The mineral processing and renewable energy industries would be among the first big beneficiaries of a R102-billion five-year investment plan by the Industrial Development Corporation (IDC), chief executive Geoffrey Qhena said yesterday.
Qhena was speaking after Economic Development Minister Ebrahim Patel disclosed the new investment target for the development financier, which is 55 percent more than a previous 2015 target, and 160 percent higher than actual IDC approvals over the past five years.
It comes amid government attempts to place the IDC at the centre of efforts to promote the New Growth Path.
Of the R102bn target, nearly two-thirds has been allocated to the three priority areas of green industries (R22.4bn), mining and beneficiation (R22.1bn) and manufacturing (R20.8bn).
The programme is due to be funded by IDC borrowings and the sale of undisclosed IDC equity investments.
Asked about the first big projects due for funding, Qhena singled out a platinum mine in Limpopo, where construction could start as early as 2013, creating more than 3 000 jobs. The IDC has invested R142 million in the Phosiri platinum project, through a 28 percent stake in Lesego Platinum, to complete a feasibility study for a large-scale underground platinum mine and concentrator.
In the green economy, the IDC had a “pipeline of projects” of varying sizes, but timing depended on the speed with which independent power producers were selected, Qhena said.
The IDC was also probing two industrial infrastructure projects with Transnet, an area of increasing focus. “But that will take a little longer.”
In September, Qhena told parliamentarians the IDC would have to sell R26bn of its listed share portfolio over the next five years to fund new equity investments that would drive the government’s industrial policy action plan.
He said yesterday that the IDC had not yet sold shares because, first, dividends from investments had been higher than expected and, second, project uptake had been slower than expected, due to both a mismatch between approval of investments and disbursement of cash, and a “wait and see” attitude by some entrepreneurs during the economic recovery.
Of R6bn designated by the IDC in 2009 for distressed firms, about R2bn was still available.
The IDC’s investment in listed entities was worth R45.1bn at the end of March 2010, compared with R6.1bn invested in unlisted entities, according to a 2010 annual report. The portfolio includes sizeable stakes in Sasol, Kumba Iron Ore, ArcelorMittal South Africa and BHP Billiton, among others.
Qhena said the IDC was “so undergeared – we can borrow… four times our current borrowings of about R6bn and still be fine and disburse some of it”.
He pointed out the IDC had registered a domestic term note of R15bn last year, which it could draw over three years. “There is good appetite domestically for people who want to buy our paper. We also have good relations with development finance institutions. So internationally and locally, there are funding sources,” he said.
The IDC had not delayed the sale of equity shares, but wanted to “ensure the timing is right. When we sell, the money must go straight into the economy, not a bank.”
The IDC would sell “bits and pieces” of its equity portfolio rather than a chunk of any one asset. Decisions would be based on selling at the right price, liquidity and dividend yield.
Patel said the IDC’s jobs fund would provide R10bn to local firms at prime less 3 percentage points for projects with a high employment impact. The interest rate on new IDC loans would be up to 100 basis points lower for investments with high development impact, would cut borrowing costs by 50 points on average and save borrowers about R500m over five years.
“This is a dramatic improvement in available funding, made possible by greater use of the strong balance sheet of the IDC,” Patel said.
He cautioned that ensuring there was sufficient funding was “only the first of three steps needed for money to flow into productive investment. The other steps are to resolve constraints on investment (for example ensuring adequate infrastructure), and for private sector partners to step forward to access the funding.” - Business Report