IDC set for tougher funding targets

The Industrial Development Corporation (IDC) should scale up its funding activity to achieve the target of disbursing R102bn in five years which began last year.

This steep target was reiterated by the minister of economic development Ebrahim Patel during the presentation of IDC financial results for the year ended March. This is a serious challenge for the IDC which was only approving funding of about R8bn per year. On top of that the IDC has been given a new and complex task of delving into the SME sector. It has been given the responsibility to administer the consolidated state owned SME finding entities known as the Small Enterprise Finance Agency (Sefa). It’s going to be a long five years for IDC CEO Geoffery Qhena.

Ebrahim said “Last year I announced that the IDC will make available R102 billion over the next five years, to drive investment in economic priorities identified in the New Growth Path.  It requires the IDC to improve the rate of investment and refocus to areas such as the green economy, labour-absorbing sectors of the economy and rebuilding and strengthening manufacturing capability”.

He said “The IDC has achieved an unprecedented level of approvals during the past year”.   The IDC approved R13.5 billion in the year ended March compared to R8.7 billion in the previous year. The IDC needs to scale up to R20bn per year disbursement to reach this target. Given the fact that it achieved R13.5bn this year it is already running on a deficit of R6.5bn on this target.“We expect the IDC to continue ramping up its performance, so that by 2016, it achieves the stretch targets we announced last year”.

Ebrahim added that “The IDC has now been given responsibility for improved small business finance through the Small Enterprise Finance Agency (sefa).  From the beginning of the current financial year sefa is a subsidiary of the IDC.  The benefits of this association will contribute to the creation of linkages between large and small firms, which will benefit from being part of supply chains”.

The minister said “Development finance institutions such as the IDC play a central role in the economy.

Given that growth prospects in Europe remain fragile, and the possible impact this could have on our domestic economy, it remains critical to ensure that development finance institutions (DFIs) continue to play a counter-cyclical role in the economy”.

He said the implementation of the New Growth Path will in part rely on the support of the DFIs in crowding in private investment, and encouraging new economic activities, thus supporting the creation of new jobs.  “This requires that by its very nature the IDC should have a longer-term, developmental approach, as opposed to a focus on short term returns”.

“As part of the contribution of the IDC to industrial development, we have begun to measure the speed with which it considers and decides on applications. It is making steady progress to improve turnaround times” said Ebrahim.

“I have asked the IDC to consider the cost of its facilities to ensure that it is affordable and provides real support to manufacturers”.

 Qhena said considerable progress has been made. He said the R13.5bn figure was the highest ever level of investment in the local economy, making a considerable contribution to job creation, says IDC Chief Executive, Geoffrey Qhena.

He pointed out that the number of approvals also rose and will help to create or sustain about 45 900 local jobs, compared to 39 400 in the previous financial year. Of particular significance, Qhena says, is that 48% of these jobs will be based in rural areas and were largely created by IDC’s investment in mining, agriculture and renewable energy sectors. As a result, 99% of funding approvals went towards projects aligned to objectives of the New Growth Path (NGP) and the Industrial Policy Action Plan (IPAP) policies.

“Our objective is to grow the local economy through the development of industrial capacity, with job creation as a critical outcome and, where possible, benefitting communities in far-flung areas, in line with the objectives set out in the NGP and IPAP,” said.

 

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