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Johannesburg - The recession has taken a heavy toll on South Africa's premier industrial financier, the Industrial Development Corporation (IDC).
The state-owned lender, which last year reported a R5.6bn profit, is rumoured to be in the red and is planning a major restructuring, which may result in retrenchments and the cancellation of some of its funding commitments.
Sources inside the corporation said that dividends from the IDC's recession-hit investments had dwindled and some of the investments would have to be written off.
"The IDC is projecting a loss of R3m this year," said an IDC source, who declined to be named.
"A major restructuring is on the cards which may see the IDC close its regional offices, move staff around and retrench redundant people."
A senior IDC executive, who also wanted to remain anonymous, also confirmed that the lender was experiencing a "tough" financial year due to the poor state of the economy.
"The losses are bigger than what you have just told me. It is very tough. You will see our financial results when we announce them," the executive said.
But Neo Sowazi, the IDC's head of marketing and corporate affairs, dismissed speculation that the industrial financier was on course to post a loss.
"We envisage a significant reduction in profitability, but we do not expect a loss in the consolidated results," she said.
The corporation's financial year ends in March and it usually unveils its annual financial statements at the end of June.
Sowazi also rubbished rumours that the IDC was planning to restructure its business and cancel some of its funding promises made to cash-strapped businesses.
Last year, the lender approved about 231 funding applications worth an estimated R10.8bn.
"The IDC is not planning any restructuring or retrenchments.
"Our funding commitments will be met, including assistance to struggling companies and funding new applications," she confirmed.
Last year, the lender saw the value of its balance sheet drop dramatically due to the recession and weak equity markets.
The value of its total assets dropped to R73.3bn last year -after reaching a high of R90.4bn in 2008. In 2005, the IDC's assets were valued at R37bn before the equity market boom ballooned them. Now, the recession is deflating the value of these assets.
Fear and panic
The IDC's key investments in listed companies are in Sasol [JSE:SOL] , Kumba Iron Ore [JSE:KIO], BHP Billiton [JSE:BIL], Sappi [JSE:SAP] and ArcelorMittal . It also invests in non-listed companies.
Signs of the harshness of the recession were already evident last year as the IDC's impairment costs jumped 183% to R1.2bn compared with R420m in 2008.
Impairment costs arise mainly when investors need to lower the value of their assets.
IDC sources said the level of bad debts was likely to be significantly higher because many companies closed down last year, and many of them had to be bailed out by the industrial financier.
The lender had to set aside R6.1bn to assist distressed companies, many of them in the mining and automotive sectors.
One IDC staff member said there was fear among the financier's 630-strong workforce that jobs could be shed and bonus payments frozen this year.
"Right now there is fear, panic, and uncertainty at the IDC.
"I don't think we are going to get bonuses and salary increases this year.
"This restructuring that people are talking about could result in us losing our jobs," the employee said.
- City Press
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