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Johannesburg - Debt levels at the Industrial Development Corporation (IDC) are set to rocket over the next five years as the organisation prepares to underwrite a multitude of projects related to government industrial development goals.
"Our involvement with the Industrial Policy Action Plan (Ipap) will result in us investing much more," said IDC CEO Geoffrey Qhena at the development finance institution's annual results presentation on Thursday.
The IDC plans to spend over R100bn on industrial development over the next five years. As a result, its debt-to-equity ratio is set to increase from its present 4% to 50%.
Chief financial officer Gert Gouws said the IDC's strong balance sheet can handle increased borrowing rates.
It plans to look to Asia to secure funds, which signals a move away from traditional sources of IDC funds in the European Union and Africa.
"Due to Africa's growing relationship with China, we are talking much more to them," said Qhena.
The IDC alreday has fledgling relationships with the China Construction Bank and the Bank of China.
Meanwhile, higher funding levels also mean the IDC's appetite for risk is increasing. This is already evident in the level of impairments recorded in the past financial year.
Impairments made up 16.3% of the total financing cost in 2010, compared to 15.1% in 2009 and just 10.2% four years ago. Qhena said the rising rate of impairments is not a point of concern and is expected to settle around the current level.
The IDC's greater involvement with government means it will focus on companies identified by Ipap as operating in strategic growth areas.
However, Qhena said this doesn't mean the IDC will lose its autonomy in deciding on which companies to fund.
"Ipap and the IDC are partners. We are still independent," he said.
A key priority when choosing investments will be the opportunities for job creation.
"Jobless growth is a big concern," said Qhena. "We won't wait for people to come to us looking for funding; we will start the projects ourselves and there will be an element of skills training as well."
Projects and companies with strong linkages to the rest of the continent will also be favoured, as will those revolving around energy sustainability.
Qhena said the IDC is already conducting feasibility studies on about 20 green projects, ranging from wind and solar power to hydro power.
- Fin24.com
"Our involvement with the Industrial Policy Action Plan (Ipap) will result in us investing much more," said IDC CEO Geoffrey Qhena at the development finance institution's annual results presentation on Thursday.
The IDC plans to spend over R100bn on industrial development over the next five years. As a result, its debt-to-equity ratio is set to increase from its present 4% to 50%.
Chief financial officer Gert Gouws said the IDC's strong balance sheet can handle increased borrowing rates.
It plans to look to Asia to secure funds, which signals a move away from traditional sources of IDC funds in the European Union and Africa.
"Due to Africa's growing relationship with China, we are talking much more to them," said Qhena.
The IDC alreday has fledgling relationships with the China Construction Bank and the Bank of China.
Meanwhile, higher funding levels also mean the IDC's appetite for risk is increasing. This is already evident in the level of impairments recorded in the past financial year.
Impairments made up 16.3% of the total financing cost in 2010, compared to 15.1% in 2009 and just 10.2% four years ago. Qhena said the rising rate of impairments is not a point of concern and is expected to settle around the current level.
The IDC's greater involvement with government means it will focus on companies identified by Ipap as operating in strategic growth areas.
However, Qhena said this doesn't mean the IDC will lose its autonomy in deciding on which companies to fund.
"Ipap and the IDC are partners. We are still independent," he said.
A key priority when choosing investments will be the opportunities for job creation.
"Jobless growth is a big concern," said Qhena. "We won't wait for people to come to us looking for funding; we will start the projects ourselves and there will be an element of skills training as well."
Projects and companies with strong linkages to the rest of the continent will also be favoured, as will those revolving around energy sustainability.
Qhena said the IDC is already conducting feasibility studies on about 20 green projects, ranging from wind and solar power to hydro power.
- Fin24.com
