Tough economy dries up Industrial Development Corporation funding | Fin24
 
In partnership with
  • Data Market Inquiry

    MTN says it is prepared to defend itself before Competition Tribunal over report.

  • Claims of sabotage

    What we know so far about allegations of sabotage at an Eskom power station.

  • Dudu Myeni

    Court dismisses former SAA chiar's bid to have Outa withdraw from delinquency case.

Loading...

Tough economy dries up Industrial Development Corporation funding

Aug 13 2019 21:03
Lameez Omarjee, Fin24

A tough economic environment has resulted in the Industrial Development Corporation falling short of performance levels achieved in previous years, according to its CEO Tshokolo Nchocho.

The IDC, a national development finance institution, on Tuesday released its financial results for the year ended March 31, 2019.

During the 12-month period the IDC approved R13.1bn in funding, compared to R16.7bn approved in 2018. It disbursed a total of R11.8bn, compared to the R15.4bn reported in 2018, according to a note from Nchocho.

The funding is expected to "create and save" over 19 000 jobs, some 10 000 fewer jobs than projected in 2018.

"Challenging trading and operating conditions in key sectors such as manufacturing and mining, which are crucial for the IDC in terms of our developmental mandate, in the main accounted for much of the corporation's decelerating financing activity," Nchocho said.

Weak domestic demand and difficult global trading conditions, due to US protectionism and international trade tensions, combined with policy uncertainty, interruptions to electricity supply and low investment confidence negatively impacted investment spending in key sectors of the economy, he said. 

"Many of the corporation's business partners seem to have put their investment projects on hold, slowing down their borrowing plans," Nchocho said.

Some 46% or R6bn of the funding approved was for black industrialists. The IDC has spent 93% of its five-year target of R23bn in funding for black industrialists by 2021.

A total of R3bn was approved for women entrepreneurs, with the IDC meeting its five-year target of R4.5bn funding for women entrepreneurs in 2018. 

Irregular expenditure

Further to the financial results, the IDC received an unqualified audit opinion from the Auditor General. However, it reported irregular expenditure of R5.7m, higher than the R1.2m reported in 2018. The bulk of the irregular expenditure (more than R5.4m) went towards costs related to business support, and the rest was spent on sponsorship.

Fruitless and wasteful expenditure recorded for the period was R443 768, lower than the R2.6m reported in 2018. This is expenditure that could have been avoided if care had been taken. The fruitless and wasteful expenditure listed in the financial statement notes of the IDC include travel cancellation costs, duplicate payments, cancellation payments for training and payments for security services.

The corporation remained profitable, reporting a net profit of R720m. However, this was is down from R3.2bn reported the year before. Its net cash position was R9.76bn, higher than the R6.137bn reported in 2018. Total assets of R144.6m exceed total liabilities of R49.3m.

Conflict of interest

The IDC in its report said it had identified a matter of potential conflict of interest in relation to an executive. The executive, through a disciplinary inquiry, was found to have failed in declaring a conflict of interest with regard to a close family relationship in one of the IDC funded business partners.

The IDC did not name the executive but said the board took steps to address the matter in line with the corporation's internal policies.

"The board is in the process of closing out the irregularity. The finalisation of the irregularity depends on the recommended sanctions from the chairperson of the disciplinary inquiry," the IDC's financial report read. The board has said this is part of a continuous process of "strengthening" the IDC's culture and governance.

NEXT ON FIN24X

 
 
 
 

Company Snapshot

Voting Booth

How concerned are you about ransomware attacks?

Previous results · Suggest a vote

Loading...