The Industrial Development Corporation (IDC) says the turnaround in Eskom’s performance and early green shoots at Transnet will prove to be a boon for the economy and unlock foreign direct investment into SA.
IDC interim CEO David Jarvis said the turnaround at Eskom and Transnet was visible, improving sentiment.
“Due to interventions initiated by the government, we are already seeing progress towards addressing bottlenecks which have overwhelmed the country’s rail transport network and port infrastructure,” Jarvis said.
“These challenges have largely impacted export-orientated businesses, particularly those in mining and manufacturing. For us at the IDC, addressing these challenges will create opportunities to provide funding to companies that rely on rail and port infrastructure.”
The IDC on Thursday reported it had disbursed R15.9bn of its own on-balance sheet funds to businesses, facilitating the creation of 17,826 jobs in the financial year ending March 31.
Jarvis said the IDC’s disbursements facilitated a further R51.7bn worth of investments for the economy during the reporting period, representing 2% of SA’s gross fixed capital formation.
Funds committed for black industrialists totalled R10bn, while those for black-owned businesses rose by R5.3bn to R13bn. Funding for youth entrepreneurs dropped to R456m from R501m recorded in the previous financial year.
“Growth in the local economy has been tepid over the past decade, most recently attributable to factors such as load-shedding, lower commodity prices, and weakening demand in both the global and domestic markets,” said Jarvis.
“The weak economic performance has had a knock-on effect on business confidence. This largely influenced investment decisions and capital outlays by some of our existing and potential clients.”
Absa is the latest financial institution to revise upwards its SA GDP forecast for 2024 and 2025 as Eskom keeps the lights on, restoring confidence in the underperforming economy, but it warned that the emerging water shortage was a risk to the outlook. The bank, in the Quarterly Perspectives report for the three months to the end of September released on Wednesday, said its baseline forecast assumed no further systematic implementation of load-shedding.
It revised upwards its 2024 real GDP growth forecast to 1.1% from 0.9% and revised upwards 2025’s growth projection to 2%, from 1.7% previously. The group now expects annual average growth of 2.2% in 2026/27, which is 0.5 percentage points higher than its previous baseline.
Absa’s 2025 GDP growth projection is in line with that of Citibank. Comments from the Bank of America fund manager survey for August, released on Wednesday, said anticipated reforms in rail, ports, transmission and skills could drive GDP growth to 2%-2.5% in the next three years.
CFO Isaac Malevu said the IDC’s performance in the year under review strategically positions the corporation to support the country’s industrialisation, socioeconomic and structural transformation objectives.
“These results are encouraging and reflect a resilient and sustainable balance sheet that will help us to ramp up our funding activities in the year ahead. We need higher levels of sustainable GDP growth to effectively deal with the challenges of poverty, inequality and unemployment, especially among our youth,” said Malevu.
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