At 85 the Industrial Development Corporation is staking a claim to relevance

Conceptual clarity adopted in its founding principles and a strong mandate to drive sustainable industrialisation has largely defined the history of the Industrial Development Corporation (IDC).

Although shortages of manufactured goods, caused by disruption to trade between Europe and South Africa following the first and second world wars were key catalysts for the rapid industrialisation of the local economy, the core objective to industrialise South Africa still underpins the corporation's foundational mandate, alongside its commitment to job creation. Established in 1940 through an Act of Parliament, the IDC turned 85 years old, in October, last month.

For context, this institution has contributed significantly to shaping South Africa’s manufacturing and industrial base over the past eight and half decades. The corporation helped birth the likes of Ouma Rusks, Da Gama textiles, Foskor, Mossgas (since renamed Petro SA), Richards Bay Minerals, Palabora Mining, Karsten Boerdery among others.

World-class companies such as petrochemicals giant Sasol and international pulp and paper group Sappi also had their roots watered by IDC funds. By any metric, it is safe to suggest that every South African household or consumer wakes up to an IDC associated product to begin their daily grind. From a face cloth and bathing towel woven at Glodina, to Satin bath products produced at Amka factory in Centurion, IDC’s impact extends to households beyond our borders.

However, to assume universal agreement of IDC’s impact merely because one is accustomed to its products or can attest to familiarity of its legacy investments would be shortsighted. Times have changed. As such, growth without transformation would only have reinforced the inequitable patterns of wealth inherited from the past. Accordingly, government’s promulgation of Black Economic Empowerment (BEE) legislation post the new democratic dispensation ushered in a new era of transformation.

And thanks in part to the amendment of the IDC Act in 2001, the corporation has and continues to play a meaningful role in the creation of black led, empowered and owned entities - in the process supporting inclusive transformation.

Relevance and impact on transformation

For a self-funding entity, the corporation has remarkably grown its asset base from R20 billion in 1994 to R150 billion today. At best, this underscores the key opportunity to scale up, to expand our impact.

Since 1994, the corporation has facilitated several landmark BEE transactions. In one of the most significant deals signalling a drastic shift in transformation, IDC purchased and warehoused Metropolitan Life shares for BEE group, New African Investment Limited (NAIL) allowing for black participation in the mainstream economy. A raft of other mining empowerment transactions critical among them Incwala Resources followed thereafter.

During this era in which black entrepreneurs were starved of capital, the IDC through a debt financed equity, enabled Corporate Africa Holdings - a black owned consortium to acquire a 20% equity in telecoms giant MTN. Today MTN ranks as Africa’s biggest telecoms operator by numbers and revenue.

When Kumba Resources unbundled in 2006, its other assets merged with Eyesizwe coal to create Exxaro resources in a major empowerment transaction that was funded by theIDC. Thus, Exxaro became one of the first black-owned coal mining companies to list on the JSE. Subsequent empowerment transactions in the tourism sector led to black majority ownership in the tourism group, Tourvest.

Through employee shared ownership programs (Esops) black groupings own equity in companies in healthcare, manufacturing, chemicals and other key sectors of the economy. Since 2008, the number of Esops has grown to 125 with 98 having already been established - 27 in process of attaining registration - in this process benefiting 551 000 workers. The equity or share value of these Esops is estimated to be R70.3 bn covering 118 companies. In addition, the IDC’s R3.5 bn funding support has also enabled community trusts to acquire equity ranging from 5% to 25% in several renewable energy companies spread across the country, notably in the Northern Cape.

To the north of our borders, our investment in Mozambique’s Mozal aluminium marked our first foray into the rest of Africa. Boasting a presence in 15 countries with an investment exposure estimated at R12.6 billion, Ohorongo cement in Namibia, Alphamin Bisie, a tin mining operation in the DRC, rank as some of the projects IDC has supported in the continent.

Investing against the cycle

In times of difficulty, the IDC has been the bulwark to supporting growth. When the economic recession took root in 2009, the corporation demonstrated its counter-cyclical role, ramping up its capital investment into the economy from R8.5 billion in 2008 to R10.8bn in 2009. In all, R6.1bn of this investment went towards assisting distressed companies affected by the financial meltdown.

The outbreak of Covid-19 raised similar challenges prompting the corporation to devise a range of interventions aimed at alleviating the economic impact: an essential supply intervention, a distress fund, and the small business industrial distress fund, all of which provided capital to businesses that manufactured hand sanitisers, surgical masks, and protective gear.

In fact, over R143bn invested into the economy over the past 17 years has been countercyclical funding aimed at kickstarting stalling economic growth. Living up to its mandate, it is the IDC among the early pace setters that helped de-risk SA’s renewable sector. Since venturing into this space in 2012, its exposure to this sector has grown remarkably and currently stands north of R16.2bn.

To date, investments in renewable energy, notably in Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Round 1 and 2 have helped add 900MW of power to the national grid in the process creating about 8195 jobs spread across the country.

The Northern Cape, boasting abundant renewable energy resources, has to date been the biggest beneficiary of this investment with a combined capacity of 486MW and community shareholding in 15 projects. Of significance to the corporation are the employment and supplier network opportunities it has helped to create in a region battling high levels of unemployment. Reflecting boldly on the gains of the past three decades, the corporation has helped to build new industries and contributed to the creation of an ecosystem of empowered enterprises.

Looking ahead, the IDC is focused on investing in new growth industries, building strategic partnerships, and leveraging the Africa Continental Free Trade Agreement including through regional value chains for critical minerals, green hydrogen value chains, electric vehicles and battery storage value chains, and infrastructure as an enabler for continued growth; a key focus being transmission infrastructure.

As IDC marks 85 years of impact, its vision is clear: to champion sustainable industrialisation and drive inclusive economic growth. A real opportunity exists to deepen the IDC’s development impact and investing in a shared prosperity for future generations.

Mmakgoshi Lekhethe is the CEO of the Industrial Development Corporation

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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