Johannesburg - The Industrial Development Corporation (IDC), the state-owned development finance company, said yesterday it would underwrite and source R1,5 billion total funding for the expansion of Indian Ocean Fertilizer (IOF), the Richards Bay fertiliser company.
The investment in IOF, a wholly owned subsidiary of Foskor, which in turn is wholly owned by the IDC, would add value to Foskor. It would also prepare it for privatisation, scheduled to take place within 15 months.
Khaya Ngqula, the managing director of the IDC, said it would help protect jobs at Foskor and generate substantial foreign currency earnings and profits.
"This will probably be one of the few big projects that South Africa is going to have this year, and it's a great opportunity for us to kickstart our economy."
The IDC would provide the initial funding for the project, and outside funding would be available by the end of 1999.
A possible funding package would include between $40 million and $60 million worth of import finance, which might be sourced from Belgium, Germany, Austria and the US; and $30 million to $50 million from international development institutions, including the European Investment Bank, Proparco (French), DEG (German), FMO (Dutch) and CDC (UK).
The IDC or IOF would borrow between R300 million and R600 million from local institutions. The balance would be funded by the IDC.
The funding would be used for capital expenditure for the expansion, capitalised interest and continuing capital expenditure, said Ngqula.
"The project will boost national export earnings by an additional R490 million per annum on a net basis and the economies of scale resulting from it would increase the IOF's capacity by 77 percent and help make it much more competitive globally."
It would also mean the creation of up to 2 000 jobs during the construction phase, and 80 permanent jobs once full production capacity was reached by June 2002.
Construction is scheduled to begin in May and to be completed two years later.
Gert Gouws, the IDC's chief financial officer, said the corporation would take on strategic equity partners in Foskor before the end of this year, which would mean reducing its shareholding.
"It's the policy of the IDC to diversify from mature investments and recycle the proceeds into new investments, so taking on equity partners in Foskor will help us continue to do this," said Gouws.