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IDC turns focus to creation of black industrialists, as it weighs 20-year impact

IDC CEO Geoffrey Qhena on the group's shifting empowerment focus. Camera Work: Duane Daws. Editing: Nicholas Boyd. Recorded: 16.4.2014.

16th April 2014

By: Terence Creamer
Creamer Media Editor

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South African development finance institution the Industrial Development Corporation (IDC) reports that it approved funding of more than R128-billion (R204-billion in 2013 prices) over the past 20 years, a period that coincided with the country’s democratic era.

The financial commitments supported the creation of 360 000 direct jobs over the period and saved an additional 43 000 jobs, particularly through a R6-billion fund set up specifically to cushion firms that fell on hard times during the 2008/9 global financial crisis.

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Reflecting on the State-owned group’s contribution over the period, CEO Geoffrey Qhena acknowledged “more could have been done” to spur transformation and industrialisation.

But speaking at a celebratory function in Johannesburg attended by current and former IDC executives and board members, as well as a number of the group’s clients, he also underlined the financier’s economic and development contribution over the period.

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Founded in 1940 under materially different economic and political circumstances, the IDC realigned its priorities to those of the new democratic government in 1994.

Twenty years ago, the initial focus had been on facilitating and supporting the racial transformation of the South African economy, with more than R48-billion (R64-billion in 2013 prices) having been approved for black-economic empowerment (BEE) funding.

Qhena said BEE remained part of the IDC’s mandate, but the focus had shifted increasingly to supporting the creation of black industrialists, as well as expansionary investments rather than simply facilitating ownership changes.

The move was in line with government policy, as well as the latest version of the Industrial Policy Action Plan (Ipap), which was published in early April.

“The IDC will continue to support government’s industrial policy and development aspirations through on-the-ground implementation,” Qhena said, adding that it was also exploring ways to support the reindustrialisation of the economy and grow exports.

The emphasis on reindustrialisaiton came amid ongoing pressure on South Africa’s manufacturing sector, whose contribution to gross domestic product has fall from around 20% in 1994 to around 12% currently.

Initiatives such as Ipap and government and IDC industrial financing were seen as critical to reversing the deindustrialisation trend and improving the outlook for growth and job creation.

However, the most recent manufacturing statistics were not heartening, with manufacturing output rising only 1.4% year-on-year in volume terms in February and 2.2% growth in January. On a month-on-month basis, factory output fell 1.9%, but climbed 2.3% in the three months to February, compared with the previous three months.

“In the immediate future, IDC is seeking to ramp up its impact with the current resources at its disposal by focusing on more effective deployment of its assets to develop industries and create jobs,” Qhena concluded.

The Ipap also proposed greater coordination between government incentives and IDC financing schemes to offer manufacturers a core comprehensive industrial-financing package.

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