The Industrial Development Corporation (IDC) ramped up its funding more than twofold in the latest fiscal year, underlying its small but countercyclical role in an economy that is trapped in a long downward spiral.
In an earnings report for the year to the end of March, the IDC, the country’s largest development finance institution, said it doled out almost R18bn in funding, creating or saving more than 34,000 jobs. The bulk of the money — about R12bn — was disbursed to black-empowered companies.
The earnings report, which also showed the company more than doubled its net profit to more than R5bn, could be seen as evidence of the crucial, countercyclical role the IDC plays in an economy that is hardly growing and shedding jobs instead.
Even so, the IDC’s lending to the R600bn small business lending market, which is dominated by commercial banks that have lower risk appetite, is a drop in the ocean.
“Most of this funding is directed towards capacity expansions, projects and start-ups, in line with the corporation’s mandate of creating industrial capacity development,” said trade, industry & competition minister Ebrahim Patel, whose department oversees the IDC.
“These investments will catalyse and sustain the recovery of productive sectors, further underscoring the significance of the IDC’s countercyclical role in stimulating our economy.”
The SA economy is trapped in the longest downward business cycle since 1945 as corporate executives struggle to convince their boards to pump money into an economy hobbled by frequent power cuts and a dysfunctional national rail network. Economists, the Treasury and the Reserve Bank have all pencilled in virtually no growth in GDP for 2023.
The IDC, which makes money from income from loan and equity investments and exits from mature investments, reported R5.9bn in net profit for the year, a more than twofold increase from R2.6bn a year earlier, making it an outlier among money-losing state-owned companies ranging from Eskom to Transnet.
The company’s asset base decreased 5% to R161bn from R171bn registered in the previous corresponding period, largely as a result of shifts in listed share prices.
“For us, the strengthening of the corporation’s balance sheet is indicative of the organisation’s financial health as shown by a 13.3% growth in total assets post-2021 and a strong capital structure with debt: equity at 29.8% — well below the prudential policy upper limit of 60%,” CFO Isaac Malevu said in a statement.
“Our stable balance sheet places us in an adequate position to, among others, support energy intervention solutions and participate in the development and commercialisation of a new hydrogen economy.”
Patel praised the IDC’s role in promoting green energy, infrastructure, transformation and regional development.
“The IDC has done a great job in investing in these areas over the years. It has put R16bn in green energy projects since 2011, including R1.5bn last year. These projects will boost exports by R40bn in the future. I have asked the IDC to be more bold and ambitious in stimulating the economy and creating sustainable and inclusive industrial capacity,” Patel said.
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