Tuesday, July 7, 2009

IDC plans to invest R15bn in rest of Africa over five years

July 6, 2009 - By Mzwandile Jacks [Business Report]

The Industrial Development Corporation (IDC) had set aside R15 billion to invest in new and existing projects in the rest of the continent over the next five years, the state-owned financier said at the weekend.

Gert Gouws, the IDC's chief financial officer, told Business Report this was part of its mandate, which stated that it must invest in Africa and increase developmental returns from identified countries.

"These investments will not only benefit those countries but will also benefit South Africa, (because) we will be using South Africa's goods and services in those projects.

"We are looking for opportunities not only in sub-Saharan Africa, but also in north Africa," Gouws said.

The IDC had invested R2.9bn in Africa in the past financial year, but the budget would be cut by nearly half this year to R1.5bn because the development financier had to allocate R6.1bn for local firms that were hit by the recession.

According to the IDC's website, it extended its reach beyond South Africa to the Southern African Development Community in 1998 and to the rest of Africa in 2002.

It saw the need to invest in the continent because South Africa's prosperity was inextricably linked to Africa's economic development.

Africa represented enormous market potential and untapped resources, and was projected to be one of the last bastions of economic growth.

The company invests in projects ranging from mining and mineral beneficiation to agro-processing, infrastructure development and tourism.

In the past financial year, the IDC made its first investment in Eritrea: R800 million in the mining sector. The project will produce gold, silver, copper and zinc over its 10-year life span.

This will create 400 direct job opportunities and lift government revenue by 7 percent a year over the life of the mine.

It is expected to serve as a catalyst to develop Eritrea's mining industry.

The IDC has approved funding of R100m for a project in Mali to manufacture chipboard from rice straw.

It has invested R166m in Botswana to establish a plastic pipe manufacturing plant.

In Uganda it has invested R75m in a project to upgrade infrastructure, including the development of a ferry and the upgrading of roads, water and power supplies; and R783m in a telecoms satellite aimed at improving the quality of Uganda's telecoms service.

Gouws said the IDC had also invested in a number of smaller projects.

One analyst, who did not want to be named because he did not cover the IDC, said the parastatal could be moving aggressively into Africa because there were fewer opportunities in South Africa.

Gouws disagreed. South Africa remained the IDC's primary investment destination.

"We cannot neglect South Africa, because it is our backyard. This is why we have now opened IDC offices in all nine provinces," he said. "And we are currently conducting due diligence in these provinces."

Geoffrey Qhena, the chief executive of the IDC, said the opening of these offices had improved co-operation with local business communities.

This would increase proactive identification of development projects and access to clients. These offices would be a conduit for business support.

According to the IDC, in the current financial year an additional 13 000 jobs are expected to be retained through the funding of distressed companies.

At the group's annual results on Thursday, Qhena said the IDC was busy with the first batch of money to help firms affected by the domestic economic slowdown.

He said that in keeping with its long-term strategy, the emphasis was on funding interventions to help preserve jobs.

The IDC said it would fund distressed companies to ensure their long-term sustainability. Interventions would be "on a firm-by-firm" basis.