Almost 14% of the financing made available by the state-controlled Industrial Development Corporation (IDC) in the past financial year was granted to businesses in distress.
Speaking at the release of the IDC’s financial results in Bloemfontein this week, Geoffrey Qhena, CEO of the corporation, said many businesses that were struggling as a result of the weak economy and poor trading conditions were receiving support.
Financing to the tune of R16.7 billion was approved in the financial year ending in March.
That was 9% higher than in 2017.
Disbursements for the 2018 financial year totaled R15.4 billion, or 40% higher on an annual basis.
The full amount of finance approved is not always paid out in the same financial year for reasons such as cancellations or delays in projects.
Of the R15.4 billion, 39% was used for the expansion of capacity, 33% for projects and new start-ups and 14% for changes in ownership or expansionary ownership changes.
Nonkululeko Dlamini, chief financial officer, said the fact that impairments had shot up by 178% to R2.65 billion had a negative effect on the IDC’s numbers. Despite this, the corporation had still managed to make a net profit of R3.2 billion, up 47% from the previous financial year.
The IDC’s assets grew by 5% and now total R137 billion.
Impairments as a percentage of the IDC’s total financing increased from 16.7% to 17.4%.
Dlamini said although the impairments were under the 20% ratio set by the board of directors, the IDC has since appointed a unit to monitor some of the IDC’s significant investments and subsidiaries with the intention of lowering the risk of future impairments, or even reversing impairments.
The IDC had to write off R1.8 billion due to the weak performance of Foskor, an affiliate in the fertiliser market.
The business is very sensitive to fluctuations in the exchange rate, Dlamini said.
According to Gert Gouws, divisional executive: transaction support and post investment at the IDC, the nature of their investments means some business go through business cycles.
The IDC’s equity portfolio is evaluated three times a year, and if the value is less than the cost, provision is made for impairments.
Busi Mabuza, chairperson of the IDC board, said despite challenging economic circumstances, the corporation had fared well and had created or saved an estimated 29 885 job opportunities, compared with 21 949 in the previous financial year.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER