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Johannesburg – The Industrial Development Corporation (IDC) improved its bottom line by more than 800% to R2.2bn, compared to the R223m reported in 2016.
This is according to the state-owned development finance institution’s annual financial results, released on Monday. The IDC provides financing to entrepreneurs.
“The IDC achieved commendable outcomes in a year characterised by high levels of uncertainty and by a slowing economic growth momentum, globally and domestically,” board chair Busisiwe Mabuza said in the group’s integrated report.
“The IDC’s stakeholders expect us to play a counter-cyclical role during an economic downturn,” said Mabuza. The group’s funding helps support private sector investment and project development.
During the year, the IDC approved 175 transactions worth R15.3bn, up from R14.5bn reported previously. However, the total funding disbursed was down 3% to R11bn from R11.4bn reported previously.
The drop in disbursements reflects the “challenging operating conditions” and investment climate businesses and investors are facing, said Mabuza. Private sector fixed investment dropped 5% during the period.
The IDC has prioritised inclusivity and transformation and reached its targets in this regard. A total of R10.1bn was approved for black empowered companies, up 104% from the previous year. A total of R3.2bn was approved for businesses with women ownership of more than 25%. A total of R2.3bn was approved for businesses with youth ownership of more than 25%, while R4.7bn was approved for black industrialists.
The bulk of funding approved in 2017 was for projects and start-ups (46%), followed by capacity expansions (29%) and businesses in distress (13%), ownership changes (10%) and expansionary acquisitions (2%).
The IDC expects 18 206 jobs to be created and 2 675 to be saved.
The group paid out a R20m dividend throughout the year and declared a R50m dividend in June 2016. It recorded an operating profit of R1.3bn, compared to the operating loss of R494m reported in the previous year.
The IDC was in a positive cash position at the end of the year at R7.6bn, compared to the R6.8bn reported in the previous year.
Foskor and Scaw fail to meet profit targets
Subsidiaries chemical producer Foskor and Scaw metals group did not achieve their profitability targets.
The target for Foskor was R615m, but it incurred a loss of R902m, more than the R568m loss reported in 2016. The profit target for Scaw was R56m, but a loss of R787m was incurred. This was a slight improvement on the R1.07bn loss reported in 2016.
The Democratic Alliance has called for the IDC to sell its respective stakes in the entities. “In both instances, the losses are far too high. The IDC should bite the bullet and flog the flopping entities. They are albatrosses around the corporation’s neck,” said MP Mike Cardo.
In her address, Mabzua said that financial sustainability is imperative for the IDC to continue delivering its mandate. The IDC is keeping a close watch on the performance of its subsidiaries when it comes to strategic decision-making on future support to achieve the required return on investment.
She said the current economic environment affects the group’s performance and will raise risks for new funding applications. “We are monitoring trends in key financial indicators such as impairment levels very closely, and are taking the necessary pre-emptive actions.”
In the past year, the IDC failed to achieve its funding target for investments in South Africa, particularly for the manufacturing sector, where funding declined 3.8%. Similarly, it did not reach its targeted growth in funding for the rest of Africa, with funding declining 21.9%.
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