Presentation on theme: "Industrial Development Corporation 13 August 2013 Corporate Plan 2013/14 to 2017/18."— Presentation transcript:
Industrial Development Corporation 13 August 2013 Corporate Plan 2013/14 to 2017/18
2 Structure of Presentation Background Revisions to IDC’s Strategy Leading Industrial Development by Driving Implementing the NGP and IPAP Balancing increased impact with sustainability of investments Targets IDC portfolio
4 ActivitiesCustomers 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 commerciali- sation Establishment Expansion Mature Manufacturing Agricultural value-add Mining and mineral beneficiation Green industries Industrial infrastructure Tourism, cultural industries and other productive services General debt Quasi-equity Equity Export/import finance Short-term trade finance Bridging finance Guarantees Venture capital Wholesale funding through intermediaries South Africa Rest of Africa Global imports of South African capital equipment
5 Revisions to IDC’s Strategy
6 Changes to objective and outcomes to reflect changing priorities and expectations Values Vision 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” Mission The 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. Objective Support industrial capacity development PassionProfessionalismPartnership Primary: Facilitate sustainable direct and indirect employment Secondary: 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 sectors Expansionary and/or broad-based black economic empowerment Environmentally sustainable growth Growing sectoral diversity and increased localisation of production Outcomes Lead industrial capacity development Primary: Facilitate sustainable direct and indirect employment Secondary: 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 sectors Transformational impact on communities and growing black industrialists Environmentally sustainable growth Growing sectoral diversity and increased localisation of production
7 Plan investment return and risk profile to ensure sufficient growth to replace existing cash generators Ensure that appropriate pricing and fee structures are in place Manage risk through appropriate investments, pricing and management of the portfolio Leadership in Industrial Development – 2013/14 onwards Increasing Industrial Development Impact Strengthen sector development objectives and strategies Align IDC with the sector objectives of NGP and IPAP Increased project development and implementation Provide industrial finance to further achievement of sector development objectives Increase regional industrial integration through the development of value chains Ensure effective and efficiently operating sefa Human resources Ensure appropriately skilled and capacitated human resources Stakeholders Improve customer service Build partnerships with other financiers to leverage off different strengths and mandates Increase engagement with sector players to identify opportunities Strengthen IDC expertise to shape and influence policy Build strong communities around projects that IDC fund Natural environment Reduce IDC’s negative environmental impact Reduce industry’s negative environmental impact Utilisation of resources Improve efficiencies through improved systems and processes Ensuring Long-Term Sustainability Financial Capital Human, Social, Natural and Manufactured Capital Priorities have been revised and the strategy has been repackaged to emphasise the balance between increasing IDC’s impact and ensuring sustainability
8 Leading Industrial Development by Driving Implementing the NGP and IPAP
9 Context 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. Green and energy saving industries Bio fuels Agro- processing Tourism Business process services Craft and film ICT Healthcare Mining related technologies Biotechnology Downstream mineral beneficiation Mining Industrial infrastructure Logistics Metals fabrication, capital and transport equipment Automotives, components, medium and heavy commercial vehicles Plastics and chemicals Clothing, textiles, footwear, leather Forestry, paper & pulp, furniture Advanced manufacturing Pharmaceuti- cals Oil and gas
10 Sectoral focus areas –Resources Agro-Industries Localisation Land utilisation Innovation Mining and Minerals Beneficiation Steel and steel related inputs Early stage project development of mining linked to beneficiation Rest of Africa ‘New age’ minerals SHIP Industrial infrastructure High impact logistics New sector development Lines of credit and end-user finance Green-Industries Energy efficiency Renewable energy Fuel based green power Emissions & pollution mitigation Bio-fuels
11 Sectoral focus areas –Manufacturing Forestry and Wood Products Forestry Sawmilling Pulp and paper Value added products Textiles Conducive environment Competitive local / regional value chain Stabilise major IDC investments Chemicals Mineral Beneficiation Agricultural inputs Infrastructure Inputs Oil and gas Develop plastics value chain Metals SOE Capex program Tooling, die and mould industry Foundries Automotive components Medium and heavy commercial vehicles,
12 Sectoral focus areas – Services Tourism Underdeveloped tourism nodes suitable and affordable to the domestic market Rest of Africa ICT Broadband ICT Green Electronic sector Media Film production Production infrastructure development Audience development Animation Hub Pan African Television Broadcasters Healthcare Pharmaceuticals Medical Devices Hospital PPPs
13 Sectoral allocation Capital Allocation – 2013/14 to 2017/18 By IDC Business Unit By NGP Jobs Driver In 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.
14 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. Leading Industrial Capacity Development The impact of IDC playing a leading role is illustrated in the following slides
15 Case Study: Localising manufacturing of components for the renewable energy build programme DCD Wind Tower Factory After 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 production Poorer province New industry
16 Case Study: Localising manufacturing of automotive components MSSL Global RSA Module Engineering Limited The 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 manufacture Interior and exterior plastic components. The products that will be produced used to be imported previously. 450 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 production Import replacement
17 Scaw Metals Scaw, 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. Case Study: Ensuring competition in the supply of steel Modernising industry Downstream development
18 Case Study: Establishment of new industries Bioethanol IDC 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 development Poorer province New industry Job creation
19 Case Study: Establishment of new industries Conduct Telecoms Conduct 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. 109 jobs will be created during the installation of the cables. The company is increasing broadband penetration. Increasing competitiveness Job creation
20 Balancing increased impact with sustainability of investments
21 Sustainable development impact Increasing industrial development impact Sustainability: - Jobs - Environment - Communities - Financial Impact Sustainability
22 Balancing 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.
23 Sustainable communities and regional equity Several 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. IDC Offices
24 Case Study: Rural development through agro-processing Russellstone Soy Crushing Plant The 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 development Import replacement Job creation
25 Case Study: Development of value chains benefiting rural areas Coega Cheese In 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 province Downstream development
26 Case Study: Funding for renewable energy TechnologyNumber of projects Value (R’m)MW Solar Photo-Voltaic Wind Concentrated Solar Hydro Total IDC Participation in Rounds 1 and 2 of the Renewable Energy Procurement Programme IDC 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 development Poorer provinces New industry
27 Environmental impact DFIs 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.
28 Rural development through agro-processing Environmental protection SA Calcium Carbide SA 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.
29 Increasing capacity in the recycling industry Bon Accord Recycling Facility One 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
30 Partnerships 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 Project The primary focus of the project was to empower previously disadvantaged emerging commercial farmers establish a viable supply of organic beef for the growing local and international market The project engages traditional farmers in the breeding and conservation of indigenous livestock Each community receives pregnant Nguni heifers and Nguni bulls All 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.
31 Financial 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 Model IDC relies on borrowings, internal profitability, capital growth and exits from mature investments to maintain and expand its funding ability
33 PerspectiveIndicatorMeasurement 2013/14 BaselineTargeted Industrial capacity development Implementing projects% of pre-identified projects implemented70% of projects100% of projects Contribution to investment in the economy Value of funding approvals with agreements signedR14bnR21bn Sub-minimum: disbursementsR8bn Progress towards achieving priority industry development goals Achievement of industry development milestones80% achieved90% achieved Development impact Jobs expected to be created/saved in South Africa Number of jobs expected to be created or saved, counted at the time of agreements being signed Sub-minimum: jobs in rural areas7 000 Actual jobs createdActual number of jobs created/saved in South Africa Financial sustainability and efficiency Ratio of administration costs to interest and fee income Administration 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 investments IRR for investments where IDC first took equity in the underlying business since 1 April %4.% Level of impairmentsImpairments as a % of the portfolio (at cost)18%16% IDC Targets for 2013/14
34 PerspectiveIndicatorMeasurement 2013/14 BaselineTargeted Human capital Staff turnoverStaff turnover for high performance individuals and successors on M level and above 7%5% Stakeholder relations/ Customer satisfaction Turnaround 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 days Customer satisfaction indexTR*M index value as determined through survey8595 IDC reputationReptrak Pulse index value (measured every two years)Not measured sefa Implementation of sefasefa achievement of balanced scorecardsefa’s performance against targets for 2013/14 IDC Targets for 2013/14 (continued)
35 IDC’s portfolio
36 IDC’s Portfolio as at 28 February % 8% 11% 12% 4% 7% 11% 26% 1% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Eastern Cape Free State Gauteng KwaZulu Natal Limpopo Mpumalanga North West Northern Cape Western Cape Outside SA 7% 8% 9% 5% 1% 3% 5% 11% 9% 2% 7% 4% 24% 6% Agriculture, forestry & fishing Mining Food and beverages Clothing, textiles, leather and footwear Wood, paper, printing and publishing Petroleum, chemicals, rubber plastics and non-metallic minerals Basic metals Fabricated metals, machinery and equipment Motor vehicles and transport equipment Other manufacturing Electricity and water supply Construction, transport, catering and accommodation Communication and business services Medical and community services By RegionBy Industry IDC’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.
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