IDC slashes annual loss by over R3 billion

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The IDC's future funding strategy seeks to diversify its funding sources.
The IDC's future funding strategy seeks to diversify its funding sources.
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  • The state-owned Industrial Development Corporation announced its latest financial results on Tuesday.
  • It has managed to reduce its annual loss from R3.7 billion to R33 million year-on year.
  • This is despite a challenging year due to the impact of the Covid-19 pandemic and suppressed business confidence.

The Industrial Development Corporation (IDC) has managed to reduce its annual loss from R3.7 billion to R33 million year-on year, it said on Tuesday.

The development financier, which announced its results for the year ended March 2021, also said impairments and write-offs were reduced to R2.2 billion compared to R7.7 billion the previous financial year.

The state-run organisation said strict cash preservation and monitoring, improved collections and security registration had paid off despite the negative impact of the lockdown and adverse economic activity.

Revenue increased by 5.4% from R16.2 billion during 2019/20 to R17.1 billion for 2020/21, mainly from dividends and interest income.

Dividends were neither paid nor declared during the financial year.

There was lower demand for funding in a period of high uncertainty and challenging operating conditions, IDC chair Busisiwe Mabuza said in the results report.

The IDC's mandate is to drive sustainable development through "job-rich industrialisation". During the financial year, new funding of R6.5 billion was approved, with R6.3 billion disbursed to clients. This was significantly lower than in prior years, mainly due to lower overall business confidence.

However, during the year it did approve R1.4 billion for black industrialists, R599 million for women-empowered businesses and R92 million for youth-empowered or youth-owned businesses.

Major-subsidiary revenue declined, with manufacturer Grinding Media SA dropping 7% in sales due to Covid-19-related lockdowns and limited trade. Cast Products SA's revenue decreased slightly by 1.8%.

But phosphate and phosphoric acid producer Foskor's revenue jumped by 11.5%, which the IDC attributed to a turnaround strategy that improved production, efficiencies and sales.

Development financier Small Enterprise Finance Agency (SEFA) saw revenue decrease by 23% to R52 million, which was attributed to low concessionary rates on Covid-19 initiatives, and the impact of fluctuations in repo rates.

The IDC said new funding approved during the financial year was expected to create and save 2 940 jobs, in addition to another 13 354 jobs expected to be created and saved through funding approved from its Covid-19 Distressed Fund, which supported businesses to deal with cashflow constraints.

R1.2 billion worth of relief was provided to businesses through these measures.

The IDC also established a fund to help the country procure and manufacture Covid-19-related industrial products, which disbursed R335 million during the period under review.

In the integrated report, IDC CEO TP Nchocho said a drop in the value of the IDC's listed share portfolio, exacerbated by challenges at Sasol's Lake Charles project, was "devastating". As a result, the debt-to-equity ratio breached the board-set prudential limit of 60%. Downgrades to SA's sovereign credit rating further resulted in reduced borrowing capacity and increased cost of borrowings, the report said.

But, it added, it would pay "deliberate attention" to renewable energy, agro-industries and infrastructure investments in support of the Economic Reconstruction and Recovery Plan announced by President Cyril Ramaphosa.

In future, the IDC would diversify its funding sources, it said. But it foresees that development finance institutions and foreign commercial banks will continue to be a good source of funding. These include the African Development Bank, European Investment Bank, China Development Bank and China Construction Bank.

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