The decision by the Industrial Development Corporation (IDC) to embark on a new strategy to mobilise capital for investment in new emerging sectors of the economy, rather than simply being a lender, is a good one.
South Africa has been undergoing a long process of deindustrialisation with the manufacturing sector representing an ever smaller share of the economy so any effort to arrest the trend is to be welcomed.
Under its new strategy, the IDC plans to focus its financing on new economic growth frontiers and high impact industries including green industries such as critical minerals, battery manufacturing and green hydrogen; digital and blue economies; services and tourism; and agriculture, agro-processing and beneficiation.
Established in 1940, the state-owned development finance institution has played a decisive role in the establishment of companies such as Sasol, also investing in steel manufacturer Iscor, which subsequently became Arcelor Mittal South Africa (Amsa) and phosphate producer Foskor.
It also became involved in the growth of catalytic industries and more recently provided financial support of more than R3bn to Amsa to maintain the production of its long steel business ― a vital component of the country’s industrial base ― and about R2.5bn to the financially distressed sugar producer Tongaat Hulett to sustain the livelihoods of thousands of small-scale sugar cane growers and workers.
Obviously, the financier has to generate returns and cannot be the lender of last resort for struggling enterprises, but it is these kinds of grand-scale investments that play a decisive role in economic growth that should define it rather than small investments in emerging businesses.
Such a role need not prevent the IDC from pursuing its other objective of transformation as large investments can be structured in such a way as to include black entrepreneurs. The two objectives are not mutually exclusive. But it does mean that smaller investments should be left to the National Empowerment Fund, the proposed Transformation Fund, the Small Enterprise Development and Finance Agency and the provincial development finance institutions.
With a limited balance sheet burdened by a high level of impairments, the IDC will need to mobilise external capital if it is to play this decisive economic role and it is also possible that the government recapitalises it.
The strategy will be driven by a relatively new board appointed by the cabinet in June last year and by CEO Mmakgoshi Lekhethe, who took the reins in February 2025. Both have to prove themselves. Lekhethe has an impressive CV having worked for many years in the Treasury including as head of the asset and liability division. Her knowledge of capital markets will be critical in the IDC’s new trajectory but she still has to demonstrate her competence in concrete investment decision-making. Over the next three years the IDC plans to invest just more than R100bn into the economy, funding that needs to be targeted with precision.
The IDC is now facing criticisms by business that its decision-making on funding applications is painfully slow, that it is impatient about the repayment of loans and that the manner in which it interacts with clients leaves much to be desired. The board has taken the wise decision to set up an independent panel outside management control to consider these complaints.
This might be sufficient to prevent parliament’s trade, industry & competition committee from launching an inquiry into the way it conducts itself, which IDC chair Gloria Serobe believes would be ill-advised as the institution needs time to focus on its strategy.
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