid for electricity.The project has been successfully commissioned and the company more recently approached IDC to provide funding for an additional initiative aimed at removing and destroying cyanide from waste water.Environmental protection
29Increasing capacity in the recycling industry Bon Accord Recycling FacilityOne of the country’s largest waste management services companies approached IDC to set up a semi-automated material recycling facility at a landfill site in Pretoria.The transaction will create 33 jobs with the potential for 30 more if an additional shift is introduced. The company will be able to process tons of waste per month and recover paper, plastics and glass in the process.Reducing negative environmental impact
30Partnerships and collaboration In order for IDC to achieve its goal, it needs to work with other organisations. To this end, the corporation has been partnering with various role-players to fulfill its mandate and increase its impact.dti - Industrial development impact through the management of special schemes such as the Clothing and Textiles Competitiveness Programme (CTCP) and Manufacturing Competitiveness Enhancement Programme (MCEP);Whole school programme – IDC targeting 20 schools across the country in support of the Basic Education Accord. Depending on the individual needs of each school, the IDC’s intervention could include leadership training; building of science laboratories; teacher development in technology and extra lessons for maths and science;Various Provincial Governments – Increasing rural development by working with provincial govenments to roll-out the Nguni Cattle project;Association of African Development Finance Institutions (AADFI), SADC-Development Finance Resource Centre (SADC-DFRC); individual DFIs on the rest of the continent – Assisting with capacity building and providing lines of credit to assist DFIs in the rest of the continent to fund development;Business Community – Recently concluded the IDC BMF sefa Business Plan Competition in conjunction with the Soweto Branch of the Black Management Forum – competition to be rolled-out to the rest of the country;Land Bank – Working closely with Land Bank, including utilising them as an intermediary for IDC funding, to better reach rural areas and assist with the development of primary agriculture.The Nguni Cattle ProjectThe primary focus of the project was to empower previously disadvantaged emerging commercial farmersestablish a viable supply of organic beef for the growing local and international marketThe project engages traditional farmers in the breeding and conservation of indigenous livestockEach community receives pregnant Nguni heifers and Nguni bullsAll members of the communities are involved in the concept of “passing on the gift” where communities are required to return 10 heifers and 2 bulls from the offspring within 5 years.
31Financial sustainability By managing its clients better, IDC can improve their performance resulting in a more successful client base.This will result in more sustainable clients and a more sustainable development impact. If risks in businesses are identified early enough, interventions can be made earlier and turnarounds implemented in time to save the business.IDC currently subsidises certain debt funding costs with equity returns. As IDC plans to dispose of equity investments to commit capital to new ventures there is a need to find ways to replace existing mature investments with new investments that deliver suitable returns.To reduce the potential impact on IDC’s loan prices, IDC will increase its sourcing of lower-cost funding.IDC’s Funding ModelIDC relies on borrowings, internal profitability, capital growth and exits from mature investments to maintain and expand its funding ability
33IDC Targets for 2013/14 Perspective Indicator Measurement 2013/14 BaselineTargetedIndustrial capacity development Implementing projects% of pre-identified projects implemented70% of projects100% of projectsContribution to investment in the economyValue of funding approvals with agreements signedR14bnR21bnSub-minimum: disbursementsR8bnProgress towards achieving priority industry development goalsAchievement of industry development milestones80% achieved90% achievedDevelopment impactJobs expected to be created/saved in South AfricaNumber of jobs expected to be created or saved, counted at the time of agreements being signed32 00050 000Sub-minimum: jobs in rural areas7 000Actual jobs createdActual number of jobs created/saved in South Africa20 00025 000Financial sustainability and efficiencyRatio of administration costs to interest and fee incomeAdministration cost, including grants and donations, excluding impairments as a % of net interest and fee income and dividends (excl. mature legacy investments)BudgetBudget - 10%Growth in reserves5-year average growth in reserves (excl. mature legacy investments)CPI+2%CPI+4%Growth in value of new equity investmentsIRR for investments where IDC first took equity in the underlying business since 1 April 20101.7%4.%Level of impairmentsImpairments as a % of the portfolio (at cost)18%16%
34IDC Targets for 2013/14 (continued) PerspectiveIndicatorMeasurement2013/14BaselineTargetedHuman capitalStaff turnoverStaff turnover for high performance individuals and successors on M level and above7%5%Stakeholder relations/ Customer satisfactionTurnaround time on transactionsTurnaround time on non-complex transactions: (from date of start of due diligence to date of agreement being sent to client)17 working days15 working daysCustomer satisfaction indexTR*M index value as determined through survey8595IDC reputationReptrak Pulse index value (measured every two years)Not measuredsefaImplementation of sefasefa achievement of balanced scorecardsefa’s performance against targets for 2013/14
36IDC’s Portfolio as at 28 February 2013 By RegionBy IndustryIDC’s participation in the renewable energy procurement programme has made a large impact on its portfolio in especially the Northern Cape and Eastern Cape;Mining continues to play a major part in IDC’s development activities given the importance of the sector both locally as well as in the rest of the continent.100%16%8%11%12%4%7%26%1%5%7%8%9%5%1%3%11%2%4%24%6%Agriculture, forestry & fishingEastern CapeFree StateGautengKwaZulu NatalLimpopoMpumalangaNorth WestNorthern CapeWestern CapeOutside SA90%Mining80%Food and beverages70%Clothing, textiles, leather and footwear60%Wood, paper, printing and publishingPetroleum, chemicals, rubber plastics and non-metallic minerals50%Basic metals40%Fabricated metals, machinery and equipmentMotor vehicles and transport equipment30%Other manufacturingElectricity and water supply20%Construction, transport, catering and accommodationCommunication and business services10%Medical and community services0%
37Thank you Industrial Development Corporation 19 Fredman Drive, Sandown PO Box , Sandton, 2146South AfricaTelephoneFacsimile